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LAMBRO: Tax dodge depot
It’s a safe bet President Barack Obama will not be getting any awards from H&R Block for his administration’s ability to sniff out tax dodgers among his Cabinet nominees.
Three nominees in a row, at last count, have run into trouble for nonpayment of taxes. One wiggled through his nomination, but two others have withdrawn, badly tarnishing the Obama presidency and shaking public confidence in his administration.
It was embarrassing enough that Timothy Geithner, Mr. Obama’s nominee for Treasury secretary, failed to pay $34,000 in taxes. This guy, after all, was a Federal Reserve president who will oversee the Internal Revenue Service, which goes after tax deadbeats.
But worse than that, Mr. Geithner had put off paying the IRS until November, shortly before Mr. Obama named him to the high-level Cabinet post, two years after the IRS brought the troubling tax problems to his attention in 2006.
When the roll was called in the Senate on his nomination, 34 senators voted against confirmation - an unusually high vote of no confidence for a Treasury secretary - including Democratic Sen. Tom Harkin of Iowa.
Before that scandal had barely cooled, former Senate Majority Leader Tom Daschle, nominated to be secretary of the Department of Health and Human Services, revealed he hadn’t paid more than $128,000 in back taxes over three years. Incredibly, Mr. Daschle chose to pay what he owed (more than $140,000 with penalties) just six days before his confirmation hearing. Colleagues were stunned by his lame excuse that he didn’t know he owed the taxes.
The Senate Finance Committee, which oversees the IRS and the tax code, questioned Mr. Daschle behind closed doors Monday to hear their former colleague’s explanations for his transgressions. He emerged from the grilling looking ashen-faced. By Tuesday, he withdrew his nomination, saying the uproar of his tax delinquency would only be “a distraction” that would end up hurting a presidency still in its infancy.
Ignorance of the law is no excuse when the average American worker is hauled before the IRS court to explain nonpayment of taxes. But that was part of Mr. Daschle’s explanation when he was asked why he did not pay the taxes that were long overdue.
He had made more than $5 million in the last two years, reaping more than $220,000 from the health-care industry he would oversee as HHS secretary and the use of a chauffeured limo whose services are taxed by the IRS as income - but on which he had paid no taxes. That service alone was valued at $255,000 in unreported income, the committee’s staff investigation found. Failure to report it can be a crime.
Particularly embarrassing to the Obama White House were the huge sums Mr. Daschle raked in from the health industry over which he would have official jurisdiction as HHS secretary.
The Health Industry Distributors Association dished out $14,000 for a speech he gave last year, and reminded him of the fat check he got from them when they raised concerns about possible Medicare reforms that would affect their industry.
In a letter, posted on their Web site, the organization reminded Mr. Daschle: “As you may recall from speaking to some of our members during HIDA’s 2008 Executive Conference in Miami, where you were the keynote speaker, a competitive bidding program will undermine access to quality care for millions of beneficiaries.”
But the consulting (i.e. lobbying) Mr. Daschle did for the health-care industry goes much deeper than the big speaking fees he got from the health insurance industry, drug companies and other health-care groups.
As part of his work for law firm Alston & Bird in the last two years, he gave “policy advice” to United Health, an insurance conglomerate that assists the Medicaid program and dispenses advice to drug companies.
Mr. Obama wanted Mr. Daschle to oversee development of his health-care reform program, but in the end he had become a case study in conflicts of interest that turned into an ethical nightmare for the administration.
The third nominee to run into income tax trouble Tuesday was Nancy Killefer, nominated to be a deputy director of the Office of Management and Budget and the administration’s chief performance officer. She withdrew her name Tuesday after it came to light that she had mishandled her payroll taxes.
But the sloppy vetting by the Obama transition team doesn’t end there. His transition advisers gave the green light to New Mexico Gov. Bill Richardson to be his commerce secretary, despite a widely known federal investigation into a state pay-to-play scandal in which one of the governor’s top campaign donors received a lucrative state transportation contract. The Obama transition said it was unaware of the scandal, though the story was in the newspapers for many months. Mr. Richardson was asked to withdraw his name and he did so.
These embarrassing vetting blunders were “really quite stunning for a transition team that has so carefully studied everything that might go wrong,” said presidential scholar Stephen Hess at the liberal Brookings Institution.
If any of these tax-evasion cases had broken in a Republican White House, the Democrats would scream for a special prosecutor and block any vote. The Democrats confirmed Mr. Geithner Monday and probably would have confirmed Mr. Daschle, too, but he mercifully spared Mr. Obama and his party from the bloody Senate battle that would have ensued.
Leona Helmsley, the late New York real estate millionaire who went prison for failing to pay her taxes, once said, “Only the little people pay taxes.” Three high-income tax-evaders in a row this week left many people thinking the Obama Democrats were adopting Mrs. Helmsley’s imperious rule.
Donald Lambro, chief political correspondent of The Washington Times, is a nationally syndicated columnist.
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