Friday, April 3, 2009

Thursday’s Senate confirmation hearing for Kansas Governor Kathleen Sebelius to serve as Health and Human Resources secretary barely touched on the fact that she is part of an interesting club: Obama nominees who failed to fully pay their taxes.

Republican Sen. Chuck Grassley of Iowa was the only participant to mention that Ms. Sebelius and her husband recently paid $7,040 in back taxes and $878 dollars in interest and penalties for minor amendments to their 2005-2007 tax returns. The discrepancy was discovered in her preparation for her nomination. The governor avoided the subject in her testimony and is expected to be easily approved in short order.

Her specific back tax payment in and of itself is not too troubling, but it is additional proof that the tax code is too complex. Ms. Sebelius’s disclosure of what she called “unintentional errors” included missing documentation for deductions and continuing to deduct mortgage payments after the sale of a home under the mortgage’s value. These are problems any taxpayer might face.

But we thought our readers should be reminded of the four other Obama nominees with tax problems. In the context of these nominees, some of which arguably reach scofflaw status, this latest disclosure about Ms. Sebelius has us wondering why so many Democrats the administration picks to head up major agencies and initiatives have tax problems. What does this say about the Obama administration’s celebrated vetting process?

The seemingly ever-growing list of nominees with tax issues also includes:

• First HHS Secretary nominee and former Democratic Sen. Tom Daschle of South Dakota who filed over $140,000 in back taxes and interest in January after failing to disclose more than $300,000 in income, including the use of a car and driver. His violations of the tax code remain the most impressive and lead to his removing his name for consideration.

• Treasury Secretary Timothy Geithner failed to pay more than $40,000 in payroll taxes when he worked for the International Monetary Fund, correcting the error before the Senate voted on his nomination.

• The husband of Labor Secretary Hilda Solis paid around $6,400 prior to her nomination vote for tax liens on his Los Angeles auto repair business dating from 1993. The White House said Ms. Solis and her husband were unaware of the lien.

• Chief Performance Officer nominee Nancy Killefer withdrew her nomination in the wake of the Daschle tax disclosures after it came to light that she had a $947 tax lien filed against her by the District of Columbia in 2005 for failing to pay compensation taxes for a domestic employee. District records show she owed $298 in unemployment compensation, $48.69 in interest, and $600.00 in penalties that she paid five months later.

A White House spokesman declined to comment to us regarding what the list says about the administration’s vetting process or on this phenomenon more generally. He only expressed Mr. Obama’s pride in the “caliber” of the nominees. “President Obama stands behind the exceptionally qualified nominees that he’s put forward, and he looks forward to working with them to tackle the serious challenges we face,” said the spokesman.

Presidential nominee troubles are nothing new, particularly related to taxes. George W. Bush’s first Treasury Secretary, Paul O’Neill, was forced to pay $92 in back taxes in 2001. Former New York Police Commissioner Bernard Kerik dropped his bid for Homeland Security Secretary in 2004 because he had not paid payroll taxes for a housekeeper of questionable immigration status. President Bill Clinton had arguably the most infamous case of a dropped nomination with Zoe Baird’s bid for Attorney General in 1993. Ms. Baird’s nominations ended due to the outcry over her having employed two illegal aliens as domestics and not paying payroll taxes for their services.

The Obama administration has yet to equal the dropout record for problem plagued nominees. That award goes to the Clinton presidency, which had a total of six major nominees remove themselves from consideration during two terms in office. The Obama administration has had four so far, including Mr. Daschle and Ms. Killefer for their tax issues.

But given that the Obama team has already beaten the Clinton administration’s first term record of three canceled nominations and the rate at which they are racking up nominees with tax problems, we think there is a good chance they can top Mr. Clinton in this regard.

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