A plan to restart a controversial program allowing the Internal Revenue Service to contract with private collection agencies to pursue millions of unpaid tax bills is now on the Senate floor.
The provision was tucked into a larger bill, aimed at renewing several expired tax breaks, at the request of Sen. Charles E. Schumer (D-N.Y.). Schumer's measure has bipartisan support but would be unlikely to reach President Obamas desk quickly because of an ongoing dispute with the House over reviving expired tax breaks.
Nina E. Olson, the nations taxpayer advocate, this week wrote a
"Outsourcing the collection of federal tax debts is a bad idea," she wrote. "It disproportionately impacts low-income and other vulnerable taxpayers, and despite two attempts [in the past] at making it work, the program has lost money both times, undermining the sole rationale for its existence."
Moreover, "if debt collectors come to be seen as the public face" of President Obamas health-care program, Olson wrote, "I am concerned that could make the IRSs job" of administering the new health-insurance program more difficult.
The IRS phased out a similar program in 2009. Congress had authorized the Treasury Department to contract the task of recouping unpaid tax bills in 2006 and three collection agencies won initial contracts: CBE Group Inc., in Waterloo, Iowa; Pioneer Credit Recovery Inc., in Arcade, N.Y.; and Linebarger Goggan Blair & Sampson LLP in Austin, Texas.
The National Treasury Employees Union opposed that effort, stating it believes the government missed out on millions of dollars in potential revenue while paying $102 million to fund administrative and commission costs. The NTEU championed shutting down the program and opposes the revived measure.
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At the outset, the collectors produced significantly better numbers but that effectiveness dropped dramatically after collecting on "easy cases," according to the study.
After the first program ended in 2009, the IRS
TIGTA estimated that potentially $30.7 million in collections would remain as outstanding liabilities and at the time reported that the IRS might not collect up to $103.2 million per year from cases in its inventory that would have otherwise been assigned to private agencies.
In a statement, Schumer defended his new proposal. He said it would correct problems that arose when the IRS employed private debt collectors for about a year in the late 1990s and again during the more recent program. Schumer's office noted that congressional tax analysts
Advocates in Congress and in the
Further, the Government Accountability Office reports that the IRS has absorbed an estimated $900 million in budget cuts since fiscal 2010, through reductions in personnel, less employee training and some efficiencies.