Without changing the budget by a single dollar and without proposing any new legislation, the federal government could be collecting at least an extra $100 million a year. Please, don't stop reading – this isn't another one of those 20 get-rich-quick emails you get every day.

Here's how it works. Every year the Department of Defense (DOD) gives more than $160 billion to private contractors – contractors who collectively owe billions in tax arrears. Now, a new report published by the Government Accounting Office (GAO) has discovered that simply by enforcing a law that has been on the books since 1996, the Department of Defense (DOD) could begin to reclaim these taxes, to the tune of at least $100 million a year. It's an honest to goodness free lunch on a dazzling scale.

The law is the Debt Collection Improvement Act of 1996 (DCIA). The act requires federal agencies that employ contractors who owe back taxes to garnish 15% of their payments and submit the funds to the IRS. Implementing and enforcing this law is a no-brainer. Overall, billions of dollars are lost every year on account of private companies defrauding the IRS, but what makes the case of DOD contractors particularly severe is that we are dishing out billions to the very same contractors who are cheating us on their taxes.

More infuriating still is what the ill-gotten gains are being used for. The GAO found that many of these contractors owed back taxes for neglecting to remit payroll taxes to the IRS. Typically, that money has instead been kept to line the pockets of upper management and, in some cases that the GAO documented, was used to buy items like luxury cars, summer homes and boats.

A few flagrantly abusive cases bear repeating here. The owner of one company with $10 million in unpaid taxes used corporate funds to buy a home in the Caribbean and a luxury boat. Another contractor used his corporate $1 million windfall to buy a large home and a luxury car. A motivational speaker hired by the DOD was found to have not filed a single tax return since the late 90's. Nearly all of these contractors continue to receive long-term contracts from the DOD.

RELATED ARTICLE
Pentagon Says Sentinel ICBM is Certifiable—at 81 Percent Over Budget It is Nuts

Despite these abuses, the tax law is not being enforced. The DOD spent 7 years just setting up the necessary machinery to track and prosecute violators, but it has yet to aggressively pursue the collection of debts. The GAO found that while the DOD could have collected $100 million in 2002 by enforcing the DCIA, they ended up claiming just $332,000 of it.

RELATED ARTICLE
Here We Go Again?

The fault lies with the IRS as much as the DOD. The IRS devotes most of its resources to negotiating voluntary compliance with delinquent taxpayers. These efforts are time consuming and very rarely rewarding. The IRS and the DOD need to work together to identify the tax dodgers and collect what is owed to the federal government. Every American taxpayer who has paid their fair share deserves at least this much.

One hundred million dollars a year may not seem like much money compared to our half trillion-dollar deficit for this year. Don't be fooled into dropping zeros – for perspective, TCS notes that $100 million is enough money to buy one hundred million McChicken Sandwiches from McDonalds' dollar menu. That's a lot of sandwiches, but the clincher on this deal should be that that money can be had for absolutely nothing. This isn't a deal that the government should be passing up.

Share This Story!

Related Posts