Don't Mess With Taxes

It's that time of year again.

No, I'm not talking about the rapidly approaching tax-filing deadline. (Yikes, can we slow down that countdown clock in the right column a bit?!)

I'm talking about Congress' annual posturing about federal employees with overdue federal income tax bills.

Don't get me wrong. I'm not giving federal workers a pass on paying, as the phrase goes, their fair share of taxes. Everyone who owes needs to pay their Internal Revenue Service bills.

And the 2014 tax bills owed by civilian workers paid by Uncle Sam amount to $1.41 billion. That's an increase over 2013's delinquencies of $1.08 billion and the highest tax debt in 10 years.

Federal Employees Who Haven't Paid Their Taxes

The Internal Revenue Service considers a federal employee as tax delinquent if he has an unresolved federal income tax bill in the form of a balance owed and/or an unfiled tax return. The numbers include taxpayer accounts designated as currently not collectible, in a combat zone, participating in an offer in compromise, or a bankruptcy is involved.

Federal employees who are paying off their tax bills via installment agreements with the IRS are not included in the agency's delinquency count.

Fewer federal tax debtors: But the IRS' annual Federal Employee/Retiree Delinquency Initiative, or FERDI, report also has some good news.

While the dollar amount has increased, the number of federal workers who owe back taxes has dropped since last year. Last year the tax-due tally on the federal payroll was 113,805, down from 116,169 in 2013.

That's right: 113,805. No zeroes after that. We're talking about just a handful more than 100,000.

Again, I agree with Rep. Jason Chaffetz (R-Utah) that these folks need to find a way to pay their tax bills.

"These employees are not exempt from their civic responsibility to fulfill tax obligations," said Chaffetz, who chairs the House Oversight and Government Reform Committee. 

But Congress, and particularly those primarily Republican Representatives and Senators who view the federal government as the country's big bad, need to widen their perspectives.

Military, retirees owe more: The $1 billion or so owed by current federal workers is just a third of money owed the U.S. Treasury by folks getting federal checks.

Another $2.4 billion is overdue from:

• 40,825 retired civilian federal employees;
• 20,608 active military members;
• 27,750 members of the military reserve or guard; and
• 91,677 military retirees.

That's almost 200,000 folks who are getting federal checks and who last year owed back taxes. 

They, however, aren't singled out by Chaffetz and his colleagues. The lawmakers point to current federal workers because it doesn't look so good politically to pick on older people, especially those who served in our armed forces.

Still, those tax debtors worked for Uncle Sam and are getting retirement checks from the U.S. government. That means that they, too, should pay the taxes they owe.

Focus remains on workers: But Congressional focus remains on current and potential workers.

As he's done in past Congressional sessions, Chaffetz introduced a bill to hold such employees accountable for their tax bills. H.R. 1563, the Federal Employee Tax Accountability Act of 2015 would prevent agencies from hiring individuals who are tax delinquent.

In addition, job applicants at federal agencies would have to submit proof that they don't have tax debt. And federal agencies would have the authority to fire current workers who owe federal taxes. Currently, only the IRS has that ability.

This latest federal worker tax debt bill passed the Oversight Committee by a voice vote on March 25. It is awaiting full House action.

At the same time last month, Chaffetz also introduced H.R. 1562, the Contracting and Tax Accountability Act of 2015. This bill, also a new version of previous legislation the Utah Republican championed in prior sessions, would prevent federal agencies from awarding contracts or grants to companies with tax debt. It, too, cleared the committee.

The remedies' costs: Would Chaffetz's law changes help? Maybe.

But doing so would have a cost, both in raw dollars as well as adding to the federal government's administrative duties.

The Congressional Budget Office (CBO), the nonpartisan agency tasked with providing independent analyses of budgetary and economic issues to support the Congressional budget process, looked at both of Chaffetz's bills.

The Federal Employee Tax Accountability Act would cost $1 million from 2016 to 2020 to implement and have negligible revenue effect, according to the Congressional Budget Office's April 3 report on the bill. The money would be used to create certification forms, develop new regulations, and review records of current and prospective employees.

As for the Contracting and Tax Accountability Act, CBO said in a separate report that same day, that this bill would increase administrative costs by $500,000 per year and have a negligible revenue effect.

Rules already in place: Plus, notes the CBO, the new contractor bill is essentially duplicative.

"Most provisions of the bill would codify current practices used to collect tax debt," according to the report. "The federal government currently collects financial information on its contractors and grant recipients through a variety of databases."

As for taxes, the CBO points out that the IRS provides data on tax liens and tax debt to various Treasury Department programs which withhold or reduce certain federal payments to collect delinquent tax (and nontax) debt owed to federal agencies.

Of course, there is some value in the legislation. It's just the political value campaigning lawmakers get by bashing the federal government.

You also might find these items of interest:

• Federal workers owe $3.5 billion in back taxes (March 2013)
• Uncle Sam owes himself $14 million in unpaid federal agency taxes
• Representatives, Senators fall over each other in rush to ban bonuses
  to IRS employees who owe federal taxes