Blocking Government Contracts for Tax Cheats

Blocking Government Contracts for Tax Cheats
Posted by Jesse Lee on January 20, 2010 at 10:28 AM EST
This morning the President announced a Presidential Memorandum putting a common sense restriction in place to put government on the side of the taxpayer: blocking contractors who are delinquent on their taxes from receiving new government contracts. He also called on Congress to go further and give the government the tools necessary to ensure that the public’s tax dollars are not used to boost the profits of companies who refuse to pay their taxes. Read the White House fact sheet and memorandum itself for all the details.

The stories of these companies are in stark contrast to the stories of working people playing by the rules even in tough times, as the President explained in his remarks:

Studies by the Government Accountability Office have identified tens of thousands of such dead-beat companies that are being awarded government contracts. One company owner who owed over $1 million in taxes was paid over $1 million as a defense contractor -- and instead of using that money to pay his back taxes, he chose to buy a boat, some cars, and a home abroad with his earnings. The total amount owed in unpaid taxes by companies like that is estimated at more than $5 billion.

Now, in Washington, $5 billion might not seem like a lot of money. But if we were to invest that money in education, it would be enough to cover the cost of annual college tuition for more than half a million students. If we were to invest in health care, it would be enough to cover 2.5 million children. If we were to invest it in energy, it would be enough to weatherize more than half a million homes.

In a time of great need, when our families and our nation are finding it necessary to tighten our belts and be more responsible with how we spend our money, we can't afford to waste taxpayer dollars. And we especially can't afford to let companies game the system. We need to make sure every tax dollar we spend is going to address our nation's urgent needs and to make a difference in the lives of our people.

The status quo, then, is inefficient and it's wasteful. But the larger and more fundamental point is that it's wrong. It is simply wrong for companies to take taxpayer dollars and not be taxpayers themselves. So 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.

That's exactly what the memorandum I'm issuing today is meant to do. I'm directing my budget office, together with the Treasury Department and other federal agencies, to take steps to block contractors who are seriously delinquent in their taxes from receiving new government contracts. I'm also directing the IRS to conduct a review of the overall accuracy of companies' claims about tax delinquencies. We need to be sure that when a company says it's paying taxes, that company is, in fact, paying taxes.