We all know that Halliburton is gouging taxpayers–according to the Pentagon, Vice President Cheney‘s old company overcharged the US government by as much as $61 million for fuel in Iraq. But now we learn that more than 27,000 military contractors, or about one in nine, are evading taxes and still continuing to win new government business.

According to the General Accounting Office, these tax cheats owed an estimated $3 billion at the end of 2002, mainly in Social Security and other payroll taxes, including Medicare, that were diverted for business or personal use instead of being sent to the government. (Lesser amounts were owed in income taxes).

In one 2002 case, the New York Times reports, a company providing dining, security and custodial services to military bases received $3.5 million in payments from the Defense Department despite owing almost $10 million to the government. (Shockingly, the GAO estimated that the Defense Department could have collected $100 million in 2002 by offsetting payments to delinquent companies still on its payroll.)

The Senate Permanent Subcommittee on Investigations has scheduled a hearing this Thursday to look into what committee chair Norm Coleman calls “an outrageous situation.” At present, federal law does not bar contractors with unpaid federal taxes from obtaining new government contracts. (The GAO has recommended policy options for barring contracts to those who abuse the federal tax system.)

At a time when $200 million would purchase enough ceramic body armor–the kind that usually works, the kind the Pentagon wouldn’t splurge for–to protect almost 150,000 GIs in Iraq, Republicans and Democrats should demand that these tax cheats pay up.