Healthcare tensions simmer at Sebelius confirmation hearing

Kansas Gov. Kathleen Sebelius, President Obama’s choice to head the Department of Health and Human Services, did not pay $7,040 in income taxes that she and her husband owed between 2005 and 2007, the White House disclosed Tuesday in another tax-related embarrassment for the new administration.

Sebelius’ tax bill stemmed from insufficient documentation of charitable donations and mistakes in deducting mortgage interest, the governor explained in a letter to the chairman and ranking Republican on the Senate Finance Committee.

It was not immediately clear how the disclosure would affect her prospects for Senate confirmation to the Cabinet post. Her unpaid taxes were substantially smaller than those of former Sen. Tom Daschle, who was forced to withdraw as Obama’s Health and Human Services nominee in February after it was disclosed that he had failed to pay more than $128,000 in taxes.

But Republicans, already leery of Obama’s healthcare overhaul plans, may give the tax matter a thorough airing when Sebelius appears before the Senate Finance Committee on Thursday. A confirmation vote by the full Senate is expected later this month.

Senate Finance Committee Chairman Max Baucus (D-Mont.), who is helping lead the effort to write healthcare legislation, rallied to Sebelius’ side.

“There is absolutely no doubt in my mind that Gov. Sebelius has the political experience, determination and bipartisan work ethic to get the job done with Congress this year,” Baucus said in a statement. “She’s the right person for the job.”

A spokeswoman for Iowa Sen. Charles E. Grassley, the senior Republican on the panel, was more circumspect.

“Sen. Grassley is always concerned about tax adjustments by nominees but reserves judgment until the nominee has a hearing and has a chance to offer an explanation,” Jill Gerber said.

In a letter to Sebelius on Tuesday, Baucus and Grassley otherwise indicated satisfaction with her disclosures to the committee.

Sebelius -- a Democrat who is the sixth senior nominee to the Obama administration to reveal tax problems -- said she paid the back taxes plus $878 in interest after they were identified by an accountant she had hired to review her returns when Obama tapped her for his Cabinet. “That evaluation revealed unintentional errors, which we immediately corrected by filing amended returns,” Sebelius wrote in a letter to Baucus and Grassley.

Sebelius explained in her letter that the review of her taxes revealed that she did not have the required acknowledgment letters for three of the 49 charitable donations over $250 that she and her husband made in 2005, 2006 and 2007.

She said the couple also mistakenly continued to deduct interest on a home loan after they sold their house in 2006 for less than the outstanding balance of the mortgage. They made a similar error on a home improvement loan, she said.

Finally, she explained that she and her husband had insufficient documentation for some of the business expenses they had deducted.

The issue of unpaid taxes had not been announced publicly when Sebelius appeared before the Senate Health, Education, Labor and Pensions Committee on Tuesday morning. At that time, several Republican lawmakers expressed skepticism about the president’s healthcare plans, which she would play a role in championing.

The governor told members of the committee that she, like Obama, favors the creation of a government-run program to cover at least some of the roughly 46 million people in America without health insurance. Such a program, which many Republicans vigorously oppose, could compete with private insurers.

Sebelius also said the White House would not oppose controversial parliamentary tactics to prevent Senate Republicans from filibustering healthcare legislation this year, another key sticking point for GOP lawmakers.

Her nomination hearings come as House and Senate lawmakers are engaged in a fierce debate over whether to include language in the annual congressional budget resolution that would allow Democrats to pass major healthcare legislation with only 51 votes in the Senate rather than the 60-vote supermajority usually necessary to avoid filibusters.

Republicans oppose Democrats’ using the procedure, know as the “reconciliation process,” although the GOP used it to pass major tax legislation when they were in the majority.

Wyoming Sen. Michael B. Enzi, the senior Republican on the committee, cautioned Sebelius against using it.

“Using budget shortcuts . . . shuts out members of the minority party,” he said. “We’ve set up . . . a tight timetable for getting something done. This time, with having Congress involved in the process, I’m confident that something will happen with it, and in a relatively short period of time. But I hope that that wedge doesn’t get thrown in there.”

Sebelius assured Republicans that the administration wants to work with them. “There’s an absolute dedication to engaging Republicans and Democrats,” she said after being introduced by two Kansas Republicans who praised her ability to work across the aisle. One was Sen. Pat Roberts. The other was former Senate Majority Leader Bob Dole, who sat with Sebelius in front of the committee.

“The question is, can we forge a bipartisan proposal that is accessible, available and affordable?” Dole told his former colleagues. “I think we can with steady and strong leadership. . . . Gov. Sebelius is ready to lead us in that direction.”

In addition to Sebelius and Daschle, four other senior nominees to the Obama administration have faced scrutiny over unpaid taxes.

Before he was confirmed as Treasury secretary, Timothy F. Geithner admitted he had not paid about $43,000 in taxes. Former Rep. Hilda L. Solis, now Labor secretary, had to answer questions about $6,400 in tax liens against her husband’s business.

Former Treasury official Nancy Killefer, whom Obama tapped to be the administration’s chief procurement officer, withdrew after acknowledging she had not paid employment taxes for a household worker. And in early March, the Senate Finance Committee reported that former Dallas Mayor Ron Kirk, Obama’s choice to be the U.S. trade representative, failed to pay almost $10,000 in taxes.

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noam.levey@latimes.com