‘Vast Majority’ of Pandemic Employee Retention Credit Claims Are Likely Scams, Says IRS

“You can add the Internal Revenue Service to the ranks of federal agencies conceding that raining taxpayer money on all and sundry to offset the negative effects of pandemic-era closures didn’t go as well as intended. Not only was a program meant to offset the cost of paying workers during lockdowns and voluntary social-distancing prone to being gamed, but the “vast majority” of claims submitted to the program show evidence of being fraudulent.”

“In the course of a detailed review of the Employee Retention Credit, “the IRS identified between 10% and 20% of claims fall into what the agency has determined to be the highest-risk group, which show clear signs of being erroneous claims for the pandemic-era credit,” the IRS announced June 20. “In addition to this highest risk group, the IRS analysis also estimates between 60% and 70% of the claims show an unacceptable level of risk.”
The Employee Retention Credit was offered to businesses that were shut down by government COVID-19 orders in 2020 or the first three quarters of 2021, experienced a required decline in gross receipts during that period, or qualified as a recovery startup business at the end of 2021. But it was clear early on that scammers were taking advantage of giveaways of taxpayer money, either to claim it for themselves or to pose as middlemen helping unwitting business owners file claims.

In March of 2023, the tax agency warned of “blatant attempts by promoters to con ineligible people to claim the credit.” In September of that year, it stopped processing claims amidst growing evidence that vast numbers of applications were “improper,” as the IRS delicately puts it. In March 2024, the agency announced that its Voluntary Disclosure Program had recovered $1 billion (since raised to over $2 billion) in improper payouts from participants who got to keep 20 percent of the take.

Ultimately, only “between 10% and 20% of the ERC claims show a low risk” for fraud, even by generous federal standards for throwing other people’s money at problems largely of government creation.”

“”The total amount of fraud across all UI [unemployment insurance] programs (including the new emergency programs) during the COVID-19 pandemic was likely between $100 billion and $135 billion—or 11% to 15% of the total UI benefits paid out during the pandemic,” the Government Accountability Office warned last September.

Earlier, the Small Business Administration’s Inspector General found more than $200 billion stolen from the Economic Injury Disaster Loan (EIDL) program and Paycheck Protection Program (PPP). “This means at least 17 percent of all COVID-19 EIDL and PPP funds were disbursed to potentially fraudulent actors,” noted the report.

With between 70 percent and 90 percent of claims for the Employee Retention Credit identified as likely scams, either the IRS is a stand-out magnet for grifters or other agencies need to return to their own investigations with a somewhat more skeptical eye.”


Connecticut Implements Mandatory ‘Inclusivity’ Training for Cosmetologists

“”Right now, hairstylists in Connecticut need almost a year of education before they can work at their trade,” Darwyyn Deyo, a professor of economics at San Jose State University, tells Reason. “Although efforts at improving inclusivity and equity can improve outdated state-mandated curriculum, SB 178 could also make it harder for aspiring hairstylists to afford their training by increasing the cost of education.”

Research from the Institute for Justice, published in November 2022, found that “too many licensing burdens are excessively onerous or entirely unnecessary” because “red tape forces aspiring workers to waste time and money or, worse yet, shuts them out of work.”

One of the authors of that study, Kyle Sweetland, a research analyst at the Pacific Legal Foundation, tells Reason that the new Connecticut law is no exception. “While everyone loves to get a good haircut,” Sweetland says, “requiring beauticians in Connecticut to spend more hours in training—as Public Act No. 24-53 will do—is unfair to debt-burdened beauticians in the state and could lead to higher prices for customers.”

“If there is an unmet demand and high prices for cutting a certain type of hair,” he adds, “salons have a strong financial incentive to train their beauticians on cutting this type of hair—or to hire beauticians who know how to do so already.””


Divided Over Purdue Pharma Deal, SCOTUS Unites in Accepting a Dubious OxyContin Narrative

“Was OxyContin in fact “central” to the upward trend in opioid-related deaths? Estimates from the National Household Survey on Drug Abuse (now the National Survey on Drug Use and Health) indicate that nonmedical use of prescription pain relievers rose for 11 consecutive years before OxyContin was introduced, and then continued to rise. Even during the period highlighted by Gorsuch, OxyContin never accounted for a very large share of the prescription analgesic market.

Defending itself against all of those lawsuits, Purdue presented Drug Enforcement Administration data indicating that OxyContin accounted for just 3.3 percent of pain pills sold in the United States from 2006 through 2012. After adjusting for potency, ProPublica calculated that the product’s “real” share of the market was more like 16 percent.

