Geithner Update: AP's Early-AM Revision Flushes Many Details, Calls His Tax Problems 'Goofs'

Geithner0109.jpgIn a post last night, I criticized the Associated Press for glossing over the 15 years of personal and domestic self-employment tax filing and payment problems of Timothy Geithner, Barack Obama's nominee for Treasury Secretary (pictured at right in an AP photo).

It turns out that Brett Blackledge's Tuesday evening report was relatively hard-hitting in comparison to Julie Hirschfeld Davis's rendition early this morning (stored here, because her original 3:33 a.m. report has since been updated).

Davis's assignment appears to have been to shorten and update Blackledge's original writeup. To be fair, Davis immediately indicated that Geithner's nomination is no longer on cruise control. But she deleted, or pushed to later paragraphs, quite a few details that would cause an average reader to go "Huh? This guy wants to be Treasury Secretary?" What's more, her vague title ("Tax problems may plague Obama's treasury pick") replaced a much more specific one from Blackledge ("Geithner failed to pay self-employment taxes").

Davis's most obvious airbrush is in her second paragraph (bold is mine):

Senate Democrats are pressing to schedule a quick confirmation hearing for Geithner on Friday, hoping to tee up swift approval of his nomination on Inauguration Day. But newly released information about the tax goofs by Geithner, regarded as a brilliant financial markets specialist well-positioned to deal with the nation's considerable economic problems, could complicate the process.

Davis expects us to accept, as if it's an indisputable fact, that Geithner's problems are "goofs." A "goof" is defined as "a mistake or blunder, esp. one due to carelessness." 

The reports by the AP writers themselves show that there are quite a few reasons to believe that more than "carelessness" might be involved.

First, there's the matter of what taxes got paid, and when. This is Davis's sixth paragraph:

He paid some of the taxes in 2006, after an IRS audit discovered the discrepancy for taxes paid in 2003 and 2004. But it wasn't until much later - days before Obama tapped him to head Treasury late last year - that Geithner paid back most of the taxes, incurred in 2001 and 2002. He did so after Obama's transition team found that Geithner had made the same tax mistake his first two years at the IMF as the one the IRS found he made during his last two years there.

"Discrepancy for taxes paid in 2003 and 2004" is whitewash phrasing -- "unpaid taxes relating to 2003 and 2004" would be much more accurate -- but let's stay focused.

As I said last night:

Giethner's personal self-employment "mistakes" have to do with his obligation to pay Social Security taxes on his income when he worked at the International Monetary Fund. The IMF is exempt from paying the employer's share, and apparently doesn't withhold any amounts for Social Security on employees' behalf. It's easy to see how non-financial administrative employees might get tripped up here, but the idea that Giethner wasn't aware of his obligations makes him either evasive, negligent, or incompetent. The same possible adjectives apply to the fact that he took as long as he did to catch up on his assessments. These are usually not qualities one looks for in a Treasury Secretary. 

The obvious question is why the IRS, and for that matter Giethner, didn't look back at 2001 and 2002 after the 2003 and 2004 errors were caught. The answer may well be that by the time it found the 2003 and 2004 "discrepancies," the IRS's ordinary three-year statute of limitations for unpaid taxes from the date a return is filed had expired for 2001 and 2002.

But there's an exception to that three-year rule: "The statute of limitations does not apply in the case of a false or fraudulent return with intent to evade any tax." Intent can be difficult to determine, but Team Obama must have concluded, "brilliant" financial guy that he is, that Geither should have known, and indeed may have known, that he was required to pay self-employment tax at the time he filed his 2001 and 2002 returns. So they told him to pay up.

Second, Geithner has a 15-year history of issues relating to self-employment taxes, something Blackledge brought up in his report last night in this very damning paragraph:

The committee's materials said Geithner "has experience with Social Security tax issues." He filed the taxes late for his household employees in 1996 for years 1993 to 1995; he incorrectly calculated Medicare taxes for his household employees in 1998 and received an IRS notice; and he received notices from the Social Security Administration and the IRS after not filing 2003 and 2004 forms for his household employees, the report states.

Davis had nothing about the matters from the 1990s in her update.

It seems quite a stretch to believe that a guy with "experience in Social Security tax issues," and who had also experienced the fact that these taxes have to be paid when employing domestic help, didn't realize that he would have to pay those taxes himself if his employer wasn't withholding them.

Finally, though they both did so at the very end of their reports, Blackledge and Davis quoted an expert who took strong exception to the "goof" argument:

Tom Ochsenschlager, vice president of tax for the American Institute of Certified Public Accountants, said it would be difficult for someone preparing a tax return for a self-employed person to skip the Social Security and Medicare tax lines.

Of course, Ochsenschlager is right. You would expect any experienced tax preparer looking at a W-2 form showing no Social Security or Medicare tax withheld to follow up with his client and find out why. If that preparer did follow up, it seems that Geithner would have either told him or her that he was exempt from such taxation without verifying it, or that he fibbed.

All of this represents evidence that Geithner's tax problems go well beyond the "goof" level. By putting such a "goofy" assertion into her second paragraph, Davis may be hoping that readers, including those who are preparing the teleprompter scripts for the morning TV newscasts and network news programs, don't take the nominee's checkered tax history as seriously as they should.

I also pointed out last night that there was no historical context in Blackledge's report. 

In 2001, Linda Chavez's nomination as Labor Secretary went down in flames over matters relating to an illegal immigrant whom Chavez had sheltered in her home a decade earlier. Also, in 1993, Zoe Baird withdrew as Bill Clinton's nominee for Attorney General over the employment of illegal-immigrant domestic help and her failure to pay the related employment taxes on a timely basis.

Davis's report similarly provides no historical context.

Longtime Media Research Center devotees may recall that ABC's George Stephanopolous was involved in torpedoing Chavez's nomination.

Cross-posted at BizzyBlog.com.

Tom Blumer
Tom Blumer
Tom Blumer is a contributing editor for NewsBusters.