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Treasury Secretary

WSJ: IMF Informed Geithner on Taxes

 Timothy Geithner, Federal Reserve Bank of New York President On Thursday January 15th 2009, The Wall Street Journal published an article entitled IMF Informed Geithner on Taxes. According to the article's lead, "Timothy Geithner, whose nomination as Treasury secretary has been delayed by his past failure to pay taxes, was repeatedly advised in writing by the International Monetary Fund that he would be responsible for any Social Security and Medicare taxes he owed on income he earned at the IMF between 2001 and 2004."

Toomre Capital Markets LLC ("TCM") wrote about this issue two days ago in the post Timothy Geithner Has Some Past Tax Problems. If the information is indeed correct, sadly while admiring Mr. Geithner's work in general, Toomre Capital Markets LLC strongly believes that the willful decision to avoid paying social security taxes, particularly being audited and being required to pay back taxes for the 2003 and 2004 tax years, disqualifies Timothy Geithner from being confirmed as Treasury Secretary in the Obama administration. TCM strongly believes that a tax evader is unqualified to oversee the Internal Revenue Service.

While we wish that Timothy Geithner had paid his taxes when due, his personal decision smacks of tax avoidance when he chose not pay social security taxes for the years 2001 and 2002 (after the 2006 IRS audit) until the business day before his nomination. TCM does not accept the defense offered by the transition officials earlier this week: Mr. Geithner made a mistake common to people who work for international institutions. Mr. Geithner is a pretty sharp individual and he should have at a minimum known that he had made a mistake after the 2006 audit.

If Mr. Geithner did not know that those past taxes were due (after the audit), he surely is not qualified to lead economic policy in the new administration. If he did know that they were due and still did not pay them until recently, the incident speaks volumes to his personal ethics and should likewise disqualify him from overseeing the IRS. As Senator George V. Voinovich (R., Ohio) said, "He may be a smart guy, but the average person on the street sees that he hadn't paid his taxes." In this period of change, Toomre Capital Markets LLC hence hopes that either President-elect Obama will rescind this nomination or the United States Senate will refuse to confirm this nominee.

In short, if one willfully cheats on one's taxes, one definitely is not qualified to oversee the IRS and the United States tax system, not matter how qualified one otherwise is. Will the Senate and President-elect Obama demonstrate that they understand and live true to a world of high ethics? Or will this be yet another example of cutting an ethical corner? Reader comments and thoughts are welcome.