GovernmentExecutive.com

The Internal Revenue Service's national taxpayer advocate last week reiterated her strong opposition to the privatization of tax debt collection, in a report released a day after a House committee passed a measure that would bar outsourcing of collections.

As part of her annual fiscal year objectives report to Congress, National Taxpayer Advocate Nina Olson repeated previous assertions that the collection of taxes is an inherently governmental function and should not be performed by private debt collectors.

In addition to expressing concern over potential violations of taxpayers' rights, Olson said the outsourcing fails to save the IRS any money.

"She is concerned that the money spent on the IRS's private debt collection initiative is an inefficient use of government dollars, as IRS collection employees can collect more delinquent tax dollars at a lower cost to the government," the report stated.

The report said the IRS Automatic Collection System collects about $20 for every dollar spent on staffing, while private collection returns about $4 for every dollar spent.

An IRS spokesman said the agency has received the report and is reviewing its recommendations. He declined to comment further.

Former IRS Commissioner Mark Everson testified before the Senate Budget Committee in February that the IRS would not be able to address the cases that private collectors are handling, even with additional staffing. He said the IRS first addresses complex cases requiring unique enforcement authority.

Dan Drummond, spokesman for the Tax Fairness Coalition, which represents the private debt collectors, reiterated that point, noting the private collectors handle basic cases the IRS would not likely get to.

But Colleen Kelley, president of the National Treasury Employees Union and a vocal critic of outsourcing tax debt collection, applauded Olson's report.

"Nina Olson offers an important perspective on behalf of our nation's taxpayers that should be heeded," Kelley said in a statement. "Her often repeated concerns about this program have helped raise congressional and public awareness of both the costs involved and the inherent risks in turning taxpayers' personal information over to the debt collection industry."

One day before Olson's report was released, the House Ways and Means Committee passed the Tax Collection Responsibility Act (H.R. 3056), which would strip the IRS of the authority to enter into contracts with private debt collectors.

The bill anticipates the argument that private debt collection is necessary to close the gap between what taxpayers owe each year and what they pay. As the bill repeals private collection, it would bring in revenue through changes in expatriation taxes, increases in information return penalties, temporary increases in tax requirements for some large corporations, and other measures.

The legislation passed the committee by a vote of 23-18.

Drummond questioned the decision based on what the program has achieved thus far.

"Obviously, we disagree with the House Ways and Means Committee," Drummond said. "We strongly feel the program has been very successful. We've brought in $20 million, we have great customer satisfaction rates, we're doing all the right things -- why do they want to kill the program?"

Drummond said it is hard to tell what the fate of the legislation will be.

"Clearly this has a long way to go before it's ever enacted," Drummond said. "With the current political and legislative landscape, it's hard to say. You basically have two different tracks being taken within each chamber."

Drummond said while the House committee voted to end the private collection program, the Senate has mandated that for every private debt collector hired, an IRS employee must be hired or retrained for collection.

"We're not here to replace, nor have we replaced, one single job," Drummond said.

"We believe there is strong support in both the House and Senate for ending the IRS' use of private tax collectors," Kelley said. "Collecting taxes is a basic government function that should not be assigned to profit-making businesses ...The taxpayer advocate's latest report will help continue to build support for ending this program."

COMMENTS

• Moot point when we go to a consumption tax. There will be no need to collect taxes from individuals, only from companies who are negligent in paying taxes they collect on sales of new taxable items. Newt Grigrich will become president and the tax system will finally be changed. April 16 will become just another lovely Spring Day! Jacques Bakke Posted July 27, 2007 5:37 PM
• I am a union rep and a government employee, and am sroblgy against outsourcing of any kind unless a unique set of skills is needed in a life and death situation. Tax collecting is not life and death. If the agency (in this case, the IRS) does not feel that current employees would be ineffective in collections, why are they there in the first place? Maybe some employees could be trained and shifted to this function on an ad hoc basis. The IRS had a drastic situation in tax collections in the early 90s wherein their employees came down like a ton of bricks on recalcitrant (non)taxpayers, and that is why we have such Congressional legislation including the Innocent Spouse Relief Act. There has to b a middle ground between IRS employees effectively dealing with taxpayers and having non-IRS employees handl them. Why not contract with a collection agency to train th IRS employees in collection techniques? That would prove they meant business. But it may also mean hiring people with certain skill sets that may not be present in the current employee base. But as with any job that requires interaction with the public (such as mine), fostering these skills is crucial. Teresa P Bland Posted July 27, 2007 4:42 PM
• All this hoopla seems to miss a couple of points: (1) in the overwhelming majority of cases, there is no debate about whether this is a debt owed, and (2) in spite of claims to the contrary, collection agencies can do this class of collections at lower cost than the government, allowing the government staff to go after larger cases. Jerry Posted July 27, 2007 3:44 PM