A Comedy of Tax Errors

By Dana Milbank
Thursday, January 22, 2009

Make no mistake about it: Tim Geithner made mistakes.

"These were careless mistakes," said the man who as Treasury secretary would supervise the same IRS he underpaid by nearly $43,000. "They were avoidable mistakes."

"These are disappointing mistakes," agreed Sen. Max Baucus (D-Mont.), chairman of the Senate Finance Committee, which held Geithner's confirmation hearing yesterday.

"Tim has made some mistakes, which he has freely admitted and corrected," Sen. Chuck Schumer (D-N.Y.) assured everybody.

But Sen. Chuck Grassley (Iowa), the panel's ranking Republican, was skeptical that "the nominee's actions can be explained as simple and common mistakes."

The chairman asked the nominee to explain his mistakes, and Geithner repeated that he had "mistakenly" done his taxes wrong. "Now, that was a mistake," and "I failed to correct it initially." In short, "as I said in my opening statement, these were -- these were careless mistakes. They were avoidable mistakes."

You would not be mistaken to think there was a bit of showbiz going on with Geithner's hearing yesterday. Senators plan to confirm him, but they don't want to encourage tax cheats. The solution: 3 1/2 hours of ritual flagellation.

Sure, the hearing managed to work in some other issues, such as the economic collapse. Paul Volcker, an adviser to the Obama administration, told the committee that "we are in the midst of the mother of all financial crises." Schumer shared his view that the bailout plan "gave the banks too much dessert before it made them eat any of their vegetables." And Geithner skillfully distanced himself from the plan, even though as president of the New York Fed he was an architect of it. "Although policy did move, it did not move aggressively enough across the entire board, and we're living with the consequences of a deeper recession, in part, because of that," he said.

But there was still plenty of time to discuss Geithner's income tax gap. The nominee, a trim and baby-faced man of 47, understood his role: to be amply penitent, but not to depart from his script. "I should have been more careful," he uttered with proper contrition. "I take full responsibility. . . . I have gone back and corrected these errors and paid what I owed. I want to apologize to the committee."

Baucus was ready to forgive. "I believe them to be innocent mistakes," he said, while Schumer nodded and Geithner drank rapidly from his glass of water.

But Grassley found it "troubling" that Geithner didn't pay his self-employment taxes, as he was supposed to, while working for the International Monetary Fund from 2001 to 2004. "I -- I mistakenly believed that I was meeting my obligations fully," Geithner said, "but I did not prepare my returns in a way that caught that mistake initially."

Grassley asked what software he used to prepare his taxes. "These are my responsibility, not the tax software's responsibility," Geithner replied, "but I used TurboTax."

A future Treasury secretary using TurboTax? The mistakes were multiplying.

Sen. Jim Bunning (R-Ky.) didn't seem to think it was a mistake at all but rather "negligence towards the law" -- and he was still grumbling about it loudly when Sen. Pat Roberts (R-Kan.) took his turn scolding Geithner. The Kansan suggested there should be "a tax holiday for all Americans who have made a mistake and do not want to engage the IRS in the briar patch."

Bunning still wasn't satisfied and requested another five minutes to hector Geithner. He displayed a 3-by-4-foot poster enlarging the IMF form on which Geithner had promised to pay the tax that he didn't pay. "I had many opportunities to catch that initial mistake," Geithner confessed anew. "I signed it in the mistaken belief that I was complying."

Bunning kept asking, and Geithner kept apologizing. "The critical mistake I made was at the beginning that first year," the mistake-maker said. "And because I didn't catch it, after that I kept making it."

Minutes later, Sen. Jon Kyl (R-Ariz.) picked up the mistake minuet. His questions were rapid-fire -- and so were Geithner's admissions of error: "Every payroll statement I got gave me an opportunity to realize this mistake. . . . It was very clear that this was an avoidable mistake. . . . I should have been much more careful. . . . Of course I was mistaken. . . . I did not catch my mistake. . . . I was left with the mistaken belief that I fully complied. . . . I signed it in the mistaken belief that I was complying."

Kyl told Geithner that his answer -- that he didn't realize he had underpaid taxes in 2001 and 2002 until nominated for the Cabinet -- "strains credulity."

"This is my mistake, and it's my responsibility," Geithner repeated.

Kyl cut off the confessions of error. "Would you answer my question, rather than dancing around it please?" the senator said, suggesting Geithner didn't pay because the statute of limitations had expired.

"I made a series of mistakes," the nominee said once more. "And, again, I regret those mistakes, but they were not intentional. I've corrected them. But they're my responsibility."

By the time the hearing ended, the word "mistake" had been used 41 times and "error" another 11 times. And that was no accident.

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