Tom Paine has an interesting article on an overlooked government handout to the oil and gas industry.

When the U.S. House of Representatives voted to eliminate $14 billion in tax breaks and subsidies for the oil and gas industry on January 18, it left at least one item off its target list: a billion-dollar handout to a research consortium that includes publicly traded companies that reaped $100 billion in profits in 2005.

Without congressional action, the money will soon begin flowing to the Research Partnership to Secure Energy for America, a 501(c)(3) formed in 2002 by the Gas Technology Institute, a natural gas research organization that was facing the loss of a federally-mandated source of income that once topped $200 million annually.

Championed by disgraced former House Majority Leader Tom DeLay, R-Texas, the oil and gas subsidy was slipped late one night into the massive Energy Policy Act of 2005 after a House-Senate conference committee had completed its deliberations on the bill. The conferees thus had no chance to consider the provision before it reached the House and Senate floor. Though this is not the first time we have seen a corporate giveaway stealthily inserted into a bill in the early hours of the morning, it is a striking example of how taxpayers get bilked by corporations and Congress.

The Senate Budget Committee held a hearing today on the $345 billion tax gap- or the difference between what people owe the federal government and what they pay. Overall, there was consensus that a) the tax gap does exist in huge proportions, b) we must do something about it and c) we must try to minimize doing harm to compliant taxpayers when we address the tax gap.

The witnesses, and the Senators in attendance weren't all of the same mind on many important things, though. One point of confusion (more than contention): exactly how big the tax gap is. The data everyone had to go on comes from an IRS research project whose methods seem pretty unreliable. Budget Committee Chairman Sen. Kent Conrad (D-ND) and Robert McIntyre of Citizens for Tax Justice (testimony here) think that the gap is probably much higher than IRS estimates, partly because the data is bad and already out of date, and partly because of the many tax-dodging activities that the research project did not account for.

There was serious contention (and not confusion) over what we know about the causes of the tax gap. John Satagaj of the Small Business Tax Compliance & Fairness Coalition (testimony here) testified to the importance of understanding the nature of tax non-compliance prior to addressing it. Satagaj claimed that nobody really knows why people don't comply with the tax law. Until we know why they aren't complying, he said, we won't be able to keep them from cheating or making errors. However, McIntyre and Michael Brostek of the GAO (testimony here) testified to the many causes of the tax gap that are quite well-known: a lack of disclosure for certain sources of income, offshore accounts, a lack of clarity in the tax law, and inadequate audit rates, among others.

Yet Satagaj still claimed that until we know exactly what's going on, we shouldn't take action. But the problem is, as McIntyre noted, nobody will know the exact size and causes of the tax gap until action is taken. So much income is kept in secrecy that no research effort would disclose this information. It can only be brought into the light of day by changing the rules of the game.

Addressing the tax gap is a gamble, but unless we don't want to do it, there is no risk-free option.

One final point of contention, of course, was what we should do about the tax gap. McIntyre said his two priorities were disclosing offshore tax shelters (which Sen. Conrad strongly supported) and stepping up IRS resources and audits. Brostek said increasing income reporting and simplifying the tax code. And Satagaj said "education."

Brostek and McIntyre were right on the money. Education, however, is far and away an insufficient way of closing the tax gap. Call me jaded, but I think anyone using an offshore account to hide their income is well aware of the ins and outs of the tax code. What is it about effective tax collection that Satagaj, who represents ostensibly honest small businesses who are at a disadvantage when competitors cheat on their taxes, is so afraid of?

GovExec has a good follow-up to the funny business at GSA.

The General Services Administration's buying services and contracts are supposed to work like a self-lubricating machine. In come orders for goods and services from across the government, out go purchasing orders to companies on GSA's schedules. Off to the ordering agencies go products and assistance. Money to make the machine hum comes directly from customers in the form of fees paid to GSA.

But lately, GSA more closely resembles a sputtering Rube Goldberg contraption.

A Jan. 19 front-page story in The Washington Post detailed an attempt by the agency's chief, Administrator Lurita Doan, to award a no-bid contract to the company of a longtime friend. That has led to questions about her future at the agency.

More absurdity at GSA...

The chief of the U.S. General Services Administration attempted to give a no-bid contract to a company founded and operated by a longtime friend, sidestepping federal laws and regulations, according to interviews and documents obtained by The Washington Post.

Administrator Lurita Alexis Doan, a former government contractor appointed by President Bush, personally signed the deal to pay a division of her friend's public relations firm $20,000 for a 24-page report promoting the GSA's use of minority- and woman-owned businesses, the documents show.

The contract was terminated last summer after GSA lawyers and other agency officials pointed out possible procurement violations, including the failure to adequately justify the no-bid deal or have it reviewed in advance by trained procurement officers, officials said.

The last leg of the 100 hours legislative marathon- the Creating Long-Term Energy Alternatives for the Nation Act of 2007- will come up for a vote Thursday. The LA Times has a good summary of the bill here.

The bill addresses a bunch of shameful things that have been in the news recently. It corrects some mistakes in leases to oil companies that have cost the federal government billions. It rescinds a few tax subsidies to Big Oil, and ends a royalty incentive program that has failed to encourage more energy production. And it directs Congress to put the money that these measures bring in- about $14 billion over 10 years- in a fund to promote the development of alternative energy.

All worthy goals. But Congress should be aware that this bill doesn't- and, to my knowledge, couldn't- do anything about the fact that Interior Department auditors have let oil and gas companies get away with not paying royalties on energy recovered on federal property.

Oil and gas on federal property are common assets. When energy companies profit off of these assets, they owe the public some money. Congress needs to hold the Interior Department's feet to the fire until it gets what the public deserves. Bring on the hearings, investigations, and appropriations fights!

David Cay Johnston, ace tax reporter, has an excellent story in today's NYT on the norms at IRS concerning audits. To sum up, IRS auditors are more or less discouraged to do thorough audits, letting billions of dollars get away when it's right in front of them.

Top officials at the Internal Revenue Service are pushing agents to prematurely close audits of big companies with agreements to have them pay only a fraction of the additional taxes that could be collected, according to dozens of I.R.S. employees who say that the policy is costing the government billions of dollars a year.

“It’s catch and release,” said Douglas R. Johnson, an I.R.S. auditor in Colorado for three decades who said he grew so frustrated at how large corporations were allowed to pay far less than what he thought they owed that he transferred to the agency’s small-business division.

For more on this issue, see this post on a recent report from the TRAC program, which monitors government data.