February 5, 2008
By Ernest Istook
Cheaters never win? They'll win billions from the "economic
stimulus" package that's rushing through Congress. Over five
million people who file phony tax returns can expect to receive at
least $300 each (and probably more) in checks from the U.S.
The claimed purpose is to put money in people's hands so they'll
spend it and boost the economy. Many in Washington don't seem to
care which of those hands are dirty. There's another purpose, too:
It's political stimulus, to buy voter support in this fall's
elections. Even these millions of tax cheaters might vote to keep
those in office who give them such a windfall.
The $150-billion package includes about $100-billion worth of
tax "rebate" checks. By insisting that checks also be sent to those
who don't pay income taxes -- but who DO report earning at least
$3,000 -- liberals push money out the door toward a huge group who
already defraud the government each year.
How does this work? People with low incomes (and earning up to $39,783
for a family of four) and who pay no income taxes nevertheless
usually file a tax return for one reason -- to get a government
assistance check for up to $4,716 under a program called the EITC
-- "Earned Income Tax Credit." (For those who remember, this
parallels what liberal Sen. George McGovern called a "negative
income tax" when he ran for President in 1972.)
The EITC list is what the government will use to identify the
non-taxpayers who will get checks under the stimulus
That list is dominated by fraud. Year after year, from
one-fourth to one-third of these EITC returns are based on illegal
multiple returns, phony Social Security numbers, and claims of
non-existent children or even make-believe spouses.
The fraud is huge because over 22-million EITC returns are filed each year
(as of 2006), and Uncle Sam sends $43.7 billion each year in direct
checks to this group as an income supplement.
General Accounting Office in 2005 verified the vast scale of the
fraud, reporting that "the IRS estimated [it is] between 27 and 32
percent of EITC dollars claimed."
The math is simple: One-third of 22 million is 7.3 million
cheaters who get EITC checks. If the fraud level is "only"
one-fourth, then it's still 5.5 million who get the checks. The
annual cost to taxpayers for EITC fraud ranges from $11 billion to
$14.6 billion going directly out from the Treasury. Sending each
cheater an extra "stimulus" check this year for at least $300 (or
$600, $1,200 or more in some cases) is multi-billion-dollar icing
on the cake for tax cheats and a poke in the eye to honest
That GAO report was not the only warning. For many years
official Washington has known about rampant fraud in the EITC
program. Lawmakers have held multiple hearings and received
repeated reports from the IRS and watchdog agencies. But watchdogs
are ignored because most elected officials treat EITC as a sacred
EITC is America's second-largest public assistance program,
exceeded only by Medicaid. And EITC was left unfixed during welfare
reform. There is no time limit on how long someone can claim an
EITC check, year after year after year.
But now Congress and the President are determined to appear to
be doing something about the economy -- even if it's the wrong
approach. Everyone likes getting a check in the mail, but
everyone's take-home pay would improve, jobs would expand and the
economy would be stronger if we made tax fixes permanent instead,
as Heritage Foundation
research confirms. That might not buy as many votes as a
giveaway, however, and Congress is anxious to shore up its sagging
public approval ratings.
Honest low-income earners already have their Social Security and
Medicare tax payments offset through their EITC checks. So sending
them more isn't a rebate. It's a handout that everyone else is
forced to pay, and Uncle Sam is borrowing billions to send the
checks. Worst of all, the plan re-rewards those 5- to 7-million
cheaters who already rip off the EITC system.
In its haste to buy votes, Congress is taking a bad situation
and making it worse. This isn't stimulating. It's depressing! At
least there's a partial cure if Congress would apply common-sense
and refuse to send rebate checks to people who don't pay income
Istook is a distinguished fellow in Government
First appeared in Human Events
Cheaters never win? They’ll win billions from the “economic stimulus” package that’s rushing through Congress. Over five million people who file phony tax returns can expect to receive at least $300 each (and probably more) in checks from the U.S. Treasury.
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