RENEE MONTAGNE, host:
This is Morning Edition from NPR News. I'm Renee Montagne. And with the country in a recession, it's pretty clear that President Obama's top priority will be the economy, and to deal with the troubled economy, he'll need the help of a Treasury secretary. The Senate Finance Committee is scheduled to vote today on Timothy Geithner, Mr. Obama's nominee for that post. Geithner's failure to pay $34,000 in taxes earlier this decade clouded his nomination and delayed the process, but the committee is expected to recommend that the full Senate confirm Geithner. NPR's John Ydstie reports.
JOHN YDSTIE: Geithner has now paid all the past tax obligations in full. But during his confirmation hearing, Republicans continued to explore questions about whether Geithner had intentionally avoided the taxes or whether his payment of some of them just before his nomination was opportunistic. The concerns led the Finance Committee's ranking Republican, Charles Grassley of Iowa, to ask the Treasury nominee a series of questions during the hearing, including this one.
(Soundbite of congressional hearing, January 21, 2009)
Senator CHARLES GRASSLEY (Republican, Iowa; Ranking Republican, Senate Committee on Finance): Were you liable for self-employment taxes on your IMF income from 2001 through 2004?
Mr. TIMOTHY GEITHNER (Nominee, Secretary, U.S. Department of the Treasury, Barack Obama Administration): Yes.
YDSTIE: But Geithner only paid half the tax, which includes Social Security and Medicare taxes. Essentially, Geithner said, he was confused about his obligations. Actually, there's often confusion among IMF employees on this issue because the International Monetary Fund, unlike most U.S. employers, doesn't withhold taxes for its workers and forward them to the government. Geithner said yesterday he mistakenly thought the IMF was forwarding the employer's portion of the tax to the IRS, so he just forwarded the worker's portion. That meant he was paying only half the tax required; this, despite the fact that the IMF regularly informs its workers of their obligation. In the end, Geithner said he was at fault.
Mr. GEITHNER: These were careless mistakes, they were avoidable mistakes, but they were completely unintentional, and I take full responsibility for them. And again, I apologize for putting you in the position where you had to spend so much time looking through these questions, particularly now.
YDSTIE: But Republicans weren't willing to let Geithner off the hook. Their concern centered around the fact that after an IRS audit in 2006, Geithner paid the back taxes for 2003 and '04, but the statute of limitations prevented the IRS from collecting the taxes for 2001 and '02. And Geithner didn't pay those taxes until the Obama transition team brought the issue to his attention just before he was nominated. That troubled Republican John Kyl of Arizona.
Senator JOHN KYL (Republican, Arizona): It's legal to rely on the statute of limitations. There's nothing wrong with relying on the statute of limitations. I think what some people find implausible is that that isn't what you're saying you did. What you're saying is that you didn't think about it until it was brought to your attention in connection with your nomination. Is that correct?
Mr. GEITHNER: I said, senator, that I did not, looking back on it, did not think about it carefully enough, did not ask enough questions, and I regret not having done that.
YDSTIE: In the end, Kyl said, that though he initially had hoped to vote for Geithner, the responses troubled him enough that he was reconsidering. Still, there appears to be enough support to move Geithner's nomination forward. The Treasury nominee responded to other concerns, too. He defended the decisions he'd participated in during the financial crisis as president of the New York Federal Reserve. Those decisions committed hundreds of billions of dollars to rescue companies like AIG and Bear Stearns. Geithner said the threat of financial collapse required the bold action, despite the risk for taxpayers. And he suggested Congress and the Obama administration should not shrink from taking bold action to fix the economy now.
Mr. GEITHNER: The ultimate costs of this crisis will be greater if we do not act with sufficient strength now. In a crisis of this magnitude, the most prudent course is the most forceful course.
YDSTIE: Geithner said President Obama would present a detailed plan to address the financial crisis to the Congress and the nation in a few weeks. John Ydstie, NPR News, Washington. Transcript provided by NPR, Copyright NPR.
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