Report: Businesses fail to pay $58b in taxes

Ike Wilson

Aug. 27, 2008 (McClatchy-Tribune Regional News delivered by Newstex) -- A recent government report that showed more than 1.6 million businesses owe $58 billion in unpaid federal payroll taxes over the past 10 years doesn't sit well with Frederick barber Jay Wastler. Wastler recalled missing one $7 monthly sales tax payment that quickly blossomed into $40 when fines and fees were tacked on.

"Small business takes care of this world but we always get stepped on," Wastler said. "Why did the government let it reach to this point? Why did they let it get to $58 billion?"

Not having $58 billion in public coffers only adds to the federal deficit, Wastler said.

Sen. Carl Levin, D-Mich., wants something done about the results of a Government Accountability Office study that reveals businesses failed to transfer the funds to the federal government in Social Security, Medicare and federal income taxes.

"We asked the GAO to study the problem of unpaid payroll taxes. What we found is a disgrace," Levin said in a statement.

Employers are required to withhold from their employees' salaries amounts for income taxes, Social Security and Medicare. These businesses are required by law to hold these funds "in trust" for the government.

The GAO study found that while the vast majority of businesses are complying with the law, some are using funds withheld from employee paychecks for their own benefit, Levin said. Levin, who heads the U.S. Senate Permanent Subcommittee on Investigations, described the finding as "blatant cheating."

The study did not list the culprits. The GAO compiled aggregate data from the Internal Revenue Service and did not identify defaulting companies, said Kathleen Long, Levin's spokeswoman.

"I think it stinks," Wastler said.

The common man wouldn't be able to get away with it, said Dennis Rogers, a retired police officer who was getting a haircut from Wastler on Monday. "With Big Brother looking on, it shouldn't have gotten to that point," Rogers said.

Frederick real estate agent Tim O'Boyle said he needed more information before commenting on the issue.

"What kind of businesses are they, and can they not afford to pay taxes?" O'Boyle said. "I don't know why they are not paying but they should pay. If not, it will ultimately have to come out of our pockets." Local and state governments often receive money from the federal government.

In Frederick's case, the funding pays for programs such as community development block grants, airport development, emergency shelter, federal lead housing removal, housing counseling, weatherization assistance, tobacco enforcement and summer food services program.

Joseph Shapiro, spokesman for Maryland Comptroller's Office, said Comptroller Peter Franchot firmly believes that everyone and every business should pay their fair share of taxes, which is vital for the fiscal health of the state and for top priorities such as education, transportation, protecting the environment and providing critical social services.

"Towards that end, Comptroller Franchot has introduced several new initiatives aimed at capturing the tax revenues owed the state. These include: closing the captive real estate investment trust loophole; being the first state in the nation to partner with the IRS in the Federal Vendor Offset program; investing in building up the technology in our corporate compliance division and adding auditor positions," Shapiro said.

In addition, the comptroller supported and helped craft a new corporate combined reporting law during the last session, Shapiro said.

"The Comptroller hopes the federal government will also focus on the issue of closing the tax gap because if the federal government isn't collecting tens of millions of dollars they are owed, the states are missing out on millions that would be passed down to them," Shapiro said.

Newstex ID: KRTB-0064-27766060