Geithner tax problems a chink in Obama's armor

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The tax peccadillos of Tim Geithner may not sink his bid to become the next Treasury secretary, but they have tarnished a bit the aura of President-elect Obama's incoming team.

Mr. Geithner failed to pay Social Security self-employment taxes when he worked for the International Monetary Fund. He paid up for two years when his 2003 and 2004 returns were audited by the Internal Revenue Service (IRS) in 2006. But he didn't pay the same taxes for 2001 and 2002 until late last year when he was being considered for the Treasury post.

In all, he paid $42,702 in back taxes and interest, according to documents released Tuesday by the Senate committee charged with vetting Geithner. The documents also revealed more minor tax adjustments. Part of Geithner's responsibility as Treasury secretary would be the IRS.

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The documents also showed that one of his household employees continued to work for the family for three months after her proof of legal work status had expired.

Democrats said the revelations wouldn't prove a major hurdle to confirmation.

"A few little hiccups," said Senate majority leader Harry Reid (D) of Nevada, who dismissed the charges.

"I am disappointed," said Sen. Max Baucus, chairman of the committee vetting Geithner, in a statement . "But I am satisfied that Mr. Geithner has taken the steps necessary to fix these problems."

On the Republican side, Sen. Orrin Hatch of Utah also said he did not have a problem with Geithner.

A respected expert

Geithner is well-regarded for his work at the New York Fed and as a key figure in helping Obama's powerhouse economic team to make swift moves to dampen the fires of recession. But the revelations represent a chink in the armor of an Obama team that has performed well up to now.

Obama nominees, including Secretary of State nominee Sen. Hillary Rodham Clinton Tuesday, have sailed through their Senate hearings. When Commerce nominee Bill Richardson was tied to a corruption investigation, he swiftly withdrew. The team has worked closely with the Bush administration to request the second chunk of bailout money from Congress.

Still, the tax mistakes set the wrong tone for an administration that says it stands for transparency and fiscal rectitude after an era of anything goes on Wall Street.

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