New York Federal Reserve Bank President Timothy Geithner, President Obama's pick for Treasury secretary, said today at a hearing before the Senate Finance Committee that his failure to pay $34,000 in income taxes was a "careless mistake" that he regrets.
"These were careless mistakes. These were avoidable mistakes. But they were unintentional," Geithner said.
According to documents compiled during the nominee's vetting process and released by the committee Jan. 13, Geithner failed to pay $34,000 in self-employment taxes for money he earned from 2001 to 2004 while working for the International Monetary Fund.
Geithner pointed out that he has corrected the mistakes and paid the back taxes, totaling $48,268 in taxes and interest, and he apologized that the committee has had to spend so much time on this issue when there are more pressing concerns.
He expressed regret that he did not "ask more questions" and said he "thought about it more carefully" when he was audited by the IRS in 2006.
Geithner said he used Turbo Tax to prepare his faulty returns but told the committee "these mistakes were my responsibilities, not the software I used."
Some senators expressed concern over someone who did not pay his taxes being in charge of the IRS.
"It's hard to explain to my constituents, who pay these taxes on a regular basis," Sen. Jim Bunning, R-Ky., told Geithner.
Sen. Pat Roberts, R-Kan., said that while his phones were "ringing off the hook" from people in Kansas upset about Geithner's personal tax missteps and his possible confirmation, he still believes the nominee will be approved by the committee.
In his opening statement, committee Chairman Max Baucus, D-Mont., said he supported Geithner's nomination and believed that his tax gaffes were "disappointing mistakes."
"But after discussing them with Mr. Geithner, I believe them to be innocent mistakes," Baucus said. "I believe that Mr. Geithner has sufficiently corrected the errors. And I know a man of Mr. Geithner's talent and dedication will be meticulous on these points in the future."
Baucus went on to say that he is confident Geithner is "up to the job" and will succeed, if confirmed, in helping America "emerge with renewed strength."
Geithner faced several questions from senators about how the $700 billion financial bailout plan has been spent.
Geithner also said that Obama and he "share your belief that this program needs serious reform."
"This is an important program and we need to make it work," he said. "We're going to keep at it until we fix it."
"Our test is to act with the strength, speed and care necessary to get our economy back on track, and to restore America's faith in our economic future," Geithner said.
Following a 2006 IRS audit of his tax returns from 2003 and 2004, Geithner paid approximately $16,000 in owed taxes. Then, following news that Obama intended to nominate him for Treasury secretary in late November, Geithner voluntarily amended his 2001 and 2002 tax returns, resulting in payment of additional taxes of $18,000.
In addition to owed taxes, the committee found that Geithner had employed a household worker whose legality in the country had lapsed for 3½ months in 2005.