Federal Employees Don't Like Paying Taxes Either

Uncle Sam's own workers owe $1.5 billion, and growing, in unpaid taxes.

Many of us resent paying taxes. The money extracted from us goes to fund an always authoritarian and intrusive institution that's frequently unaccountable and arbitrary when it's not outright malicious. But who knew that even federal employees resent supporting the government? A recent report finds a rising number of federal employees are delinquent on their taxes. That's quite an eye-opener at a time when the Internal Revenue Service has been empowered to tighten the squeeze on ordinary Americans.

Even Feds Hate Taxes

"Although the Federal civilian workforce increased by 6 percent between FYs 2015 and 2021, there was a 32 percent increase in the number of delinquent Federal civilian taxpayers during the same period," finds the U.S. Treasury's Inspector General for Tax Administration (TIGTA) in a report published March 6. "Delinquencies include both balance dues and unfiled returns."

As of 2021, this tallies up to just shy of 5 percent of the federal workforce owing back taxes. "In FY 2021, 149,000 Federal civilian employees owed $1.5 billion in unpaid taxes." Roughly 42,000 federal civilian employees didn't even file tax returns for multiple years.

The problem is sufficiently pervasive that the IRS has a program to address it: the Federal Employee/Retiree Delinquency Initiative (FERDI). Given that FERDI has been in place since 1993 and the ranks of government workers collecting paychecks funded by taxes they're not paying themselves is rising fast, the program doesn't seem very effective.

The report helpfully breaks out the top ten agencies with the highest number of repeat civilian nonfilers. Those are the U.S. Postal Service with 9,056, the Department of Veterans Affairs with 6,586, the Department of the Army with 4,459, the Department of the Navy with 3,411, the Department of the Air Force with 2,725, the Department of Defense with 2,373, the Department of Agriculture with 1,992, the Department of Homeland Security with 1,936, the Department of Health and Human Services with 1,417, and the Social Security Administration with 953.

"Of the top 10, the U.S. Postal Service, the Department of Veterans Affairs, and the Department of the Army had the highest rates of repeat nonfilers."

But what of the tax agency itself? While they're mugging the public, are IRS agents skating on their own tax bills?

The IRS Has Its Own Problems

"Our analysis found that the IRS workforce consistently achieves the lowest tax delinquency rate in the Federal Government," boasts TIGTA. "According to the FY 2021 FERDI Annual Report, IRS employees had a 1.35 percent delinquency rate, compared to 4.93 percent for civilian workers throughout the Federal Government."

That may be because, under a 1998 law, the IRS can't keep employees who don't pay the taxes they enforce on the rest of us. So, why are 1.35 percent of the tax agency's workers delinquent anyway?

"Of the 1,250 employees the IRS identified as not fully paying their tax bills or not doing so on time in fiscal 2017, it only took disciplinary action in 90 cases—just 7% of the time," Government Executive reported in 2019.

It should be noted that IRS employees have other occasional lapses that might raise a few eyebrows. A 2015 report on the tax agency's rehiring process for former IRS workers returning to the fold found "hundreds of former employees with prior substantiated conduct or performance issues ranging from tax issues, unauthorized access to taxpayer information, leave abuse, falsification of official forms, unacceptable performance, misuse of IRS property, and off-duty misconduct."

About 11 percent of rehires had prior issues on the job and, unsurprisingly, they turned out to still be problem children. "Nearly 20 percent of the rehired former employees sampled with prior substantiated or unresolved conduct or performance issues had new conduct or performance issues."

But that's a separate matter. Whatever else they're up to, federal tax collectors are dodging taxes in fewer numbers than are other federal employees, even if they're supposed to be fired if they're delinquent at all.

Squeezing the Public

The problem here should be obvious. We've suffered much high-level whining in recent years about Americans not paying their tax bills even though the United States has about the highest compliance rate in the world (no government, anywhere, collects anything like what it considers the full tab). So, Congress gave the IRS a massive $80 billion infusion of new funds with which to step up enforcement. That promises new ordeals for Americans, especially the poor, since the IRS repeatedly vows to target the rich but instead goes after those who don't have the means to fight back.

"Despite the infusion of new funding earmarked for the IRS via last year's Inflation Reduction Act, the agency continued historic trends of hassling primarily low-income taxpayers, with relatively few millionaires and billionaires getting caught up in the audit sweep," Liz Wolfe wrote in January about the tax agency's 2022 collection efforts.

"If one ignores the fiction of auditing a millionaire through simply sending a letter through the mail, the odds that millionaires received a regular audit by a revenue agent (1.1%) was actually less than the audit rate of the targeted lowest income wage-earners whose audit rate was 1.27 percent!" noted Syracuse University's Transactional Records Access Clearinghouse.

Ignoring In-House Problems

And while the IRS tightens the squeeze on Americans, employees of the federal government funded by taxes are delinquent on their own bills to the tune of $1.5 billion! Maybe the IRS should have started with its colleagues in other federal agencies, especially since their delinquency isn't a secret. Members of Congress—which just gave the IRS that huge cash boost—were complaining about federal employees not paying taxes eight years ago, when the uncollected total was $1 billion. Lawmakers refused to pass a bill that would have made tax delinquents ineligible for employment throughout the federal government. They preferred to overlook their in-house problems and go after the population at large.

Let's tally this up as yet another addition to the list of fully justified resentments people hold against government. It's one thing to be a member of the general public who may despise the state and fall behind on the taxes that support it. It's entirely another to fail to pay taxes, or even to file returns, when you're willingly employed by the institution they fund.

So, if you get called out by the IRS for extra attention, you might want to ask them if they bothered to first drop by the Post Office or the VA.