Tax lapses are undoing of Daschle, Killefer bids for jobs with Obama

The Baltimore Sun

WASHINGTON - The withdrawal of Tom Daschle's nomination yesterday as secretary of health and human services and point man on health care reform reflected a growing recognition in the White House that his tax problems were igniting deep anger among voters across the country over an apparent double standard - calls for economic sacrifice by ordinary Americans, tolerance of laxity on taxes by Washington insiders.

Revelations that the former Senate Democratic leader had only belatedly paid $140,000 in back taxes, coming in the wake of a similar failure to meet basic tax obligations by Treasury Secretary Timothy F. Geithner, reached a tipping point yesterday, according to Democratic senators, outside supporters and President Barack Obama.

And Nancy Killefer withdrew her bid to head Obama's new office devoted to improving government performance, acknowledging she hadn't paid employment taxes for a household employee.

The turnaround on Daschle's nomination occurred with lightning speed. Both Daschle and his close allies thought as late as Monday night that he could survive the controversy. By midmorning yesterday, that estimate had changed.

But the groundswell had been building outside Washington for several days. Late last week, Internet bloggers sympathetic to Obama had begun blasting Daschle on the back taxes, as well as on his ties to the pharmaceutical industry and others with stakes in health care legislation.

By early yesterday Democratic senators and administration allies outside the government had begun expressing concern to administration officials about whether Daschle could weather the criticism and remain an effective leader on health care reform.

Obama, seeking to return the focus of attention to his economic stimulus plan, moved quickly to take responsibility for the Daschle imbroglio.

"I've got to own up to my mistake, which is that ultimately it's important for this administration to send a message that there aren't two sets of rules. You know, one for prominent people and one for ordinary folks who have to pay their taxes," Obama said in a television interview.

"And so I'm frustrated with myself, with our team. ... And I'm here on television saying I screwed up and that's part of the era of responsibility, is not never making mistakes, it's owning up to them and trying to make sure you never repeat them and that's what we intend to do."

By any measure, yesterday was the most difficult day of Obama's young presidency. He had entrusted Daschle with his most ambitious domestic priority: reducing the cost and expanding the scope of health care coverage. Even before Obama was sworn in, Daschle was traveling around the country to build support for Obama's plans.

And Daschle was not the only Obama nominee to go down in flames yesterday over a failure to pay taxes: Nancy Killefer withdrew her bid to head Obama's new office devoted to improving government performance, acknowledging she hadn't paid employment taxes for a household employee.

Several weeks ago, the Obama administration told Senate staff of a tax problem involving Killefer - she hadn't paid employment taxes for a household worker, according to a person familiar with the nomination.

In 2005, she had been hit with a $947 tax lien from the District of Columbia. The Senate at first didn't believe the issue would doom Killefer's chances, the person said. But the timing of the revelation turned out to be lethal - coming on top of both Daschle and Geithner.

Geithner was confirmed amid nagging concerns that the man who would oversee the Internal Revenue Service had himself failed to pay $34,000 in payroll taxes.

On Sunday, Daschle sent a letter of apology to the chairman and ranking member of the Senate Finance Committee, which was to have voted on his nomination. In the letter to Sens. Max Baucus of Montana and Charles E. Grassley of Iowa, Daschle offered regrets as well as a promise to answer any questions.

"As you can well imagine, I am deeply embarrassed and disappointed by the errors that required me to amend my tax returns," he wrote in a letter circulated to news organizations yesterday. "I apologize for the errors and profoundly regret that you have had to devote time to them. I will be happy to answer any Committee members' questions about these issues."

Daschle's withdrawal is unlikely to derail a health care reform movement that had begun gathering steam even before Obama was elected.

"If anything, there's more urgency for us to keep up the momentum," Baucus said yesterday.

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