Act to End IRS Farming Out Debt Collection

By ARI PAUL

The U.S. House of Representatives' Ways and Means Committee approved the Tax Collection Responsibility Act of 2007 July 18, which, if signed into law, would strip the Internal Revenue Service of the ability to hire private debt-collectors.

COLLEEN M. KELLEY: 'A giant step forward.'

National Treasury Employees Union President Colleen M. Kelley lobbied for legislative action by the full House and the U.S. Senate, calling the move a "giant step forward towards abolishing the IRS's authority to do this."

Claimed Abuses

While maintaining that tax debt-collection was inherently governmental work and could not be contracted out, Ms. Kelley also said that private collectors have been known to use excessively abusive collecting tactics.

Private debt-collectors keep 25 percent of what they collect, she said, and were therefore encouraged to be overly aggressive, which was harmful to taxpayers.

The union has also argued that in-house employees do debt collection more efficiently, saying they get a 13 to 1 return on investment while private collectors have a 4 to 1 return.

Max Sawicky, an economist at the Washington-based Economic Policy Institute and the editor of the book, "Bridging the Tax Gap," echoed those sentiments.

"It's a waste of money," he said of the use of private debt-collectors. "One of the things we report is that the estimates show it actually costs the IRS more to use contractors than to do it themselves."

Thinks It's Ideological

Ms. Kelley couldn't think of why the IRS would want to contract out debt collection if it wasn't efficient.

"There had always been too few employees to do the work," she said. "IRS employees who do this work do it very well. This administration is not interested in hiring more Federal employees. There's this interest in this administration to contract out as much work as possible."

For Ms. Kelley, whose union represents 150,000 Federal Government workers, the committee's approval of the measure meant that Congress was counteracting the administration's eagerness to outsource government work in general.

"The more they learn about this issue," she said, "the less they like it."