Tax Inequity

PAYING TAXES is a thorny subject for Americans. Along those same lines, tax breaks are a hot campaign issue between President Barack Obama and GOP challenger Mitt Romney.

A report just released by congressional investigators adds salt to the taxpayers’ wounds.

The findings reveal that thousands of Medicaid health care service providers still got paid by the government even though they owed hundreds of millions of dollars in federal taxes. The payment loophole is traced to a legal technicality, making it harder for the IRS to collect.

We believe it is a situation that needs addressed quickly and justly to bring an end to such inequity.

According to the Government Accountability Office, Medicaid payments to doctors, hospitals and other providers aren’t technically considered federal funds, since they’re funneled through state health care programs. That mode of thinking prohibits the IRS from shutting off the payment spigot to collect tax debts.

Conversely, the IRS can block Medicare payments to scofflaw providers. It is allowed to do so by implementing a “continuous levy” clause. We find it hard to fathom that the IRS is precluded by law from using the same strategy to go after Medicaid payments, although the federal government pays about 60 percent of the costs of Medicaid.

We view that as an unlevel playing field. It is a situation that government officials need to correct in timely fashion.

The Government Accountability Office may be laying the groundwork to do just that. GAO investigators recommended that the IRS immediately reassess its policies to find more efficient ways of collecting back taxes from Medicaid service providers. The IRS agrees action is needed, as do we.

The study covered just three states, yet some $6 billion of payments were made to tax delinquent Medicaid providers.

It is mind-boggling how much was wastefully paid out across the nation.