Despite such positive steps, there remains the nagging question of why should any federal contractor receive government funds if he or she fails to do what nearly 84 percent of Americans do every year -- pay taxes? Why isn't there a zero tolerance policy when it comes to federal contractors who are either abusing or ignoring the tax system?

Just last month, our full Committee heard from the head of the Department of Justice Hurricane Katrina Fraud Task Force who said a zero tolerance policy greatly aided in the prosecution of Katrina-related fraud cases. Given that many of the initial Katrina cases involved low-level dollar figures, a zero tolerance policy might work when we're dealing with billions in unpaid taxes by federal contractors.

Because of the PSI hearings -- and what I believe is a real commitment from IRS Commissioner Everson -- there has been a coordinated and cooperative effort to close the tax gap for federal contractors. I look forward to hearing from the Commissioner what he sees as the next steps in dealing with this pervasive problem.

I do want to raise a couple of additional concerns that tie into today's hearing. Knowing that the job of detecting -- deterring -- and prosecuting tax fraud rests with the IRS, I continue to oppose outsourcing the collection of unpaid taxes which I feel is as an inherently governmental job. Because contracting officers cannot access tax information, I want to know how the IRS is reviewing contractors who are competing for and being selected to receive these contracts. I am also curious whether individuals employed by contractors -- those who will actually perform the work -- will be held to the identical performance and ethical standards as IRS employees. We know that IRS employees may be fired for breaking any of what's called the twelve deadly sins. It's unfair for contract employees to be held any less of a standard if they are doing such important work.

I know from our hearings here and the Joint Committee on Taxation hearing I attended last May that Commissioner Everson is fully engaged in closing the gap between what is owed to the federal government and what gets paid to the federal government. But in doing so, we must make sure that IRS contractors fulfill their tax obligations.

In closing, I also want to acknowledge the outstanding work being done by Mr. Kutz and his team at GAO. Sixteen years ago, GAO began its high risk list, and for 16 years the area of uncollected taxes has been on the list. In fact, GAO expanded the list to include the backlog of uncollected debts and the IRS's ability to detect noncompliance of tax laws. I mention this, because tomorrow, my Subcommittee -- Oversight of Government Management -- will hold its sixth hearing in 12 months on the GAO high risk list. Senator Voinovich and I, just as Senator Coleman and Senator Levin here, are working with GAO and selected agencies to resolve long-term, systemic problems. That is why I am so pleased to be a part of this continuing effort to ensure that federal contractors are not cheating the American people of their hard-earned money.

Mr. Chairman and Senator Levin, I want to thank you for holding today's hearing and for including in GAO's ongoing review of tax delinquent contractors my special concern of whether a 1996 law that allows the federal government to withhold federal contractor payments for state debts is working. You understand that Minnesota and Michigan, like Hawaii, could use these uncollected state taxes to pay for state health and education programs. Thank you.