Wednesday, January 21, 2009

Confirming Timothy Geithner as Treasury Secretary

Timothy Geithner, President Obama’s pick to head the Treasury, has acknowledged his failure to pay, in a timely manner, four years of taxes that he owed on Social Security and Medicare. He failed to pay the required taxes despite receiving documents from the International Monetary Fund where he worked that advised him of his responsibility to do so. Moreover, he requested funds from the IMF for that purpose. It took an IRS audit and vetting by the Obama transition team to identify the failure and secure remittance of all back taxes with interest. The issue would not have received so much attention were it not for the fact that the Treasury Secretary oversees the Internal Revenue Service.

In his own words, Geithner stated that his mistake was “careless but unintentional.” Some commentators blame his “honest” mistake on the complexity of the tax code, suggesting the need for serious tax reform.

One can’t help but wonder how many individuals who have failed to pay lawfully due taxes on time are also guilty of nothing more than “careless but unintentional” mistakes The IRS claims that the federal tax gap, the gap between what is owed and what is paid, exceeds $300 billion. How much of that is due to “careless but unintional mistakes?” If charged with failure to pay taxes, how many individuals are likely to plead what could become known as “the Geithner defense?” Could unintentional carelessness in application of tax law become a valid excuse. Not only has it been excused to confirm Geithner, it should be noted that the Treasury Secretary is fifth in the presidential succession list after the Vice-President, Speaker of the House, President pro tempore of the Senate, and Secretary of State.


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