By Richard Rubin 

Rep. Mick Mulvaney, President Donald Trump's pick to run the Office of Management and Budget, faces two confirmation hearings and questions about his personal taxes Tuesday.

Mr. Mulvaney, a Republican from South Carolina, told lawmakers in a questionnaire he had failed to pay more than $15,000 in payroll and unemployment taxes for a household worker he employed from 2000 through 2004.

Similar tax missteps have tripped up past nominees, ending Sen. Tom Daschle's bid to be Secretary of Health and Human Services in 2009 and nearly preventing Tim Geithner from becoming Treasury Secretary. The top Senate Democrat, New York's Charles Schumer, has called for Mr. Mulvaney to withdraw.

A spokesman for Mr. Trump's transition team said last week that Mr. Mulvaney and his wife hired the worker to take care of their triplets and disclosed the problem during the vetting process. Mr. Mulvaney told senators that he had paid back taxes but hadn't yet paid penalties, interest and state taxes.

Mr. Mulvaney said Tuesday the employee was a babysitter who he didn't think of as a household employee because she didn't cook or clean. He said he didn't think about it again until two days after Mr. Trump nominated him. He said he received an IRS publication outlining the rules for what a household employee is and he realized that he should have withheld taxes for the worker.

"It made it immediately clear to me that I had made a mistake," he said, adding that he is willing to pay any late fees and penalties.

Mr. Mulvaney's appearance before Senate Budget Committee began at 10:30 a.m. He's scheduled to testify before the Homeland Security and Governmental Affairs Committee at 2:30 p.m.

He'll have plenty to discuss beyond his own taxes and said in his opening remarks that the national debt, now approaching $20 trillion, is unsustainable.

"I believe, as a matter of principle, that the debt is a problem that must be addressed sooner, rather than later," Mr. Mulvaney said. "I also know that fundamental changes are necessary in the way Washington spends and taxes if we truly want a healthy economy."

Mr. Trump's plans, however, would increase federal debt by more than $5 trillion beyond current projections, largely because of his tax cuts, according to a campaign-season projection from the Committee for a Responsible Federal Budget. Mr. Trump also has promised to avoid Social Security and Medicare cuts, limiting his options for curtailing spending.

Sen. Bernie Sanders, a Vermont independent who caucuses with the Democrats, pointed to the contrasts between Mr. Trump's position on those entitlement programs and Mr. Mulvaney's previously stated views.

"The opinions and ideas of Mr. Mulvaney are way out of touch with where the American people [are]," Mr. Sanders said. "And more importantly, they are way way out of touch with what President Trump campaigned on."

Sen. Lindsey Graham (R., S.C.), said Mr. Mulvaney will follow Mr. Trump's vision, including higher defense spending.

Mr. Mulvaney, first elected to Congress in 2010 as part of the tea party wave, is a sharp critic of federal spending. In 2011, he was one of the freshman Republicans who argued against the need for an immediate increase in the debt limit because the government would have enough money to pay interest on existing borrowing, preventing a default.

That was true, but Treasury officials warned about accidental missed payments. Also, failing to increase the debt limit would require immediate and deep spending cuts in other areas of the government.

Mr. Mulvaney backed an alternative, the "Cut, Cap and Balance" plan, that would have imposed spending cuts and a path to a constitutional amendment requiring a balanced budget.

Congress will need to raise the debt limit by the middle of this year. Last week, Steven Mnuchin, Mr. Trump's pick to be Treasury secretary, said he wanted Congress to raise the debt limit soon.

Mr. Mulvaney will likely be asked about Mr. Trump's plans for tax, infrastructure and health policy, as well as any attempts by Mr. Trump to cut federal spending.

Mr. Trump signed an executive order Monday freezing federal civilian hiring, and he tasked OMB with coming up for a plan for reducing the federal workforce through attrition. On the other hand, Mr. Mnuchin last week criticized staff reductions at the Internal Revenue Service that had been driven by congressional Republicans.

Write to Richard Rubin at richard.rubin@wsj.com

(END) Dow Jones Newswires

January 24, 2017 11:52 ET (16:52 GMT)

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