Daschle's Tax Woes Derail Nomination, Leaving Obama's Healthcare Reform in Limbo

Until he dropped out, former Sen. Tom Daschle was to be Obama's point man on healthcare.

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The decision by Tom Daschle to remove his name from consideration for the nation's top healthcare post two weeks into Barack Obama's presidency deals a blow to both the administration's bid to hit the ground running and overhaul the nation's troubled healthcare system.

Amid intensifying concern about his unpaid taxes, Daschle abruptly withdrew from consideration for the top spot at the Health and Human Services Department. Obama had chosen Daschle to spearhead an ambitious reform effort as head of the huge cabinet-level agency and in a new post running the White House Office of Health Reform.

Daschle's decision came swiftly on the heels of another nominee withdrawing from consideration for an Obama administration post—Nancy Killefer, who was nominated by Obama to be the government's first chief performance officer, but ran into her own tax troubles. A third Obama nominee, Timothy Geithner, also faced scrutiny over unpaid taxes, but won confirmation as Treasury Secretary.

Obama said today that he accepted Daschle's withdrawal "with sadness and regret." Daschle has been battling for his nomination even after paying $140,000 in unpaid taxes and interest. It emerged in recent days that he owes even more because of his failure to pay additional taxes for the use of a luxury-car service and driver. But even Daschle's close ties to his former Senate colleagues could not stem the growing controversy over Daschle's taxes.

Daschle said he was pulling his name from consideration because the work requires a leader who will "operate with the full faith of Congress and the American people." He added, "Right now I am not that leader and will not be a distraction." White House spokesman Robert Gibbs said after the news that Obama has a robust agenda and that Daschle "did not want to be a distraction to that agenda."

Daschle appeared yesterday before a closed-door meeting of the Senate Finance Committee, which was preparing to vote on his nomination. He apologized for his "completely inadvertent" failure to pay the full amount owed in taxes. "I deeply apologize to President Obama, to my colleagues, and to the American people," he said.

But the apology wasn't enough. The tax troubles stemmed in part from failing to pay tax on his consulting income, in part from taking too many charitable dedications, and in part from use of the car service.

After Daschle telephoned Obama to withdraw his name from consideration, Sen. Max Baucus, a Democrat from Montana who chairs the Finance Committee, said he learned of the news "with regret but with respect for his decision."

"Tom would have been, as I said, a terrific partner at HHS on health reform, and I hope and fully expect that he will continue to play a leading and valuable role in health policy for this country," Baucus said.

Leading up to Monday's meeting, Republican lawmakers called Daschle's tax problems "very serious" and said he should have known better because he sat on the Senate's tax-writing committee. One member of the Senate Republican leadership team, Sen. John Ensign of Nevada, characterized Daschle's nomination as "very problematic" and said his explanation for not paying the taxes "had holes in it."

Daschle, 61, a native of South Dakota, is a former Senate majority leader who came to Washington after being elected to the House in 1978. He was Senate minority leader and a high-profile GOP target when he lost a re-election bid in 2004.