A second Obama cabinet nominee is having tax troubles, Jake Tapper and Jonathan Karl report.
ABC News has learned that the nomination of former Senator Majority Leader Tom Daschle, D-S.D., to be President Obama’s secretary of health and human services has hit a traffic snarl on its way through the Senate Finance Committee. The controversy deals with a car and driver lent to Daschle by a wealthy Democratic friend — a chauffeur service the former senator used for years without declaring it on his taxes.
It remains an open question as to whether this is a “speed bump,” as a Democratic Senate ally of Daschle put it, or something more damaging.
After being defeated in his 2004 re-election campaign to the Senate, Daschle in 2005 became a consultant and chairman of the executive advisory board at InterMedia Advisors. Based in New York City, InterMedia Advisors is a private equity firm founded in part by longtime Daschle friend and Democratic fundraiser Leo Hindery, the former president of the YES network (the New York Yankees’ and New Jersey Devils’ cable television channel).
That same year he began his professional relationship with InterMedia, Daschle began using the services of Hindery’s car and driver. The Cadillac and driver were never part of Daschle’s official compensation package at InterMedia, but Mr. Daschle — who as Senate majority leader enjoyed the use of a car and driver at taxpayer expense — didn’t declare their services on his income taxes, as tax laws require.
During the vetting process to become HHS secretary, Daschle corrected the tax violation, voluntarily paying $101,943 in back taxes plus interest, working with his accountant to amend his tax returns for 2005 through 2007. (Daschle reimbursed the IRS $31,462 in taxes and interest for tax year 2005; $35,546 for 2006; and $34,935 for 2007, a Daschle spokesperson said, adding that Daschle had asked his accountant to look into the tax implications of the car and driver five months before Obama won the presidency.)
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In a speech to his fellow Republican House members, Rep. Eric Cantor, R-Va., compared Daschle’s issue with the tax problems that hindered the confirmation of Treasury Secretary Timothy Geithner and those of Rep. Charles Rangel, D-N.Y., who is embroiled in a controversy over payment of taxes on a beachfront villa in the Dominican Republic. “A pattern is developing,” Cantor said. “The pattern is solidified. … It’s easy for the other side to sit here and advocate higher taxes because — you know what? — they don’t pay them.”
While a funny line, it’s at least plausible to me that Daschle didn’t realize he owed taxes for this. After all, he’d been chauffeured around for so long that he likely just thought all senior executives get that treatment. Moreover, if it wasn’t part of his compensation package and just done as a courtesy, it’s quite probable that he didn’t consider this to be income and it’s unlikely for his accountant to have asked about it.
A later Tapper report, however, is more problematic:
Mr. Daschle also didn’t report $83,333 in consulting income in 2007.
The Senate Finance Committee Report also notes that during the vetting process, President Obama’s Transition Team “identified certain donations that did not qualify as charitable deductions because they were not paid to qualifying organizations. Daschle adjusted his contribution deductions on his amended returns for 2005, 2006 and 2007 to remove these amounts and add additional contributions.” This adjustment meant a reduction in the amount he contributed to charitable foundations of $14,963 from 2005 through 2007.
These two omissions are much harder to dismiss. Indeed, they look like actual tax fraud — an attempt to conceal a substantial amount of obvious income and to claim deductions to which he wasn’t entitled and which his accountant could easily have verified. He’ll need a humdinger of an explanation.
Commenter markm sent me an email on this last night but by the time I got to it the story was all over memeorandum. The commentary has thus far been exclusively from the right and, from a sampling, it appears none too favorable.
- Ed Morrissey notes that the optics aren’t great either, snarking, “How many Americans make so much money that they could forget about $83,000 of it in a year?”
- TigerHawk offers an amusing moral hierarchy of tax evasion, including a compelling spouse nagging discount multiplier that makes avoiding nanny taxes more forgivable than avoiding chauffeuring taxes.
- Neptunus Lex observes that, “I have to say this whole business of powerful figures being chastened to pay back taxes prior to their cabinet confirmations . . . is more than a little off-putting. After all, these men are from the same party earnestly abjuring us that the wealthy must pay more to pay their fair share (even though the top 5% already pay 60% of the total income tax burden).” He adds, “The same ones who want to tax us stiffed us, at least until it stood in the way of their political ambitions.”
Unlike Timothy Geithner, who was confirmed as Treasury Secretary despite failure to pay self-employment taxes which he owed even though he wasn’t self-employed thanks to a quirk in the tax code, it’s going to be hard to argue that Daschle is “indispensable.” But, as a former Senator — and leader in the Senate — he’s got an inside track at a pass on this. The real question isn’t whether the failure to pay taxes here is forgivable but rather how well liked he was by former colleagues.
UPDATE: Hillary Bok (aka Hilzoy), writing from the Left, is pretty harsh, too.
I don’t understand why people in public life don’t just recognize that they should report anything that might even conceivably count as income, and do things right the first time.
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Part of what bothers me about this is the sense of entitlement: the sense that having a car and driver is just one of those ordinary things that happen to a person, not worth noticing or thinking of as compensation or a gift.
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I also have to ask: didn’t this come up during the vetting? If not, why not? And if it did, what’s up with that?
If mainstream Democrats are having that sort of reaction, Daschle’s done.
Photo: Chicago Limousine Service
