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Praise for Obama’s picking Timothy Geithner to be our next Treasury Secretary was abundant. Most people rightly thought that he’d sail through confirmation. It now appears that Mr. Geithner’s ship might have sailed. NRO’s Byron York had this to say about Mr. Geithner’s troubles:

Documents released by the Senate Finance Committee strongly suggest that Geithner knew, or should have known, what he was doing when he did not pay self-employment taxes in 2001, 2002, 2003, and 2004. After his failure to pay was discovered, first by the IRS and later during the vetting process, Geithner paid the federal government a total of $42,702 in taxes and interest.

The IMF did not withhold state and federal income taxes or self-employment taxes, Social Security and Medicare, from its employees’ paychecks. But the IMF took great care to explain to those employees, in detail and frequently, what their tax responsibilities were. First, each employee was given the IMF Employee Tax Manual. Then, employees were given quarterly wage statements for the specific purpose of calculating taxes. Then, they were given year-end wage statements. And then, each IMF employee was required to file what was known as an Annual Tax Allowance Request. Geithner received all those documents.

The tax allowance has turned out to be a key part of the Geithner situation. This is how it worked. 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.

The NYTimes’ Caucus Blog reports this as Geithner’s initial explanation:

From 2001 until 2004, when he received his final payments from the I.M.F., Mr. Geithner paid his state and federal income taxes but did not pay self-employment payroll taxes. The I.M.F., as an international organization, does not withhold U.S. payroll taxes for Social Security and Medicare from its American employees’ paychecks, so they are required to pay the roughly 15 percent tax on their own. The Obama transition is calling his mistake a common error for American employees of the I.M.F.

Team Obama’s explanation is understandable. It might be true that “American employees of the I.M.F.” have made this mistake, though I doubt it. Considering the fact that he was paid an allowance for paying the various taxes and considering the fact that he signed a document that said that he was responsible for paying his taxes, Mr. Geithner’s explanation is looking like a dishonest answer.

Yesterday, Harry Reid said that this flap over not paying taxes wouldn’t derail Mr. Geithner’s confirmation. To be fair to Sen. Reid, he said that before York’s reporting of this story. I can’t imagine that it’s inconsequential that the Treasury Secretary, who oversees the activities of the IRS, (a) didn’t pay his taxes for a three year period and (b) signed a document saying that he was responsible for paying payroll and income taxes.

That’s why I’m thinking that Mr. Geithner’s ship has sailed. That’s why I’m thinking his nomination will be withdrawn. President-Elect Obama would be doing the right thing to withdraw Mr. Geithner’s nomination. Let’s hope President-Elect Obama does the right thing.

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Cross-posted at California Conservative

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