Senator Targets Contractor "Tax Deadbeats" “Thousands of GSA contractors abused the federal tax system with little consequence,” the Government Accountability Office charged. The auditors found about 10% of GSA contractors owe back taxes totaling $1.4 billion. Testifying at the third hearing on the subject by the Senate’s Permanent Subcommittee on Investigations, GAO officials suggested contractors be required to give GSA permission to check to see whether they owed back taxes. Contracting officers do not have access to the IRS’s tax data because of federal privacy laws. The subcommittee chairman, Sen. Norm Coleman (R-MN), suggested some of the stories unearthed by GAO could make a reality TV show called “Lives of the Rich and Famous Tax Deadbeats.” GAO said it investigated 25 GSA contractors “with abusive and potentially criminal activity,” mostly because they had not forwarded payroll taxes withheld from employees. “A number of owners or officers of the 25 GSA contractors have significant personal assets, including commercial properties, houses worth over $1 million, and luxury vehicles,” the report said. In addition, several of the owners of these GSA contractors gambled hundreds of thousands of dollars at the same time they were not paying the taxes that their businesses owed.” Coleman cited these examples: *A security company was awarded more than $1 million in contracts while it owed $12 million in overdue taxes. The owner withdrew large amounts of company funds and used $100,000 of it for gambling. *Another contractor failed to turn over $1 million in employees’ payroll taxes, while the owner was buying a million-dollar house and withdrawing $500,000 in cash at casinos. *A third company was awarded a GSA contract while the IRS had a tax lien pending against it. Last year GAO found that at least 27,000 Defense Department contractors owed about $3 billion in taxes. (SAA, 2/20/05) Sen. Coleman and the subcommittee’s ranking Democrat, Carl Levin (D-MI), have introduced a bill to create a registry of contractors for tax purposes. It is still awaiting action. Coleman praised federal agencies for expanding the Federal Payment Tax Levy Program, which allows the government to claim a portion of a contractor’s payments to pay back taxes. He said the program recovered $42 million in 2005, six times as much as it did two years earlier.