There really isn’t much I can add to this story in USA Today about the IRS giving money to prisoners. Yes, it is a story about typical government incompetence. But it also shows the inevitable problems that occur when government engages in industrial policy and social engineering via the tax code. Let’s call this argument 1,549,628 in favor of the flat tax.
Despite efforts by the IRS to combat scams, thousands of individuals — including nearly 1,300 prison inmates — have defrauded the government of millions of dollars in home buyer credits, Treasury’s inspector general reported Wednesday. …1,295 prisoners, including 241 serving life sentences, received $9.1 million in credits, even though they were incarcerated at the time they reported that they purchased their home. These prisoners didn’t file joint returns, so their claims could not have been the result of purchases made with or by their spouses, the report said. 2,555 taxpayers received $17.6 million in credits for homes purchased before the dates allowed by law. 10,282 taxpayers received credits for homes that were also used by other taxpayers to claim the credit. In one case, 67 taxpayers used the same home to claim the credit.