[Congressional Record Volume 155, Number 16 (Tuesday, January 27, 2009)]
[Senate]
[Pages S886-S887]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                          GEITHNER NOMINATION

  Mr. KOHL. Mr. President, yesterday the Senate confirmed Timothy 
Geithner as the Secretary of Treasury with my support. Mr. Geithner has 
the experience and the knowledge to lead the country through these 
economic hard times.
  The Treasury Department is facing an uphill battle to provide 
appropriate monetary policy and regulations to get our economy back on 
track. Congress has been working with Federal Reserve and the Treasury 
Department to find ways to jump-start our economy. Congress recently 
approved the release of the second half of the TARP funds and is 
working with the new administration to create an effective economic 
stimulus package. I am pleased that President Obama and Mr. Geithner 
have committed themselves to restructuring the TARP but stress the 
importance of reforms which increase accountability, transparency, and 
help homeowners. Furthermore, the Treasury Secretary must implement 
meaningful and effective policies to avoid another system-wide failure 
and promote long-term economic stability. Mr. Geithner's career in the 
Treasury Department and the Federal Reserve Bank of New York has made 
him well qualified for the difficult task at hand.
  Mr. SPECTER. Mr. President, I have sought recognition to discuss my 
vote against the nomination of Mr. Timothy F. Geithner to be Secretary 
of the Treasury.
  I was originally inclined to support the nomination to enable 
President Obama to get his team together and begin addressing the 
economic crisis. As I have said publicly, I want to be supportive of 
President Obama and I understand the importance of assembling his full 
economic team to address the critical problems facing our Nation's 
economy. After considerable thought, I have decided I cannot support 
this nomination. I have since taken a close look at the circumstances 
of Mr. Geithner's failure to pay Social Security and Medicare payroll 
taxes from 2001 to 2004 while an employee at the International Monetary 
Fund--IMF. Then, I spoke to Finance Committee ranking member Chuck 
Grassley who provided some additional insight. Based on those factors, 
I decided to vote against Mr. Geithner.
  International organizations such as the IMF are exempt from the 
employer contribution of payroll taxes, so U.S. citizens who work there 
are required to pay their portion as if they are self-employed. During 
an IRS audit conducted in 2006, it was discovered that Mr. Geithner 
failed to pay these taxes and he then paid what was owed for tax years 
2003 and 2004. Despite having made the same error in previous years, he 
did not pay for 2001 and 2002 because the statute of limitations had 
expired. Only after the non-payment was discovered during the vetting 
process by the Obama transition team in late-2008 did Mr. Geithner 
finally pay for tax years 2001 and 2002.
  Mr. Geithner was paid an extra sum, or tax allowance, by the IMF with 
the expectation that he would use it to pay the IRS for his payroll tax 
liabilities. According to remarks by Senator Grassley at Mr. Geithner's 
confirmation hearing, ``Furthermore, the nominee received a tax 
allowance from the IMF to pay the difference between the `self-
employed' and `employed' obligations of his Social Security tax.'' At 
his confirmation hearing, Mr. Geithner acknowledged receiving various 
documents detailing his obligations as an American employee at the IMF. 
The IMF provides its employees with a tax manual at the time they are 
hired that includes information describing how to pay self-employment 
taxes. Page 2 of the document states, ``U.S. citizens who are staff 
members are required to pay U.S. tax are entitled to receive tax 
allowances.'' Page 12 of the document states, ``Employees of 
international organizations are considered self-employed for purposes 
of social security taxes. As such, they must pay both the employer's 
and the employee's share of social security taxes. The Fund gives you a 
tax allowance for the employer's share of social security taxes only. 
You are responsible for the employee's portion of this tax.'' Mr. 
Geithner signed a document each year in order to receive this extra tax 
allowance. At the end of the tax allowance form are 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

[[Page S887]]

from the Fund.'' Also, the IMF provides its employees with detailed 
statements of their liabilities.
  These errors set a bad example for other taxpayers when the 
Government seeks to collect back taxes. We can be assured that the 
precedent set by Mr. Geithner's neglect will be cited repeatedly by 
future offenders. Mr. Geithner's conduct would be problemsome on the 
confirmation of any high-level officers, but especially so for 
Secretary of the Treasury. The Secretary has within his jurisdiction 
the Internal Revenue Service which is responsible for collecting taxes. 
With the full Senate confirming Mr. Geithner, it is a virtual certainty 
that other taxpayers will cite his situation as a reason or excuse for 
their not having paid taxes. If the issue of failure to pay taxes goes 
to court in either civil or criminal proceedings, it will be an obvious 
defense or argument by defense counsel in mitigation or defense.
  President Obama has placed ethics reform as a top priority for his 
administration. In his inaugural address, he said, ``Those of us who 
manage the public's dollars will be held to account, to spend wisely, 
reform bad habits, and do our business in the light of day, because 
only then can we restore the vital trust between a people and their 
government.'' That is the appropriate tone to set an example, 
especially for young people, where in the past election there has been 
a resurgence of interest in voting and government. We ought to do 
everything we can to maintain that interest and momentum.

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