Stim­u­lus re­cip­i­ents found to be tax cheats

The Washington Times Weekly - - Politics - BY STEPHEN DI­NAN

One con­struc­tion com­pany that won mul­ti­ple awards of money un­der Pres­i­dent Obama’s 2009 stim­u­lus pro­gram was delin­quent on its fed­eral tax bill to the tune of $700,000, even as a com­pany ex­ec­u­tive was blow­ing hun­dreds of thou­sands of dol­lars at casi­nos.

Yet an­other com­pany failed to pay taxes, en­tered into a pay­ment plan with the In­ter­nal Rev­enue Ser­vice, and then re­peat­edly de­faulted on that agree­ment, and still won stim­u­lus con­tracts worth more than $1 mil­lion, ac­cord­ing to a Gov­ern­ment Accountability Of­fice re­port re­leased May. 24

All told, gov­ern­ment in­ves­ti­ga­tors found that dur­ing the pe­riod they ex­am­ined, one out of ev­ery six stim­u­lus con­tract or grant dol­lars went to a known tax cheat, ac­cord­ing to Sen. Tom Coburn, an Ok­la­homa Repub­li­can who, along with sev­eral col­leagues, re­quested the GAO re­view.

The re­view found that at least 3,700 stim­u­lus re­cip­i­ents owed a to­tal of more than $757 mil­lion in taxes, but were awarded $24 bil­lion in stim­u­lus money.

“Av­er­age Amer­i­cans are likely won­der­ing why we gave such a huge amount of fed­eral money to tax cheats when our na­tional debt is more than $14 tril­lion,” Mr. Coburn said. “That $24 bil­lion went to such peo­ple looks like we are re­ward­ing peo­ple for po­ten­tially crim­i­nal be­hav­ior.”

GAO said the num­ber of cheats and the to­tal dol­lar amount of un­paid taxes is likely higher than their find­ings be­cause IRS data­bases don’t record amounts owed by tax­pay­ers who have not filed re­turns or who have not been as­sessed delin­quent pay­ments by the IRS.

Fed­eral law does not bar tax cheats from get­ting con­tracts, nor does it al­low the IRS to share tax­payer in­for­ma­tion. It does al­low the gov­ern­ment to dock pay­ments to cheats in or­der to make up their miss­ing taxes, but only up to 15 per­cent.

Daniel I. Gor­don, the pro­cure­ment ad­min­is­tra­tor in the Of­fice of Man­age­ment and Bud­get, said the Obama ad­min­is­tra­tion is try­ing its best to limit awards to cheaters, but that Congress needs to give the gov­ern­ment more au­thor­ity to let the IRS share data with the agen­cies that dole out the money.

He also said the pres­i­dent’s 2012 bud­get calls for giv­ing the IRS au­thor­ity to levy up to 100 per­cent of fed­eral pay­ments made to ven­dors that owe delin­quent taxes.

Com­pli­cat­ing the process, the GAO said much of the money couldn’t be re­couped by the levy pro­gram be­cause the stim­u­lus grants were first made to states, lo­cal­i­ties or prime con­trac­tors, which then awarded them to sub­con­trac­tors.

GAO said that loop­hole must be closed.

The gov­ern­ment in­ves­ti­ga­tors took a closer look at 15 stim­u­lus re­cip­i­ents whose his­to­ries raised red flags. The 15 were re­spon­si­ble for $40 mil- lion in un­paid taxes, and had all en­gaged in po­ten­tially crim­i­nal ac­tiv­i­ties, in­clud­ing with­hold­ing pay­roll taxes from em­ploy­ees but never send­ing the money to the IRS.

All 15 have been re­ferred to the IRS for fol­low-up.

The tax-cheat prob­lem is not unique to the stim­u­lus pro­gram, but it has brought the mat­ter into fo­cus again.

The Demo­crat-con­trolled Congress passed the Amer­i­can Re­cov­ery and Rein­vest­ment Act in Fe­bru­ary 2009 in an ef­for t to boost the strug­gling econ­omy, and Mr. Obama promised the money would be re­spon­si­ble for fund­ing 3.5 mil­lion jobs.

Since then, though, the stim­u­lus price tag has grown to $821 bil­lion while pro­duc­ing mixed re­sults on the job front.

The un­em­ploy­ment rate topped 10 per­cent, de­spite the ad­min­is­tra­tion’s pro­jec­tions that it would never go above 8 per­cent. The Con­gres­sional Bud­get Of­fice says the spend­ing is re­spon­si­ble for sup­port­ing 3.5 mil­lion jobs at best, but it’s also just as likely that it sup­ported 1.3 mil­lion jobs, well short of the Obama ad­min­is­tra­tion’s pro­jec­tions.

Seek­ing to re­new at­tacks re­gard­ing the pro­gram, House Repub­li­cans’ cam­paign arm, the Na­tional Repub­li­can Con­gres­sional Com­mit­tee, used the GAO re­port’s find­ings to at­tack Democrats who voted for the stim­u­lus.


Sen. Tom Coburn, Ok­la­homa Repub­li­can, says of the GAO re­view of stim­u­lus re­cip­i­ents: “Av­er­age Amer­i­cans are likely won­der­ing why we gave such a huge amount of fed­eral money to tax cheats when our na­tional debt is more than $14 tril­lion.”

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