ProPublica’s analysis is questionable, assuming the concern is how many opportunities nonmedical users have to get their hands on prescription opioids. But either way, the vast majority of pain reliever prescriptions involved products other than OxyContin, most commonly hydrocodone pills such as Vicodin and oxycodone pills such as Percocet. Those latter two types of products also figured prominently in the pain relievers consumed by nonmedical users, accounting for 75 percent of the total in 2018, according to the federal government’s survey data. OxyContin, by comparison, accounted for 11 percent of nonmedical use that year.”

“According to a 2007 American Journal of Psychiatry study of OxyContin users admitted to drug treatment programs, 78 percent “reported that the drug had not been prescribed to them for any medical reason.”

Since Gorsuch and Kavanaugh both fault Purdue for contributing to opioid-related deaths by misrepresenting OxyContin as abuse-resistant, it is instructive to consider what happened after the company tried to make good on that promise by reformulating the drug. The new version, introduced in 2010, was much harder to crush for snorting or injection. The idea was to deter nonmedical use, and the hope was that the reformulation would reduce addiction and opioid-related deaths. That is not how things worked out.

The reformulation of OxyContin was instead associated with an increase in deaths involving illicit opioids and, ultimately, an overall increase in fatal drug overdoses. Researchers identified that pattern by looking at the relationship between pre-2010 rates of OxyContin misuse, as measured by surveys, and subsequent overdose trends. They found that death rates rose fastest in states where reformulation would have had the biggest impact.

The root cause of that perverse effect was the substitution that occurred after the old version of OxyContin was retired. Nonmedical users turned to black-market alternatives that were more dangerous because their potency was highly variable and unpredictable—a hazard that was compounded by the emergence of illicit fentanyl as a heroin booster and substitute. Nowadays illicit fentanyl accounts for around 90 percent of opioid-related deaths, which have reached record levels in recent years.

Interventions like the reformulation of OxyContin and the broader crackdown on opioid prescriptions not only failed to turn the tide. They contributed to the upward trend that Gorsuch blames on OxyContin. The story that he and Kavanaugh credulously echo turned out to be deadly as well as misleading.”


Trump Wishes Americans Stayed in Afghanistan To Fight China

“Former President Donald Trump helped negotiate the U.S. withdrawal from Afghanistan, ending America’s longest foreign war. But now he believes that the United States should have kept its largest base in Afghanistan to help in a future conflict against China.
During this week’s Republican National Convention, speaker after speaker has tried to transform “America First” from a slogan against overseas entanglements into a cry for more aggressive military force. And the gambit seems to have succeeded. A day after Trump’s running mate, Sen. J.D. Vance (R–Ohio), condemned the war in Afghanistan as a failure, Trump himself called for using Afghanistan as a springboard to future conflicts.”


Why Has Joe Biden’s $42 Billion Broadband Program Not Connected One Single Household?

“Carr blames the delay on “the addition of a substantive wish list of progressive ideas” to the approval process. In an April 2023 letter to Davidson, 11 Republican U.S. senators warned that “NTIA’s bureaucratic red tape and far-left mandates undermine Congress’ intent and would discourage participation from broadband providers while increasing the overall cost of building out broadband networks.”
Among several examples, the senators noted that NTIA’s BEAD proposal “requires subgrantees to prioritize certain segments of the workforce, such as ‘individuals with past criminal records’ and ‘justice-impacted […] participants.'” The infrastructure law that authorized the program merely required contractors to be “in compliance with Federal labor and employment laws.”

The previous year, in a letter to Commerce Secretary Gina Raimondo, Republican senators warned that the NTIA’s proposed BEAD rollout “creates a complex, nine-step, ‘iterative’ structure and review process that is likely to mire State broadband offices in excessive bureaucracy and delay connecting unserved and underserved Americans as quickly as possible.”

In practice, this is exactly what’s happening: Multiple representatives from the telecommunications industry told MinnPost this week that they had no interest in applying for a piece of Minnesota’s $652 million in BEAD grants. Brent Christensen, president and CEO of Minnesota Telecom Alliance, which represents 70 Minnesota telecom companies, said, “None of them would bid for the federal grants because of the regulations that would come with it—especially the requirement to provide low-cost services to low-income households in exchange for grants that would allow internet providers to build out their networks.”

MinnPost noted that new state laws also “requir[e] companies who receive state grants to pay workers a ‘prevailing wage,’ a basic hourly rate paid on public works projects to a majority of workers in a particular occupation.” Since the federal government’s prevailing wage list does not include telecom workers, “companies in Minnesota would have to pay more because they would have to use a similar, but higher-paying, classification.”