Daschle gets caught in a tax revolt

"Tom Daschle would have been the best person to help shepherd . . . a healthcare bill through a very difficult process in Congress," he said.

Nonetheless, many lawmakers said they had no plans to slow down.

"Healthcare will stay on the top of the agenda because the American people want it and the president has said he will do it," said Rep. Henry A. Waxman (D-Beverly Hills), who is expected to play a key role in shaping the legislation as chairman of the House Energy and Commerce Committee. "The rest of us just will have to work harder."

John Castellani, who heads the influential Business Roundtable, said his group over the last month had been working more closely with members of Congress than with the new administration.

That effort builds on the emerging consensus that the federal government must act decisively to help cover the roughly 46 million people in America who lack health insurance.

If both Daschle and Killefer had been confirmed, they would have been the second and third Obama officials allowed to serve despite having owed back taxes -- making it hard for Obama to insist he was imposing the strictest ethical standards.

So in the morning, news broke that Killefer had withdrawn. Daschle pulled out shortly afterward.

Last month, Daschle paid more than $140,000 in back taxes and interest stemming from his failure to report as income the use of a car and driver provided by InterMedia Advisors, a New York private equity fund that Daschle has worked for since he left the Senate in 2005.

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

In Killefer's case, she had been hit with a $947 tax lien from the District of Columbia in 2005 over back taxes on a household employee.

Although Daschle and top administration officials thought Monday night that he could survive the uproar and win Senate confirmation, other Washington veterans saw trouble.

"It became clear over the weekend that this was going to be a dragged-out issue," said Stanley Brand, a Washington lawyer who specializes in ethics cases involving legislative and executive branch officials.

And Republican senators announced they had more questions about Daschle.

Obama spokesman Robert Gibbs, briefing reporters Tuesday, denied that the president had asked Daschle to step aside. "As Sen. Daschle said in the statement that we released and told the president on the phone, he did not want to be a distraction to [Obama's] agenda."

At least one public health advocate expressed relief that Daschle had quit, not because of his tax problems but because of a fear that the wealth he had obtained, at least indirectly, from healthcare corporations would compromise his ability to lead.

Dr. Marcia Angell, former editor in chief of the New England Journal of Medicine, said Tuesday that she was pleased with Daschle's decision.

"I was much more concerned about his history of working on behalf of the private health insurance industry than I was about his tax issues," said Angell, who teaches at Harvard Medical School. As "head of the Obama health system reform effort, he would inevitably have had to make decisions that greatly affected his former clients."

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peter.nicholas@latimes.com

tom.hamburger@latimes.com

Times researcher Janet Lundblad in Los Angeles contributed to this report.