In the British comedy series “Yes, Prime Minister,” politician-protagonist Jim Hacker angrily confronts a European official with the fact that a bureaucrat in Brussels “spends all his time paying farmers to produce masses of surplus food, while somebody in the next office pays people to destroy the surpluses.”
“That is not true!” the European official shoots back. “He is not in the next office — not even on the same floor!”
In any oversized bureaucracy, there are instances of one hand not knowing what the other is doing, and Washington is no exception. But it is rarer that federal agencies consciously and knowingly work at cross-purposes to each other.
Sen. Dan Coats, R-Ind., put his finger on one such instance at a hearing this week, but it wasn’t as funny as the fictional British PM’s encounter with an insoucient Eurocrat.
In the real federal government case, the cluelessness threatens millions of people’s personal data security.
The Social Security Administration tries to prevent fraudulent use of Social Security Numbers, the nine-digit numbers used for nearly every significant financial transaction in America. When it becomes aware of fraud, it tells other agencies that deal in people’s Social Security numbers.
On Tuesday, Coats confronted IRS Commissioner John Koskinen over the fact that his agency does the opposite, deliberately overlooking known fraudulent use of numbers for employment purposes, even when notified of specific frauds by the SSA.
“[T]he IRS,” Coats noted, “continues to process tax returns with false W-2 information and issue refunds as if they were routine tax returns, and say, ‘That’s not really our job,” Coats said. In his investigation, he went on, he also learned that “the IRS ignores notifications from the Social Security Administration that a name does not match a Social Security number, and you use your own system to determine whether a number is valid.”
At issue is the fraudulent use of fake numbers by illegal immigrants seeking employment. Koskinen responded that IRS policy of consciously accommodating such fraud helps the agency collect more in taxes, so “it is in everyone’s interest.” He added that the agency tolerates identity fraud for employment purposes, but not if real people’s Social Security Numbers are used to defraud their holders — for example, by fraudsters who file fraudulent tax returns in order to collect someone else’s refund. As long as illegal immigrants use a separate Taxpayer Identification Number in order to file their tax returns, he said, there is no harm, no foul.
But what he described is an accident waiting to happen. It makes the federal government’s general incompetence on data security much less surprising.
The IRS is one of the worst agencies in this regard. Taxpayers were cheated out of $21 billion last year by fraudulent refunds that the IRS issued to fake filers using stolen Social Security numbers. So on top of all the illegal non-compliance and tax evasion that occurs, the IRS loses more than one percent of all income tax revenue because it sends it back to scammers.
Not every illegal immigrant using a fake number to get a job is engaged in that kind of fraud. But even that the fraud that the IRS is abetting can have consequences for credit ratings and benefits eligibility if the number belongs to or is later assigned to someone else. Is it any wonder that both identity and tax refund fraud would flourish when government agencies apply such lax procedures in dealing with the broader fraudulent use of Social Security Numbers?
Koskinen said the IRS is working to determine “the most effective way” to tighten SSN security “without necessarily having people decide not to file their taxes.” This is an inadequate response. Illegal immigrants should not have the added benefit of earning tax free income, to be sure, but perhaps the agency should put a higher premium on preventing legal taxpayers from having their identities stolen because of government neglect.
