I think Charles Schumer put it in perspective on Charlie Rose the night before last.
He thinks, and others on the Finance Committee think, there are only 6 or 8 people in the country with the skill set to be Treasury Secretary now, and guide us through this financial crisis.
I assume he thinks Henry Paulson was not qualified. That brings up a point; it is not just financial acumen, it requires political adroitness and superior communications ability. With Congress, with the President, internationally.
So they (Senate Finance Committee) are doing what is in the nation's best interest.
You need someone who understands all the instruments and what all the policy choices are. And how all the pieces fit together, what are the low-risk choices and the medium- and high-risk choices. And how all this fits in with other nations and other Central Banks. You can't leave it all to the Fed Chairman.
On taxes:
I would bet that Geithner knows the regulations and he knows how to read, and there's something about how it is worded and how he got paid, that he fairly thought he would prevail in the position he took if the IRS challenged him (I'm referring to the years for which the IRS said he owed after the audit).
Years pass, he's done the returns the same way, he comes back to be a Fed governor, and he rises in national stature. In that situation, he decides appearances are also important, so he accepts what the IRS says, even though 2-3 years earlier he would have negotiated or explained his side.
For instance, there are NYSE CEOs who have had contracts (disclosed to the SEC and shareholders) for their pay to include all the taxes due on their compensation (a "gross up" provision). When an employer pays that compensation, the employee pays no taxes and just deposits the money.
If the IMF paid Geithner and misworded the letter or the policy that explained what they did or were doing, or mishandled the reimbursement, here's what could have happened:
1. The IMF reimbursed Geithner for the self-employment tax on his "contractor" pay (that's what I saw reported); or
2. The IMF reimbursed Geithner for the "employer share" of self-employment tax; or
3. The IMF reimbursed an amount that would leave Geithner with the same payroll tax net as he would have paid as a U.S. employee of a U.S. company. This one is less because a self-employed taxpayer gets a partial credit so it is not fully twice what the taxpayer side is.
So, the possibilities are:
1. He would owe taxes on that reimbursement.
2. He would owe no taxes on that reimbursement.
3. If what was taxable was self-employment income reported on Schedule C, he didn't owe SE tax on the gross paid, but on the amount on a lower line on that Form. He could have had deductions, and even substantial deductions and even losses from a prior year to reduce taxes due in the later year(s).
Taxes are complicated and I just want to state, it is possible that he paid the IRS audit bill for appearances sake, even though in 2006 he could have gotten it reduced or eliminated.
This year, with the Treasury Secretary position open, I would still bet that Geithner knew what he was doing better than a vetting committee (unless a currently practicing CPA who specializes in taxes was vetting him). Chances are, when he presented his prior tax returns, the vetters saw the audit and payment (which included interest), and inquired about any prior years. Or he submitted 7 years of returns at the beginning of the process, and they asked what about 2001 and 2002?
Note, I have other messages from this Board that I haven't looked at yet. |
