Obama opens fraud-ridden benefits program to illegals

President Obama's unilateral executive action on immigration will make hundreds of thousands, perhaps more than a million, illegal immigrants eligible for federal transfer payments. That will be done primarily through two widely used programs -- the Earned Income Tax Credit, or EITC, and the Additional Child Tax Credit, or ACTC.

As it turns out, those two programs are already among the most corrupt and fraud-ridden in the entire federal government. A newly released report from the inspector general of the Internal Revenue Service confirms that the EITC is plagued by fraud (which was already well known) and also reveals for the first time that the ACTC is even worse.

The two programs, intended for low-income workers, provide what is known as refundable tax credits. That means they give workers a tax refund that is larger than their tax liability. So a family with a tax bill of $1,000 might receive an EITC "refund" of $5,000, meaning the family doesn't write a check to the government but rather receives a check from the government. The ACTC works similarly for low-income workers with children.

Supported by both political parties over the years, the programs were intended to encourage work and strengthen families. Their growth has been extraordinary in recent years -- payments increased 40 percent from 2007 to 2012 alone. And now both are beset by staggering levels of fraud.

According to the inspector general, the IRS paid out $63 billion in EITC benefits in 2013. Of that, 24 percent, or about $15 billion, was given improperly to people not qualified to receive it. That improper payment rate has been enough to qualify the EITC as a "high risk" program for years.

The IRS paid out $26.6 billion in ACTC credits in 2013. The inspector general reports the child credit improper payment rate for that year was somewhere between 25.2 percent and 30.5 percent -- worse than the EITC.

Considering that federal law defines a program as having "significant improper payments" when such payments exceed 2.5 percent of all the money the program sends out, those are pretty terrible numbers.

Even as the problems with the Earned Income Tax Credit were obvious, the IRS has for years insisted that the child credit was a program with a "low risk" of fraud. The inspector general concluded that the IRS has known all along that the "low risk" designation was phony. "The IRS's rating of the ACTC as low risk for significant improper payments is contrary to its own enforcement data," the report noted.

Both Congress and the president have ordered the IRS to crack down on improper payments. But the agency doesn't appear to be trying very hard. "The estimated EITC improper payment rate has remained relatively unchanged since fiscal year 2003 (the first year the IRS was required to report estimates of these payments to Congress), and the amount of EITC claims paid in error has grown," writes the inspector general.

The report estimates there has been somewhere between $124 billion and $148 billion in improper EITC payments in the last decade. That's more than the federal government pays for, say, veterans' benefits, or the justice system, or agriculture, or transportation in any given year. And it is all wasted.

Top IRS management has disputed most of the inspector general's conclusions and rejected most of his suggestions. So don't expect much to change. But if nothing changes, the problem will get worse.

"Existing compliance processes will not reduce the billions of dollars in improper Earned Income Tax Credit and Additional Child Tax Credit payments," the inspector general concludes. And now the programs -- and the fraud -- are likely to grow with the president's immigration order. It's something Obama did not take time to explain when he made the announcement.

In fact, the president obscured what is happening by telling the covered illegal immigrants that if "you're willing to pay your fair share of taxes, you'll be able to stay ... " In fact, for many of those affected, "willing to pay your fair share of taxes" actually means "willing to accept an assistance check from the government."

If past practice is any guide, the Obama administration will likely start an aggressive, multilingual campaign to encourage illegal immigrants affected by the president's action to apply for as many benefits as possible. And if not all of them are actually eligible to receive the taxpayers' money? Well, no one will be checking that too closely.

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