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Geithner Nomination

Floor Speech

Location: Washington, DC


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 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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