Tax Deadbeats Raking In Federal Cash

It has long been clear that, when monitoring the activities of the federal government, one must often suspend natural expectations for sanity and integrity. For example, anyone who fails to pay taxes should be last in line to collect benefits paid for by taxpayers. But if the results of four reports are any indication, tax deadbeats are raking in federal cash.

A report, released by the Government Accountability Office (GAO) in July, 2012, found that Medicaid providers with tax debt had received an estimated $6.6 billion in Medicaid reimbursements in Florida, New York, and Texas alone. GAO investigated 40 Medicaid providers in those three states and found that they had received $235 million in Medicaid reimbursements, but owed approximately $26 million in taxes as of September, 2011. GAO extrapolated those numbers to arrive at a global estimate of $6.6 billion in those three states.  Worse, since it relies on the amount of unpaid taxes reported by individual providers or uncovered by Internal Revenue Service (IRS) audits, the report “likely understates the full extent of unpaid taxes owed by these or other businesses and individuals.”

 A similar GAO report released in May, 2012 found that the Federal Housing Administration (FHA) had issued $1.44 billion in mortgage insurance for 6,327 borrowers with an average of $20,340 in tax debt. In that case, FHA issued insurance to thousands of borrowers who should have been ineligible, since many had not reached repayment agreements with the IRS. Despite the fact that borrowers with tax debt carry foreclosure risk “two to three times” greater than those without unpaid taxes, applicants for FHA mortgage insurance are not required to provide their federal debt status to FHA.

Finally, a February, 2012 IRS report found that about 98,000 federal employees owed the federal government $1.03 billion in 2010. That amount included $833,970 in unpaid taxes from 36 White House aides, an average of $23,156. While IRS employees – who presumably are more familiar with the tax code than most government workers – can be fired for tax delinquency, other federal employees cannot.

In all, it seems clear that tens of billions of dollars are doled out by the federal government to taxpayers who have shirked on their taxes each year. In a world where the fairness and shape of the federal tax system is fiercely debated, fixing such an obvious injustice must be a priority. After all, it might be the only issue in Washington on which everyone can agree.