What's New
US PIRG scored a major victory for the public over
tax-dodging private contractors this month. Several major federal contractors,
including Kellogg, Brown, and Root, a Haliburton spin-off, have used taxpayer
funds to set up sham companies in tax havens like the Cayman
Islands in order to avoid paying their most basic federal responsibilities. In
response, US PIRG organized a coalition of consumer, labor, church, and taxpayer
groups to urge members of Congress to close this outrageous tax loophole and to
ensure that contractors that receive billions in tax dollars pay their fair
share of taxes and employee withholdings.
Both the House and Senate responded by including a
provision closing the loophole to a bill extending tax relief for military
personnel and veterans. The HEART Act rewards members of the military for their
service and pays for it by stopping tax gimmicks from some of the government’s
largest private contractors. The bill passed 403-0 in the House, and was
approved by unanimous consent in the Senate. Some of the federal government’s
largest private contractors, including KBR, the largest defense contractor in
Iraq, will have 30 days to reform their corporate structures,
reclassify their employees, and start paying their fair share of Medicare,
Social Security, and payroll taxes.
How You Can Help
Hold Delinquent Contractors Accountable
Call
your Senators and urge them to co-sponsor the Contracting and Tax Accountability
Act.
Overview
The federal government spent $422 billion in taxpayer funds last year on outside contracts. It is the fastest growing portion of federal discretionary spending, increasing by 100 percent between 2000 and 2006. The projects cover a wide range of expenses from equipment for soldiers in Iraq to relief efforts for victims displaced by Hurricane Katrina.
Americans are familiar with the troubling and high profile scandals involving Blackwater and Halliburton. Sadly, the lack of accountability in federal contracting is not limited to these companies. After Hurricane Katrina, the Federal Emergency Management Agency (FEMA) awarded no-bid contracts to a company with a history of defrauding the government. The IRS hired a firm that had experienced several serious data breaches of customer information to manage and secure sensitive data. The Army renewed contracts with companies that failed to test if the aircraft equipment they built worked properly.
If Congress is serious about establishing fiscal responsibility and accountability, they must follow up on efforts to remove the secrecy that surrounds contract awards and make information available to the public. Congress must increase competition and reduce the number of no-bid contracts. And they should develop standards that punish bad behavior. Companies with shoddy or deceitful track records must not have immediate access to additional federal contracts. The current lack of accountability provides no incentive to ensure that the public is getting its money’s worth.
