Is Congress Being Too Tough on Nominees' Taxes?

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Chip Somodevilla / Getty

Kansas Governor Kathleen Sebelius testifies before the Senate Health, Education, Labor and Pensions Committee during her confirmation hearing to be Secretary of Health and Human Services on Capitol Hill on March 31, 2009

At what point does congressional due diligence become onerous and unreasonable flyspecking? With legions of Obama Administration posts sitting vacant amid multiple national crises, that's the question that many in Washington are asking.

Complaints that the vetting process has gone overboard grew earlier this week, when Kansas Governor Kathleen Sebelius, President Obama's pick for Secretary of Health and Human Services, became the latest nominee to be embarrassed by a public disclosure of problems with her tax returns. In Sebelius' case, the discrepancies were, by all appearances, relatively minor ones, centered mostly on a failure to produce the proper documentation for charitable contributions and business expenses. She agreed to pay an additional $7,918 in taxes and interest, and she looks to be on track to a relatively easy Senate confirmation. (See the top 10 Obama gaffes.)

Still, episodes like this are stoking tension between the Administration and the Senate — particularly with the Finance Committee, which has vetted a number of the nominees for whom problems have emerged, including the tax issues that threatened to derail the confirmation of Treasury Secretary Timothy Geithner and forced former Senate majority leader Tom Daschle to withdraw his name from consideration as head of HHS. One source close to the process says the Finance Committee is now giving such scrutiny to the tax records of Administration nominees that, amid the committee's larger concerns, it has questioned items as small as $14 on their returns. As a result, sources say, the White House has stepped up its own vetting process — slowing everything down even further. (Read "Tim Geithner's Hiring! And His Critics Hope It's Soon.")

"It just seems like they've reached a point where they are going too far," says Darrell West, the director of governance studies at the Brookings Institution. And the sluggishness comes at a time when the government needs to have all hands on deck as quickly as possible. At this point, West says, the Administration has named candidates for only 28% of the government positions that require Senate confirmation, which suggests it is moving more slowly than previous Administrations.

West notes that the Treasury Department, which is the Administration's command center for dealing with the financial crisis, has made significant progress in recent weeks in putting candidates into the pipeline for confirmation. (A list provided by Treasury to TIME shows that people have been nominated or confirmed for all but four of the top 18 political posts.) But West says only one-third of the political appointees to top jobs are at their posts in the Commerce and Health and Human Services departments. And staffing is going slowly at the Pentagon, the Environmental Protection Agency and Homeland Security as well, he adds. (See who's who in Barack Obama's White House.)

Many on Capitol Hill insist that scrutiny has not gotten significantly tighter. "The Finance Committee is not doing anything different now from what it has always done under the leadership of either [Chairman Max] Baucus or me," ranking Republican Chuck Grassley of Iowa said recently. "We are vetting nominees for the current Administration the same way we vetted nominees for the previous Administration." Finance Committee staffers note, for instance, that Paul O'Neill, who was George W. Bush's first Treasury Secretary, had to pay $92 in back taxes when the Finance Committee noticed that he hadn't reported gifts he had given a part-time housekeeper. (See George W. Bush's biggest economic mistakes.)

But the atmosphere of tension and mistrust is real — and no longer limited to the Finance panel. In recent weeks, three sources tell TIME, the Senate Committee on Foreign Relations has added a tax-related item to the basic questionnaire it presents to nominees it is vetting, asking them whether they have reviewed their tax returns for the past five years and can verify that they are accurate. And officials say that other panels, such as Homeland Security and the Governmental Affairs Committee, are moving slowly in vetting the nominees that are before it.

One effect of this, officials say, has been to discourage talented people from seeking government jobs. What rankles some in the Administration is the fact that even mistakes that are relatively small and by all appearances inadvertent — such as U.S. Trade Representative Ron Kirk's failure to count as income speaking fees that he subsequently donated to charity — are being made public. "This is a new procedure on [the Senate's] part," complains one official, "and it has created an incredible anxiety on tax issues." Adds a prominent tax attorney who has experience in the confirmation process: "In the past, if something like that happened, an amended return would show up a couple of days later, and that would be it. It wouldn't be the public torture that is going on today." (Both sources — like pretty much everyone else interviewed for this story — insisted on anonymity, citing the sensitivity the issue has engendered.) (See pictures of Barack Obama's nation of hope.)

There is at least some precedent for going public with these kinds of embarrassing mistakes. It is true, for instance, that O'Neill's minor tax transgression was made public by the Finance Committee in 2001. But it didn't cause nearly the stir that has surrounded the more recent nominees with tax problems. And Grassley has little sympathy for that argument. "The tax issues of the nominees considered by the Committee this year came to be public only because the nominees chose to proceed. Chairman Baucus and I agree that if a nominee chooses to proceed after tax issues are identified, then the public should be informed of those issues," Grassley said. "In every case, the nominee is aware that we will make this information public."

Of course, there may be a solution here for everyone to consider. If so many smart and talented officials are getting tripped up over their tax returns, perhaps it is time for Washington to make the tax code simpler for everyone.

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