John Ransom

The Democrats’ predilection for “stimulating” the economy with tax credits that redistribute wealth, instead of tax cuts that preserve wealth, has created conditions of rampant fraud amongst government agencies including the IRS, government sponsored corporations, like General Motors (aka Government Motors), and individual tax filers according to several recent reports from the federal government and government watchdog groups.

And a new report may indicate that the trend is spreading to new markets.

Last week, Townhall Finance detailed a report from the Treasury’s Inspector General (IG) that told the story of widespread abuse in the application of the first-time home buyer credit, earned-income tax credits and home energy tax credits for residential wind and solar power devices.

The IG estimates that “one-quarter of payments of the earned income tax credit” alone, for example, “are issued to people who are ineligible for them, which cost the government more than $11 billion in fiscal 2009, according to the Treasury’s inspector general for tax administration,” according to Bloomberg.

Now a former Saturn auto dealer and an associate with the National Legal Policy Center (NLPC) is charging that the $7500 tax credits for the purchase of the Chevy Volt are being claimed by auto dealers who first title the cars to collect the tax credit, and then sell them as used at the  Manufacturer’s Suggested Retail Price.

The Chevy Volt is a hybrid gas-electric vehicle manufactured by General Motors. According to the automaker the company has sold about 1,700 Volts through April 2011, which is apparently all the cars from the Volt channel that GM has been able to manufacture.  

Mark Modica, with the NLPC, set out to find out if Chevy Volts were really selling so fast that it was hard to keep them in stock. What he found out instead was that dealers are allegedly “gaming” the system in order to keep the tax credits that were intended for consumers.

“Many Volts with practically no miles on them are being sold as used vehicles,” writes Modica “enabling the dealerships to benefit from the $7,500 credit supplied by the American taxpayers on each car. The process of titling the Volts technically makes the dealerships the first owners of the vehicles, which gives them the ability to claim the subsidies.  The cars are then offered to retail customers as used vehicles.”  

Modica says that he became suspicious because despite reports that say GM can’t meet demand for the Chevy Volt, he found at least 6 in stock within 70 miles of his location just by going online.

After talking to several dealers he discovered that some of the used vehicles being advertised had only 10 to 30 miles on them. One dealer admitted that the dealership was titling the vehicle in order to claim the tax credits.

“When I asked if I was eligible for the $7500 tax credit” on the car says Modica, “I was told that I probably wasn't since the dealership was applying for the subsidy.”

Considering that reports from the IG’s office suggest that others are gaming the tax credit system as well, perhaps it’s time to have a House investigation into the uses an abuses of tax credit schemes.     

“Under the 2008 program,” wrote columnist Ken Harney last week on Townhall Finance about abuses in home purchase tax credits, “auditors identified 1,326 individuals who claimed more than $10 million in credits for home purchases that occurred after the claimant's recorded date of death. More than 900 of the claimants had been dead for at least half a year.”

Last week, Townhall Finance’s Bob Beauprez also detailed widespread fraud at the IRS itself.

“Not surprisingly,” wrote Beauprez “scores of fraudulent claims [for the first-time home-buyer credit] were filed …including from more than 100 IRS agents that the IG says falsely filed for the credit themselves,” according to a report filed by the IRS.

So far the IRS has not charged any of the employees involved with a crime.  

“It is incomprehensible that this many IRS employees improperly claimed the homebuyer tax credit,” said Sen. Orrin G. Hatch of Utah, the top Republican on the Senate Finance Committee, according to the Washington Times. “These are the very people who are supposed to fairly enforce our tax laws, but seem to instead be taking advantage of that expertise for their own personal benefit.”

That’s the problem when you mix cash economic incentives with government’s ability to tax. It’s a recipe for fraud, waste and abuse with little or no accountability. And it’s one of the very best arguments against ever bailing out any private industry including automakers and banks.        

Unfortunately the IRS isn’t the only government enterprise now that has the expertise and the means to take advantage of taxpayers in this manner.

Thanks to Obama’s activist government, we’ve just seen another example of how car dealers, banks, healthcare providers, insurance companies, mortgage servicers and whole host of quasi-governmental bodies can now rip off taxpayers with the same efficiency as the IRS agents who defrauded us.

Greed is good, say the Democrats, as long as it comes in the form of a tax credit.  


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email: thfinance@mail.com



John Ransom

John Ransom is the Finance Editor for Townhall Finance.
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