Tax 'Goof' Update: Geithner Was 'Reimbursed' for Taxes He Didn't Pay; AP Story Buries, Then Deletes

Yesterday, details discovered about Treasury Secretary nominee Timothy Geithner's tax situation moved it to well past the level of an "honest mistake."

You wouldn't know it from the Associated Press's Julie Hirschfeld Davis, who, as I noted yesterday (at NewsBusters; at BizzyBlog), continues to run interference for him. A story from Thursday afternoon that has since been dynamically updated had a final paragraph alluding to the fact that Geithner had signed annual statements acknowleding his obligation to pay his own payroll taxes (Update: That Thursday afternoon story is still at Breitbart). That paragraph is not present in the story as updated at 3:13 a.m. this morning (saved here for future reference). Even that paragraph, when it was present, didn't note that Geithner had applied for and received reimbursement for payroll taxes he didn't pay. 

First, here are key paragraphs from Davis's cheerleading roundup, including disconcerting statements of support for Geithner from many who should know better:

Revelations that Timothy Geithner failed to pay some of his taxes have derailed Democrats' efforts to install him quickly as President-elect Barack Obama's treasury secretary, but senators in both parties say his tax problems won't torpedo his chances for confirmation.

Obama said Wednesday that the disclosures that Geithner had failed to pay $34,000 in taxes between 2001 and 2004 were embarrassing, but added that Geithner's "innocent mistake" shouldn't keep him from taking the helm of the new administration's urgent efforts to revive the economy. Several Republicans agreed that Geithner would get Senate approval and said their party had little appetite for a partisan fight at a precarious time for the economy.

GOP opponents of Geithner should "think this through," said Sen. Orrin G. Hatch, R-Utah., a member of the Senate Finance Committee that's considering his nomination. "They're not going to get anybody better than him from this administration for treasury secretary."

..... (Barack) Obama had hoped for approval by Tuesday, but given the GOP objections, senators scheduled Geithner's confirmation hearing for next Wednesday, with Senate debate and a vote sometime after that.

"Is this an embarrassment for him? Yes. He said so himself. But it was an innocent mistake," Obama said. "My expectation is that Tim Geithner will be confirmed."

..... Democrats and Republicans on the Senate Finance Committee are backing Geithner, who's engaged in an intense damage control effort, including numerous phone calls to senators, to persuade them that his tax problems were the result of innocent errors, not deliberate attempts to avoid paying the Internal Revenue Service.

"It's an honest mistake," said Sen. Max Baucus, the Montana Democrat who chairs the committee, adding that Geithner's confirmation was "a given."

GOP Sen. Lindsey Graham of South Carolina was among those coming to Geithner's defense.

"These are huge times. Now is not the time to think in small political terms," Graham said. "I don't see any desire by the Republican Party to play gotcha on this. ... I think he's the right guy."

Here's what Davis left out, and what those who don't want to be seen as meanies are ignoring, courtesy of this two-paragraph capsule from the Wall Street Journal's Jonathan Wiseman (bolds are mine):

The Obama team said Mr. Geithner's taxes have been paid in full, and that he didn't intend to avoid payment, but made a mistake common for employees of international institutions. That characterization was contested by Senate Finance Republicans, who produced IMF documents showing that employees are repeatedly told they are responsible for paying their payroll taxes.

As to why Mr. Geithner didn't pay all his back taxes after the 2006 audit, an Obama aide said the nominee was advised by his accountant he had no further liability. Senate Finance aides said they were concerned either Mr. Geithner or his accountant used the IRS's statute of limitations to avoid further back-tax payments at the time of the audit.

As I noted yesterday, the normal three-year statute of limitations rule "does not apply in the case of a false or fraudulent return with intent to evade any tax." Given the frequent notifications Geithner received, and other evidence that will follow, I believe it's fair to contest Geithner's professed lack of intent to evade taxes.

Michelle Malkin, as usual, has much more, including this statement from an e-mailer (bolds are mine):

[H]aving worked at the World Bank/IMF I can tell you that as an American working there, they REIMBURSE you for the self-employment taxes! The idea is that American’s get paid “on par” with all the foreigners i.e. NO taxes are withheld. The compromise is that American’s (sic) pay the “self-employment” tax but you get a CHECK from the Bank/IMF to pay them with. 

Byron York at National Review has also been all over the reimbursement issue, and adds several important "he had to know what was going on" elements (bolds are mine):

..... IMF employees were expected to pay their taxes out of their own money. But the IMF then gave them an extra allowance, known as a “gross-up,” to cover those tax payments. This was done in the Annual Tax Allowance Request, in which the employee filled out some basic information — marital status, dependent children, etc. — and the IMF then estimated the amount of taxes the employee would owe and gave the employee a corresponding allowance.

At the end of the tax allowance form were the words, “I hereby certify that all the information contained herein is true to the best of my knowledge and belief and that I will pay the taxes for which I have received tax allowance payments from the Fund.” Geithner signed the form. He accepted the allowance payment. He didn’t pay the tax. For several years in a row.

According to an analysis released by the Senate Finance Committee, Geithner “wrote contemporaneous checks to the IRS and the State of Maryland for estimated [income] tax payments” that jibed exactly with his IMF statements. But he didn’t write checks for the self-employment tax allowance. Then, according to the committee analysis, “he filled out, signed and submitted an annual tax allowance request worksheet with the IMF that states, ‘I wish to apply for tax allowance of U.S. Federal and State income taxes and the difference between the “self-employed” and “employed” obligation of the U.S. Social Security tax which I will pay on my Fund income.”

Absolutely none of this is in Julie Hirschfeld Davis's AP story.

A New York Times editorial today inadvertently makes the concise argument why the Geithner nomination should be withdrawn:

Mr. Geithner must be questioned forcefully about these matters at the hearing next week, and his explanations must be credible. Even in the best of economic times, it would be hard to accept a Treasury secretary — who, after all, is in charge of the Internal Revenue Service — with a cavalier attitude toward paying his taxes. Today, in a time of economic peril, the nation cannot afford a Treasury secretary with a tainted ability to command respect and instill confidence.

Exactly.

Cross-posted at BizzyBlog.com.