President Barack Obama today called on Congress to pass legislation introduced by Rep. Brad Ellsworth and U.S. Senator Claire McCaskill (D-MO) to withhold federal contracts from those who owe taxes to the federal government. The President made his remarks while signing a Presidential Directive ordering the Office of Management and Budget, Treasury Department, and other federal agencies to take steps to prevent contractors who are delinquent on their taxes from receiving new government contracts.
"Beyond these steps, I'm also calling on Congress to build on the kind of legislation that Senator McCaskill, Congressman Ellsworth, and Chairman Towns have introduced -- and that I introduced when I was senator -- legislation that will crack down on tax cheats by allowing the IRS to share information about tax delinquency with contracting officials. And by the way, when I introduced that Senate bill, Claire stood by me, and Brad led the way in the House," said President Obama.
In April of 2008, Ellsworth and then-Senator Barack Obama introduced the Contracting and Tax Accountability Act to address this problem. McCaskill was a cosponsor of the bill in the Senate. A similar provision had previously been included in the Omnibus Appropriations Package of 2007, but only applied to contracts awarded in Fiscal Year 2008. The Ellsworth-McCaskill bill would make this a permanent requirement for the awarding of government contracts.
Ellsworth attended the signing ceremony and applauded the announcement as an important step toward restoring fiscal accountability and the public's trust in Washington.
"Everyday Americans play by the rules and pay their taxes; I don't think it's too much to ask companies that receive millions, sometimes billions, in taxpayer dollars to do the same," said Ellsworth. "With his signature today, the President has moved the ball forward in holding tax cheats accountable and reforming the contracting process."
Studies by the Government Accountability Office (GAO) have repeatedly shown that thousands of federal contractors owe over $5 billion in unpaid taxes. While the government does require organizations seeking federal contracts to reveal a certain level of financial information, delinquent tax debt does not currently exclude an applicant from receiving the taxpayers' dollars.
In fact, current law prohibits the disclosure of taxpayer data, which means there is no mechanism for contracting officers to access the IRS's tax data when conducting their review of prospective contractors. Without a systematic review process, the federal government ultimately continues to award lucrative contracts to companies with significant tax debt.
"Our bill is a practical and cost-effective way to ensure all companies compete on an equal playing field and our tax dollars are being used wisely," said Ellsworth. "Together, with the support of the President today, we will restore some needed accountability to the contracting process and protect the taxpayers going forward. It is an issue that deserves our time in the House, and I hope our leadership with heed the President's call and consider it soon."