Washington, DC -- Senator Daniel K. Akaka (D-HI) today called on the federal government to help Hawaii and other states collect unpaid taxes. In a hearing on federal contractors owing federal taxes, Senator Akaka criticized the Financial Management Service (FMS) for failing to implement a 1996 federal law that allows the federal government to withhold federal contractor payments for state debts such as taxes.

"I am particularly disturbed that two-thirds of the outstanding federal tax debt is because of failure to remit payroll taxes," said Senator Akaka. "This is not about businesses that run into financial hardship and don't have money to pay taxes. While honest Americans are paying their taxes, many of these tax evaders open a business, profit from federal contracts, fail to comply with payroll taxes, close the business, then start all over."

Senator Akaka and other members of the Senate Permanent Subcommittee on Investigations requested the Government Accountability Office (GAO) to review the amount owed by federal contractors for unpaid taxes. GAO found that $3 billion is owed to the U.S. government by 33,000 federal contractors. As part of the review, Senator Akaka asked GAO to also look at how much the federal government was collecting on behalf of states.

He sharply questioned Richard Gregg, Administrator of the Financial Management Service about whether the FMS is living up to its responsibilities as the government's money manager. In addition, Senator Akaka asked why the FMS has not exercised greater leadership to collect state tax debts from federal contractor payments, and asked Mr. Gregg to pledge to work with the states to do what is necessary to implement the law. Senator Akaka will continue to work to ensure that FMS follows through on this important issue. This program would provide money for states like Hawaii to pay for necessary health and education programs.

"We must ensure that those who receive the benefit of federal contracts are good corporate citizens," Senator Akaka said.