Democrats pull tax cheat bill

By: Erika Lovley

March 4, 2010 04:19 PM EDT

Legislation that would force government and Hill staffers to pay back taxes or lose their jobs
was pulled from House committee markup today after Democrats hit the brakes.

Rep. Stephen Lynch (D-Mass.), who chairs the House Oversight and Government Reform
subcommittee that oversees government workers, told POLITICO he was concerned that the
legislation would kick workers to the curb before it could be determined if the IRS had erred.

“The employee can fight it, but they don’t have a job,” Lynch said during a committee markup
today.

“In 80 percent of [default] cases there is a dispute,” Lynch later told POLITICO. “The people
are arguing with the IRS about business expenses, non-business expenses, deductions, tax
credits and exemptions. And in a lot of these cases, the IRS turns out to be wrong. I’m not
sure how many of those cases apply to Senate and House staffers, but just because you’re
fighting with the IRS doesn’t mean you’re wrong.” 

The legislation sponsored by Rep. Jason Chaffetz (R-Utah) would cause federal employees
who defaulted on their taxes to lose their jobs, including the hundreds of congressional and
Hill staffers who owe the government millions of dollars.

In 2008 alone, 447 House employees and 231 Senate workers didn’t pay their taxes,
according to figures from the IRS, Office of Personnel Management, and Department of
Defense. Federal employees in the U.S. House of Representatives owed more than $5.8
million in unpaid taxes in 2008. The Senate employees owe more than $2.46 million,
according to figures.

But some Republicans, including Chaffetz, said he suspects that’s not the only reason why
Democrats didn’t support it.

“I think the subtext is the Democrat’s support for unions,” said Chaffetz, a committee member.
“Federal employees should not be more protected than others.” 

“Some Democrats see this as an attack on federal workers that’s not merited,” argued a
Democratic committee aide. “If you don’t pay taxes, your wages are garnished automatically.
It’s not hard for the IRS to find a federal worker…There may be some question as to whether
this is really necessary on the federal employee side.” 

But Chaffetz wants congressional employees held to a strict standard.

“We have over 600 staffers on Capitol Hill not paying their taxes. That’s just not acceptable,” 
Chaffetz said in an interview with POLITICO yesterday. “It’s disingenuous to take federal
taxpayer dollars and not pay your full share of taxes. It’s wrong.” 

Chaffetz’s legislation was offered as an amendment this morning during the Oversight
Committee’s markup to a larger bipartisan-supported bill, which would prevent the
government from working with government contractors that have failed to pay their taxes.

House Committee Chairman Edolphus Towns (D-N.Y.) even sweetened Chaffetz’s language
for Democrats today by giving workers wiggle room if they were in the midst of a payment
plan with the IRS or if they were experiencing serious hardships.

But Towns pulled the entire bill from markup after Democrats shot down their own chairman’s
compromise, a move Ranking Member Darrell Issa called “disappointing.” 

“There was a bipartisan effort and compromise reached with Chairman Towns to create
consequences for both Federal contractors and Federal employees who are seriously
delinquent in paying their taxes to the IRS,” said Issa in a statement. “I am thoroughly
disappointed that Democrats rejected the chairman’s compromise and stubbornly refused to
work with him on an effort to hold Federal employees to the same standard as the private
sector. There needs to be consequences for both contractors and federal employees who fail
to pay their taxes.” 

Congress has attempted in the past to stop tax-cheating contractors from getting federal
contracts, but the legislation has never made it to the president’s desk. That could change
this year. President Obama has also been on the case of tax defaulters. He sent a letter to
federal agencies earlier this year warning that the White House would be monitoring federal
contractors who had defaulted on their taxes, and could prevent them from getting additional
contracts.

A recent Government Accountability Office study estimated that government contractors owe
the government nearly $5 billion in back taxes.
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