Bill to Prohibit IRS Collection Farmouts;

Bill to Prohibit IRS Collection Farmouts


A group of Democratic U.S. Senators introduced legislation Jan. 18 that would make it illegal for the Internal Revenue Service to outsource tax collection work to private debt collectors.

BYRON DORGAN: IRS abdicating responsibility. The legislation was championed by Sens. Byron Dorgan of North Dakota and Patty Murray of Washington State.

They patterned their bill on a recent recommendation from National Taxpayer Advocate Nina E. Olson that IRS plans for private debt-collection be scrapped.

IRS Shirking Its Duty?

"Everyone needs to pay the taxes they owe. This legislation is not an effort to coddle those who do not," said Senator Dorgan. "But the IRS is responsible for collecting taxes and protecting the confidentiality of every American's tax information, and the IRS's use of private debt-collectors falls short on both scores."

The bill was signed by more than a dozen Senate colleagues last week, among them Joe Lieberman of Connecticut and Robert Menendez and Frank Lautenberg of New Jersey.

Both bill sponsors objected to the privatization plan last year when it first surfaced. Echoing concerns expressed initially by the National Treasury Employees' Union, which represents tax agents in the IRS, and various taxpayer advocacy groups, the elected officials said there was an inherent violation of privacy involved in turning over confidential IRS information to private businesses.

Critics of the plan pointed to a similar attempt by the IRS in 1996 to use private debt-collectors which resulted in security violations, inappropriate collection activities and huge costs to collect debt compared to the cost of using professional IRS employees.

Privacy, Savings Doubts

"I'm deeply concerned that the plan to outsource debt collection would neither adequately protect privacy nor guarantee any cost savings to the U.S. Treasury," Senator Murray said. "I have been fighting this program since its inception because it threatens the American taxpayer's rights to fair treatment and outsources essential government functions."

IRS Commissioner Mark W. Everson has greeted recent opposition to his privatization plan with promises of increased transparency and accountability on the program's progress.

In recent Congressional hearings, he said the IRS has to contract out debt-collection services because of a lack of personnel and resources. He also acknowledged, however, that trained IRS employees can collect far more tax revenue than private collectors working similar cases.

The National Taxpayer Advocate's report noted that the private companies keep up to 24 cents of every dollar recouped for the agency, while Federal employees perform the work far more efficiently, with a return on investment of approximately 13:1.

'Give IRS Resources'

"If that's the situation, then we need to provide more people and more resources for them to do their job," Senator Dorgan said in a written statement announcing the legislation. "The answer is not to create a system filled with opportunities for potential abuse and wholesale violation of confidential tax information."

Other Senators supporting the measure include Barbara Mikulski of Maryland, Daniel Akaka from Hawaii, Patrick Leahy of Vermont, Carl Levin from Michigan, Edward Kennedy and John Kerry, representing Massachusetts, and Barbara Boxer from California.