A little personal liability for the unpaid taxes would get the point across. The TaxProf passes on this nugget from the Treasury Inspector General for Tax Administration:
Federal agencies are exempt from paying Federal income taxes; however, they are not exempt from meeting their employment tax deposits and related reporting requirements. As of December 31, 2011, 70 Federal agencies with 126 delinquent tax accounts owed approximately $14 million in unpaid taxes. In addition, 18 Federal agencies had not filed or were delinquent in filing 39 employment tax returns. Federal agencies should be held to the same filing and paying standards as all American taxpayers.
When private or non-profit employers fail to remit payroll taxes, the IRS can impose personal liability on the “responsible persons” who fail to see that the taxes are paid. The IRS can go after anyone from executives to bookkeepers to collect the unpaid tax. It appears from the TIGTA report (page 2) that the IRS can’t or won’t apply this when government agencies are involved. Another triumph of fairness from Doug Shulman’s IRS. The TIGTA report recommends steps to address the problem, but tar and feathers would be a good start.
Contrast the IRS delinquent tax approach to other agencies with this:
A federal judge in Worcester, Mass., sentenced William Scott Dion today to 84 months in prison for conspiring to defraud the United States, and for obstructing the Internal Revenue Service (IRS), the Justice Department and IRS announced. U.S. District Judge F. Dennis Saylor also ordered Dion to pay restitution in the amount of $3 million.
According to the evidence presented at trial, Dion, Floyd and Adams ran a payroll tax scheme in order to pay employees “under the table” without properly accounting for, withholding, and paying over to the IRS the payroll taxes required by law.
So a private sector actor gets seven years in the big house for scamming payroll taxes. When a government agency budgeteer does it… nothing.
Other coverage: Kay Bell, Uncle Sam owes himself $14 million in unpaid federal agency taxes
Think of it as a high-income housing tax credit. Developer Gets 11 1/2 Years in Bank, Tax Fraud Scheme (HamptonRoads.com).
Eric Menden, the former owner of the Wainwright building and the old James Madison Hotel downtown, was sentenced Wednesday to 11-1/2 years in federal prison after admitting to his role in two fraud schemes that grossed more than $40 million.
Menden, 53, of Chesapeake, pleaded guilty to charges of bank and wire fraud and making false statements. He admitted his role in scamming the state and federal government’s historic tax credit program and to defrauding Bank of the Commonwealth out of tens of millions in a loan scheme.
Even when outright theft isn’t involved, “targeted tax credits” are normally a disreputable transfer from the taxpayers to the well-connected.
Howard Gleckman, A Modest Proposal: Five Ways to Tax the 47 Percent (TaxVox). I know he’s trying to show how outrageous it is to try to broaden the income tax base, but his first suggestion — repealing the Earned Income Tax Credit and the Child Tax Credit — is probably a good idea, and it would save the government billions of dollars in fraud losses.
In any case, if spending is not cut, the “47 percent” are going to see a tax increase, probably in the form of a Value Added Tax. The “rich” simply don’t have enough money to cover the government’s incontinent spending, even if you took all their income.
Tax Policy Blog chart of the day:
Trish McIntire, Livestock Deferment Extended
Russ Fox, California Musings
Jim Maule, Taxes and Services
No kidding. Corporate tax avoidance subsides when IRS audit threat increases, study finds (Nanette Byrnes, Tax Break) Next thing you know, a study will show that motorists slow down when they see a state trooper running radar up ahead.
News you can use: Cigarette Smuggling Can Make You $4 Million Dollars Richer (Scott Drenkard, Tax Policy Blog)