NEW YORK (MainStreet) — In what can only be described as an unfortunate ironic twist, a new report shows that thousands of the contractors who received handouts from the government’s stimulus package actually owed the government money in back taxes.
More than $24 billion worth of stimulus money was given to some 3,700 contractors who failed to pay their back taxes in full, according to a report from the Government Accountability Office, or GAO. In total, these tax cheats owed the government $757 million in taxes.
If that’s not bad enough, the GAO’s findings are based on an analysis of 63,000 of 80,000 contractors who received stimulus money. So, according to the GAO, if one were to assume that the same proportion of the remaining contractors are tax cheats, the total amount given to duplicitous contractors would be $29 billion, or roughly 10% of the total stimulus money that was marked for contracts and grants.
“It is a matter of basic fairness that those who take government money should be required to pay their taxes like everyone else,” said Sen. Tom Coburn (R-Okla.), who requested the report along with four other Senators. “That such a huge amount of the stimulus money went to known tax cheats should be a wakeup call for Congress.”
While one might expect some tax cheats to slip under the radar, several of these contracts had clear red flags. As the GAO points out, one nonprofit organization actually owed more than $2 million in unpaid payroll taxes, and apparently its CEO was known to frequent casinos. Still, the organization was given more than $1 million in stimulus funds.
Given the scale of the stimulus package and the speed with which it was distributed to businesses around the country, the government initiative has had a remarkably low level of fraud reported – about $3 million worth of funds, or 0.001% of the total have been contested. But the GAO’s report raises new concerns about the government’s vetting process for the funds.
Ordinarily, the federal government has a program in place to weed out tax cheats, but according to the report, the stimulus funds were often distributed at the state and local government level or else through private contractors, which may have made it easier for some of these contractors with bad tax records to go unnoticed.
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