TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Tuesday, February 4, 2014

OMB: EITC Is 4th Most Error-Prone Federal Program, With 22.7% Error Rate

Conversable Economist:  Improper Federal Payments of $100 Billion Annually:

To its credit, the U.S. Office of Management and Budget keeps a list of "High-Error Programs," which is roughly defined programs that pay out $750 million or more improperly. Here's the list for 2012.


While I'm a fan of the Earned Income Tax Credit, the 22.4% rate of improper payments is nonetheless striking and disheartening. As I discussed here, the problem seems to be a mixture of people whose economic and family lives are often in flux and who often have no particular facility for filling out detailed paperwork and records, combined with a complex set of government rules. Throw some opportunistic fraud into the mixture as well, and the overpayment rate gets high.

(Hat Tip: Linda Galler, Ed Kleinbard, Francine Lipman, Walter Schwidetzky.)

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It appear to me that the fraud and error prone payments could be improved two ways....easier to understand explanations and regulations and finally an outsourcing of enforcement to private industry with an incentive of 50% of collections going to the private firm for the collection. I guarantee if this was outsourced with this type of incentive we would have less than 3% fraud and errors.

Posted by: Sid | Feb 4, 2014 4:52:38 PM