The Pentagon's 26,000 Tax Deadbeats Pose a Security Risk, GAO Says

Illustration by Steph Davidson

Thousands of Pentagon employees and contractors with security clearances owe the U.S. Treasury unpaid taxes, the Government Accountability Office reports (pdf). Together they owed $730 million in 2012.

Why is the GAO, the investigative arm of Congress, even looking at this? Because people who are hard up for cash might be more easily compromised. “An individual who is financially overextended is at risk of having to engage in illegal acts to generate funds,” the agency writes, and that factor must be considered when deciding who can access government secrets.

The GAO put the number of Defense Department tax delinquents at 83,000, but not all of them pose the same level of risk. It’s easy to understand, for example, how a military intelligence officer deployed in a combat zone might miss a tax deadline. More than 5 million people—military, civilians in government, and private contractors—have national security clearances. It would be surprising, even suspicious, if none of them owed any back taxes.

Not everyone with a clearance is actually dealing with secrets—it just means they’re eligible to. The GAO found 26,000 Pentagon workers who actually have access to classified information and owed delinquent taxes. Of those, 6,200 had higher-level clearances known as top secret, or access to “sensitive-compartmentalized information.” Although some in this group owed only $100, others had tax debts in the millions, according to the GAO.

The agency has previously reported that 8,400 civilian executive branch employees have security clearances and owed tax debts. The new report, published July 28, focuses on Department of Defense employees and contractors. And it doesn’t get close to probing the personal finances of all the nation’s high-level spooks. The GAO says it doesn’t count “employees of the executive branch, employees of the legislative branch, or employees of the intelligence community.”

Perhaps most worrisome, investigators found more than 200 people with clearances who were subject to an IRS sanction called a “trust fund recovery penalty.” This means that they were responsible for paying or collecting taxes and “willfully” decided not to. When a federal employee or contractor deliberately chooses not to pay a tax debt, it’s hard to understand why they belong on Uncle Sam’s payroll at all, let alone with access to state secrets.

    Before it's here, it's on the Bloomberg Terminal.