Obama targets tax delinquent contractors
Updated 5:09 p.m. ET
The Obama administration on Wednesday announced plans to crack down on federal contractors that fail to pay their taxes, part of the White House's continuing efforts to save taxpayer dollars by cutting wasteful government contracts.
An executive order signed by President Obama directs the Office of Management and Budget and Treasury Department to block tax-delinquent contractors from receiving new work from federal agencies. The Internal Revenue Service will also review the accuracy of contractors' tax returns to ensure truthful reporting.
Obama called the steps "basic common sense," but said they alone will not eliminate all instances of contractor waste and abuse.
"It is simply wrong for companies to take taxpayer dollars and not be taxpayers themselves," Obama said. "We need to insist on the same sense of responsibility in Washington that so many of you strive to uphold in your own lives, in your own families, and in your own businesses."
Obama cited Government Accountability Office reports that thousands of contracting companies have received government work despite owing billions of dollars in federal taxes. A 2007 GAO study found that several contracting company owners counted expensive boats, cars, jewelry and multimillion-dollar properties among their assets, despite billions of dollars in unpaid taxes.
Wednesday's announcement is the latest in a series of administration steps to reduce contracting waste, fraud and abuse. Federal agencies have saved roughly $19 billion in government contracting costs during the fiscal year that began in October, putting them almost halfway to a two-year $40 billion goal set by Obama last spring. OMB also has instructed agencies to slash spending on "high risk," noncompetitive contracts by 10 percent this fiscal year. The administration is soon expected to issue guidance on “inherently governmental tasks” that can no longer be performed by contracting companies.
Obama's decision has broad Congressional support. Sen. Claire McCaskill (D-Mo.) and Rep. Edolphus Towns (D-N.Y.) appeared with the president at the White House on Wednesday. Both have called for contracting reforms.
Sen. Charles E. Grassley (R-Iowa) has also called for reforms, and said Obama's crackdown "is the right thing to do."
"It’s a matter of fairness, and it’s especially offensive that contractors who make money from tax dollars are delinquent in paying their own taxes," Grassley said.
The Iowa Republican still wants the Obama administration to address the issue of tax delinquent federal employees, who collectively owe at least $3 billion in taxes.
"Everybody should pay what they owe, federal employees and contractors included," Grassley said.
| January 20, 2010; 1:31 PM ET
Categories: Administration, Contracting
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