Daschle's tax problem highlights difficulty of vetting

Kansas City StarFebruary 3, 2009 

How hard can it be? It's right there on the questionnaire:

Do you have any expectation that you will be the subject of any tax, financial or other audit or inquiry?

You're applying for a top government job. Whether you've paid the government its due taxes just might come up, don't you think?

It seems vetting is to politics what flossing is to teeth. We've never been quite as thorough as we should be.

On Monday, Tom Daschle apologized for failing to pay almost $130,000 in back taxes while President Barack Obama "absolutely" continued to back his longtime ally to head the Department of Health and Human Services.

"Nobody's perfect," added press secretary Robert Gibbs. But he acknowledged: "It was a serious mistake."

Time and again, political teams push someone for office only to learn — or not learn — of damning problems in their biography.

Missouri's Tom Eagleton failed to tell George McGovern's campaign that he'd suffered depression and undergone electroshock therapy. Douglas H. Ginsburg was nominated by Ronald Reagan for the Supreme Court and backed out when we learned he'd smoked marijuana as a Harvard law professor.

Zoe Baird and then Kimba Wood had to withdraw their hopes to be Bill Clinton's attorney general when it became known they skipped rules in paying their domestic help. George W. Bush's first choice for labor secretary, Linda Chavez, got punted in light of an illegal immigrant on her payroll.

"Some people convince themselves that something's been handled in a way that it will not come out," said Kenneth Gross, a Washington attorney who has vetted nominees for Democrats and Republicans. "Or they rationalize that it will be understood when it does come out."

Now comes the Obama administration with the latest claim that it would have the most ethical administration yet. It put together a 63-point questionnaire for its top jobs that at first was criticized for being too intrusive.

Despite that, the White House ended up promoting two men with tax stains on their records. First, it came to light that the eventual Treasury secretary, Timothy Geithner, needed to pay $43,000 in back taxes and penalties. That came from unmet payroll taxes while he was working for the International Monetary Fund — and until pressured he was going to leave unpaid some of that money because the statute of limitations had expired.

Then came what Daschle described as an “unintentional” slipup on charitable contributions deducted in error and overlooking a car-and-driver service given to him for three years.

“You have to know what to ask for and what to press for. … You have to insist. You have to explain to them why you have to disclose everything,” said Stanley Brand, another Washington attorney who has vetted appointees. “Even when you do that, this sort of thing still happens.”

Many analysts thought Geithner made it to the Cabinet despite his tax problems — ironic for the man in charge of the Internal Revenue Service — because he was otherwise viewed as a vital player in Obama’s effort to upright the economy.

Once he got a pass, they say, the sailing got easier for Daschle. And his friendships in the Senate, the body that must vote yea or nay on his appointment, were seen as an asset to overcoming his tax problems.

Still, Daschle’s mistake prompted more jaw-dropping in the capital because his errors were the sort not expected from somebody who started in Congress during the Carter administration and rose to Senate majority leader.

“Taxes are not optional,” said Melanie Sloan, the executive director of Citizens for Responsibility and Ethics in Washington. In particular, she noted the doomed Baird and Wood nominations signaled that failure to pay taxes could sink a political career.

“How such a sophisticated player, who has been in the Senate for such a long time and leveraged that position to make a lot of money, could not see this is really a puzzle,” she said.

In a letter to the Senate Finance Committee released Monday, Daschle discussed overlooking additional income for consulting and the car service. He also deducted more in charitable contributions than he should have. He recently amended his tax returns for 2005-07 to report $128,203 in back taxes and $11,964 in interest.

“I am deeply embarrassed and disappointed by the errors that required me to amend my tax returns,” he said.

He gave a timeline for the errors and subsequent tax payments. Daschle wrote in his apology that the presidential transition team highlighted some problems, and his accountant noted other errors in adjusting his returns.

Some saw Daschle’s case as an example of how big money and political influence separate Washington’s elite from ordinary Americans. Massie Ritsch, at the Center for Responsive Politics, noted that Daschle left the Senate ranked 78th among its 100 members in wealth, with a net worth of less than $775,000. After losing re-election in 2004 and going to work for a D.C. law firm — although neither as lawyer nor lobbyist — he earned $5.2 million in the past two years.

“We need our officials and elected leaders to understand what the rest of us are going through,” he said.

Still, he allowed that a man with a busy schedule and complicated income might innocently overlook a limousine service as income that should be taxed. David Callahan, author of The Cheating Culture, compared it to someone of more modest income getting a free gym membership.

“The notion of in-kind income like that isn’t so obvious as income,” he said. “There are so many perks floating around at the upper echelon of society that they can be taken for granted.”

There also seems to exist unreal expectations about what can be kept private. Consider John Edwards and his run for the Democratic presidential nomination. He had an affair while his wife’s life was threatened by cancer.

“You have to ask the person, ‘Is there anything else I should know?’ ” said Herb Kohn, a partner in the Bryan Cave law firm.

He vetted candidates for paid and volunteer jobs for Kansas City Mayor Kay Barnes and Jackson County Executive George Lehr.

“The truthful answer at the time is ‘no,’ even though it may turn out that that was not accurate. In their minds, they’re telling the truth,” Kohn said. “The more a person has done in life, the more jobs they’ve had, the more things they’ve done, the more difficult it is to try and remember everything.”

Ethicists note that in anonymous surveys large numbers of Americans confess to cutting corners on their taxes. The IRS estimates a tax gap between what should be paid and what is paid of $345 billion a year.

Yet in surveys, people often rationalize their underpayments by citing their notion that the rich don’t pay their part.

Certainly, Daschle is not alone. Michael Josephson of the Josephson Institute of Ethics said the country needs to separate “moral misdemeanors from moral felonies.”

“We should pay attention to these mistakes, but they shouldn’t always be fatal to someone’s career,” he said. “I don’t know anyone who can bear 24-hour scrutiny.”

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