$13.6 billion lost in bogus Earned Income Tax Credit claims last year

Before the federal behemoth asserts more control over our lives, it would be swell if it could develop a basic level of competence at the duties it’s supposed to be performing.  Case in point: the Treasury was looted by Earned Income Tax Credit scammers to the tune of $13.6 billion last year.  This is not a new problem.  As the Washington Times reports, auditors have known about incorrect payments on a vast scale for many years:

The Treasury Inspector General for Tax Administration said it warned the IRS in 2011 that it was making the erroneous payments, but two years later the agency hasn???t fixed the problem.

Over the last decade, the IRS could have paid out as much as $132.6 billion in improper payments.

???The IRS has made little improvement in reducing improper EITC payments as a whole since it has been required to report estimates of these payments to Congress,??? the inspector general said. ???The IRS acknowledges that further reductions in the EITC improper payment rate will be difficult to achieve.???

Maybe they should have spent less time slow-walking tax-exempt applications from President Obama’s political opponents through the approval process, and put more effort into fixing this rather glaring problem.  Or maybe we shouldn’t be distributing welfare payments through the tax revenue system, which is a ludicrous perversion of its purpose, and another way of ensuring a large number of voters bear no obvious burden of the government, although they pay in many less visible ways.  Those who pay no income taxes should not be conditioned to expect a “tax refund.”

The percentage of EITC money ladled out improperly is stunning:

Bogus payments can include those that never should have been paid, or were paid out in the wrong amount. According to the audit, the improper payments accounted for between 21 percent and 25 percent of all EITC claims in 2012. That means between $11.6 billion and $13.6 billion was misspent.

Those figures do show a little progress. In 2010, as much as 29 percent of EITC payments were erroneous, accounting for up to $18.4 billion.

Yay!  We’re down to less than 25 percent of the money getting paid out improperly!  I can’t imagine why so many people are reluctant to let Super Government take control of their health care.  The EITC is said to be “a complex program that is difficult to check for eligibility.”  Good thing medicine and health insurance incredibly simple!

Actually, the Wall Street Journal notes that some Republicans have been wondering if ObamaCare’s maze of tax subsidies might fall prey to the same kind of errors and abuses:

???Refundable tax credits are a nightmare to administer and lead to far too much of the American people???s money going out to those who aren???t eligible. That the IRS can???t figure out how to rein in the improper Earned Income Tax Credit payments doesn???t bode well for the $1.1 trillion in ObamaCare subsidies,??? said Sen Orrin Hatch (R., Utah) in a prepared statement.

Acting IRS commissioner Daniel Werfel said at a congressional hearing last summer that the EITC and health care credit are designed differently. That will be ???helpful in reducing the instances of fraud??? in the health-care program, he said. One big difference is that taxpayers don???t get the money from the credit ??? insurers do ??? Mr. Werfel said.

The IRS said in statement Monday: ???Every year, the IRS conducts 500,000 EITC audits as part of a broader enforcement strategy, and EITC claims are twice as likely to be audited as other tax returns. The IRS protects nearly $4 billion in improper claims each year and is committed to continuing to work to reduce improper claims. As the data in the TIGTA report shows, there has been a significant decline in the improper payments since 2010.???

Contrary to the great improvements touted in the IRS statement, The Hill describes that Inspector General report as more than a little gloomy:

Due to a 2009 executive order, the IRS is supposed to have targets for rolling back those improper payments. But the agency has yet to do so, and the Treasury inspector general says in its audit that the IRS needs to rethink its methods for cutting down on waste in EITC payments.

Russell George, the tax administration inspector general, noted that the IRS had made some strides in stopping inappropriate payments, and in educating taxpayers about EITC eligibility. Still, George said the billions of dollars lost to waste each year was ???disturbing.???

???The IRS must do a better job of reining in improper payments in this and in other programs,??? George said in a statement.

[…] Fraud and dishonest tax preparers have also driven up the number of improper payments, the IRS says.

Those sorts of issues have led the tax administration inspector general to say that the IRS probably won???t make any ???significant??? reduction in erroneous EITC payments ??? especially given that limited resources have already eaten into the effectiveness of the agency???s current methods.

So 21 to 25 percent waste and fraud is as good as it gets?  The IRS isn’t going to get much better at catching deliberate fraud – which everyone seems to agree is rampant – and the rules are so complicated that even honest filers routinely get them wrong.  Is it too much to ask that we junk all this leaky fiscal plumbing and have a simple, understandable tax code entirely focused on collecting revenue, as evenly and efficiently as possible?  Or is this another one of those permanent redistribution schemes that can never be reformed, because too many of its beneficiaries will fight tooth and nail to protect it?