Obama's New Order: No Government Contracts for Tax Cheats

President Barack Obama on Wednesday signed an executive order directing the Office of Management and Budget and other federal agencies to keep contractors who are delinquent on their taxes from getting new contracts with the government. He also directed the IRS to review contractor filings to ensure the companies are not lying about the taxes they've paid."By issuing this directive, all of us in Washington will be required to be more responsible stewards of your tax dollars. All across this country, there are people who meet their obligations each and every day. You do your jobs. You support your families. You pay the taxes you owe – because it's a fundamental responsibility of citizenship," Obama said in a prepared statement.

He added, "The steps I'm directing today and the steps I'm calling on Congress to take are just basic common-sense. They're not going to eliminate all of the waste or abuse in government contracting in one fell swoop. Going forward, we'll also have to do more to hold contractors more accountable not just for paying taxes, but for following other laws as well."

The White House said the move is part of the president's effort to restructure government contracting to root out waste and abuse. He plans to end no-bid contracts and to crack down on what the administration deems improper payments.

In December, the administration released an update on the president's efforts to cut high-risk, no-bid contracts, showing federal agencies on track to save $19 billion in contracting reforms this year and $40 billion by the end of 2011. In November, the president had outlined steps to crack down on wasteful, improper payments which, in 2009, were expected to reach about $100 billion.

"1.6 Million Businesses Owed Over $58 Billion in Unpaid Payroll Taxes"

Obama is basing his effort to root out tax cheats on studies done by the Government Accountability Office, which estimates that the U.S. is owed more than $5 billion in unpaid taxes by thousands of companies that are still being awarded government contracts.

In a July 2008 report, the GAO said the "IRS's records showed that over 1.6 million businesses owed over $58 billion in unpaid payroll taxes, including interest and penalties. Of that amount, 70 percent of all unpaid payroll taxes are owed by businesses with more than a year (4 tax quarters) of unpaid federal payroll taxes, and over a quarter of unpaid payroll taxes were owed by businesses that accumulated tax debt for more than 3 years (12 tax quarters)."

Obama ordered the director of the Office of Management and Budget, working with the secretary of the Treasury and other agency heads, to evaluate practices of contracting officers and to provide him recommendations on process improvements within 90 days to ensure these contractors are not awarded new contracts, including plans to make contractor certifications available in a government-wide database, as is already being done with other information on contractors.

He also directed the commissioner of the Internal Revenue Service to conduct a review of certifications of non-delinquency in taxes that companies bidding for federal contracts are required to submit pursuant to a 2008 amendment to the Federal Acquisition Regulation. He wants a report within 90 days on the overall accuracy of contractors' certifications.

In addition, Obama wants Congress to give him more tools to ensure tax dollars don't benefit companies that owe money to the government. Most importantly, he wants to allow the IRS to share tax data with agency contracting chiefs to help officials catch tax cheats.

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