IRS's Faulty Farm-Out Math

The U.S. Government Accountability Office on Halloween released a report essentially finding that the Bush Administration is playing a trick on voters by farming out part of the debt collection work of the Internal Revenue Service.

Officials at the National Treasury Employees' Union had previously said the plan could not possibly be profitable because the private collectors would be given up to 24 cents of every dollar they recouped. The union compared that to the much-smaller expenditure made on the IRS employees who handle that work. It also questioned the potential for privacy violations in giving private companies access to taxpayers' personal data.

The GAO study found that not only wouldn't the farm-out be as profitable as the IRS claimed, it would actually lose money. The IRS had estimated that the initial outsourcing would yield as much as $92 million in additional collections, with $62 million of that offset by the costs of the new program. The GAO, however, found that the IRS was not figuring in the fees it would be paying to the debt-collection companies. With those costs added to the other program expenditures, the GAO concluded the IRS could actually lose $18 million a year on the program.

NTEU President Colleen Kelley sure seems on target when she asserts that the program is "nothing more than an outrageous giveaway of taxpayer money to private companies."