$3.4 Billion Tax Credit Fraud

A tax credit that is supposed to help Americans pay for college has been abused by millions of taxpayers not attending school, including at least 250 prisoners, according to theI nspector General (IG) in charge of monitoring tax collection. This year, the scam may cost the country $3.2 billion.

The IG’s analysis of 2.1 million claims for the credit found 1.7 million filers have received the credit for students even though they provided “no supporting documentation that they attended an educational institution.” Among those improperly receiving the credit were over 63,000 students double-counted as dependents or spouses, 250 prisoners, and 84,754 students who did not have valid Social Security numbers (SSN). The Inspector General said to receive federal education aid, students generally must have valid SSNs, but for this tax credit, they did not. Unfortunately, the IRS has no effective process in place to identify false claims.

IRS Loses $3.9 Billion To Identity Thieves

This year, identity thieves will collect an estimated $3.9 billion in tax refunds on fraudulent returns they will file using stolen Social Security numbers (SSN). The Treasury Inspector General for Tax Administration (TIGTA) released an investigation this year outlining what the Internal Revenue Service (IRS) needs to do more to prevent rampant tax fraud. Over five years, taxpayers could lose more than $20 billion to crooks. These losses are largely preventable with better anti-fraud measures.

$7.3 Million Wasted On School Grant

In the last three years, schools across the nation received $1.6 billion dollars in School Improvement Grants (SIG) from the U.S. Department of Education to improve student performance. An evaluation of the program in the state of Washington has revealed the program resulted in little to no improvement. Washington public schools will use $7.3 million from the program in 2012 and have gathered over $60 million in the past three years.

A report by the Center on Reinventing Public Education found most Washington schools receiving SIGs made only marginal changes. Not one of the schools outpaced the state average in reading and math standardized tests. “The majority of schools studied show little evidence of the type of bold and transformative changes the SIGs were intended to produce,” the report states. One district SIG director interviewed about the program asked the researchers “how to successfully turn around a failing school…He went on to explain that he was at a loss as to how to do this.”

War on Drugs a Trillion-dollar Failure

Richard Branson has written an excellent article on the failure and cost of our country's "war on drugs". Here are some excerpts:

In 1925, H. L. Mencken wrote an impassioned plea: "Prohibition has not only failed in its promises but actually created additional serious and disturbing social problems throughout society. There is not less drunkenness in the Republic but more. There is not less crime, but more. ... The cost of government is not smaller, but vastly greater. Respect for law has not increased, but diminished."

We could learn a thing or two by looking at what Prohibition brought to the United States: an increase in consumption of hard liquor, organized crime taking over legal production and distribution and widespread anger with the federal government.

In business, if one of our companies is failing, we take steps to identify and solve the problem. What we don't do is continue failing strategies that cost huge sums of money and exacerbate the problem. Rather than continuing on the disastrous path of the war on drugs, we need to look at what works and what doesn't in terms of real evidence and data.

In the United States, if illegal drugs were taxed at rates comparable to those on alcohol and tobacco, they would yield $46.7 billion in tax revenue. A Cato study says legalizing drugs would save the U.S. about $41 billion a year in enforcing the drug laws.

Have U.S. drug laws reduced drug use? No. The U.S. is the No. 1 nation in the world in illegal drug use. As with Prohibition, banning alcohol didn't stop people drinking -- it just stopped people obeying the law.