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Porkulus: Cash for Tax Cheats

The opinions expressed by columnists are their own and do not necessarily represent the views of

When President Obama signed the trillion-dollar stimulus law in 2009, he proclaimed that he was "keeping the American dream alive in our time." The stimulator-in-chief failed to mention that billions would be spent keeping American tax scammers afloat on our dime.


At a congressional hearing on Tuesday, federal auditors reported on the latest porkulus spending gone wild. According to a new General Accounting Office audit conducted over the past year, nearly 4,000 stimulus recipients received $24 billion in Recovery Act funds -- while owing more than $750 million in unpaid corporate, payroll and other taxes. Among the tax-cheating federal contractors and grant winners who raked in stimulus bucks, the Senate Permanent Subcommittee on Investigations found:

-- Two social services groups with nearly $3 million in unpaid taxes each received more than $1 million in stimulus awards.

-- One nonprofit organization owed more than $2 million from years of unpaid payroll taxes, while at the same time its CEO made numerous trips to a casino. The group was awarded more than $1 million in stimulus funds.

-- One engineering services firm had a $6 million delinquent tax debt and was called by the IRS an "extreme case of noncompliance," yet won a contract worth more than $100,000.

-- A municipality with a history of late tax filings and five periods of unpaid payroll taxes worth $1 million received $100,000 in stimulus money.

-- A health care company that owes more than $1 million in back taxes and has had federal IRS liens filed against it since the late 1990s received $100,000 in stimulus funds.


-- One security firm owed $9 million and was repeatedly cited not only for being uncooperative with the IRS, but also had been nabbed with frequent labor violations. It also received a stimulus contract worth more than $100,000.

And this is just the tip of the Cash for Tax Cheats iceberg. The GAO acknowledged in its report that "the estimated amount of known unpaid federal taxes we identified is likely understated" because of rampant underreporting of income and because the analysis did "not include Recovery Act contract and grant recipients who are noncompliant with or not subject to Recovery Act reporting requirements."

The official response of the Obama administration's stimulus oversight board? First, the Recovery Accountability and Transparency Board patted itself on the back for its transparency. Second, the panel dodged responsibility by sheepishly pointing out that "federal law does not prohibit tax delinquents from getting government contracts or grants." As if the RATs couldn't have exercised their own common sense to stop such plundering in the name of job creation themselves?

Even if such a prohibition existed, you can't count on the IRS to perform due diligence on behalf of the American taxpayer, either. Last week, the Treasury Department inspector general found that the tax police have failed to prevent fraud in the stimulus law's energy tax credit program. Some $6 billion in stimulus energy credits for homeowners have been claimed -- but the inspector general's audit found that 30 percent of credit-claimers had no record of homeownership. "I am troubled by the IRS's continued failure to develop appropriate verification methods for distributing Recovery Act credits," the Treasury Inspector watchdog said.


Moreover, when the IRS wasn't falling down on its job policing outside fraud, its own workers were committing their own stimulus fraud -- by cheating the system and claiming a first-time homebuyer tax credit included in the 2008 and 2009 economic stimulus packages. At least 128 IRS employees claimed the credit, according to a recent Treasury Department audit, yet weren't first-time buyers or violated other basic eligibility criteria.

Oklahoma GOP Sen. Tom Coburn, who has doggedly tracked stimulus waste from Day One, said, "That such a huge amount of the stimulus money went to known tax cheats should be a wake-up call for Congress." It should be about the 20th wake-up call by now. Obama's notorious slush fund has redistributed wealth to prison inmates, flaky researchers, social justice boondoggles, infrastructure to nowhere, foreign companies, dead people and ghost congressional districts -- not to mention $20 million in chump change to pay for campaign-style stimulus-hyping road signs across the country emblazoned with the shovel-ready logo.

And for what?

Unemployment remains near double-digits. Obama economic advisers Christina Romer and Jared Bernstein infamously vowed the stimulus would stay below 8 percent. Highway jobs have not materialized. Investor's Business Daily notes that a new study by economists Timothy Conley of the University of Western Ontario and Bill Dupor of Ohio State "found that despite the influx of all that federal money, highway construction jobs actually plunged by nearly 70,000 between 2008 and 2010." Indeed, the researchers found that the stimulus actually "destroyed or forestalled" a whopping one million private sector jobs by crowding them out with make-work public jobs and programs.

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