House Votes an
End to IRS Use of Private Tax Collectors
In a move that serves the nation’s taxpayers,
the House of Representatives approved a tax bill containing a provision
that would end Internal Revenue Service (IRS) use of private collection
agencies to collect federal taxes.
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The House approved H.R.
5719, the Taxpayer Assistance and Simplification Act, after
a broad coalition of unions and public interest groups—led
by NTEU—wrote to every House member in support of the measure.
NTEU has been in the forefront of the fight against privatization
of tax collection.
“The House vote shows clearly the growing depth and breadth
of opposition to the IRS using private tax collectors,” said
NTEU President Colleen M. Kelley. The bill was approved despite
a White House veto threat contained in a Statement of Administration
Policy.
The letter
to House members from 13 unions and public interest groups argued
that the “sky-high commissions” of up to 25 percent
paid to the private companies “for work on the easiest to
collect cases is unjustified and unnecessary.” More
Earlier, the IRS program came in for renewed criticism
from Rep. Jose Serrano (D-N.Y.), chairman of the House Appropriations
Subcommittee on Financial Services and General Government. At a
hearing on the IRS’s proposal fiscal 2009 budget, he said
“this program continues to lose money, and there is no evidence
that these debt collection companies can do the job just as effectively
as the IRS.” The IRS return on investment is put at 13 to
1, compared to a mere 4 to 1 for the private collection agencies.
The agency recently extended the contracts of two
of the three private companies it had hired—it previously
terminated the contract of the third company, but refuses to say
why—despite the program having incurred a loss of $50 million
in its first year of operation. It is now not expected to break
even until 2010, at the earliest, despite IRS projections that the
break-even point would be reached this year.
What’s more, the IRS National Taxpayer Advocate
has warned Congress that continued use of private tax collectors
could result in as much as half-a-billion dollars in foregone Treasury
revenue over the next six years.
“The collection of taxes is an inherently
governmental function that should be restricted to properly trained
and proficient IRS personnel,” said Kelley.
The House-passed tax measure, introduced by Ways
and Means Committee Chairman Rep. Charles Rangel (D-N.Y.) and with
the privatization provision modeled after language advanced by committee
member Rep. Chris Van Hollen (D-Md.), now moves to the Senate, where
opposition to private tax collection also is growing.
Most recently, Sens. Byron Dorgan (D-N.D.) and
Patty Murray (D-Wash.) wrote to IRS Commissioner Douglas Shulman
seeking a prompt review of the program that they believe would lead
to the agency dropping the program. The senators are co-sponsors
of S. 335, a bill that would effectively end the IRS’s use
of private tax collectors. More
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