Legal Commentary

TaxProf has been all over the Geithner tax-payment story, which has morphed from a Zoe-Baird-esque household-help issue into a much bigger catastrophe. His failure to pay taxes from his IMF income seems more and more troubling as details come out.  These revelations from Byron York seem particularly damning:

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. . . .

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.

. . .

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.

. . .

In a conversation today with sources on Capitol Hill who are familiar with the situation, I asked, ?Was Geithner made whole for tax payments that he didn?t make??



?Yes,? one source answered. ?He was getting the money. He was being paid a tax allowance to pay him for tax payments that he should have made but had not.?

As the New York Times opined: "As much as Mr. Obama and his team may wish it, however, the disclosures cannot be dismissed so easily, or papered over. The just-the-facts report of Mr. Geithner?s tax transgressions, compiled and released by the Senate Finance Committee, paints a picture of noncompliance that is considerably more disturbing than his supporters are acknowledging."  Lest anyone forget, here is the organizational chart of Treasury -- notice the little agency on the lower left.  (It's next to the Bureau of Engraving and Printing.)

Despite these problems, the Intrade market seems unfazed; when I last looked, Geithner shares were trading at around 93.  Perhaps Geithner's special skills are enough to outweigh the obvious concerns about his tax compliance.