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Wednesday, July 18, 2007
Private Debt Collection Fables
A favorite canard put forward by the defenders of the IRS private tax collection program is that there's no other way to collect these taxes (watch a hearing on the issue here). If Congress gave IRS the resources it needed to pursue these cases, IRS administrators would instead direct the money to functions that would yield a greater return-on-investment.
But IRS has been spending a great deal of money on the IRS program so far. As of a few months ago, the IRS spent $71 million to set up the program. If IRS had spent that money on other things, it could have brought in about $1.4 billion- over 2 years. The private debt collection program is expected to bring in about that much money over 10 years. If the IRS is so concerned with spending money with a high return on investment, why is it even bothering with this program?
And there's no guarantee that the program will actually yield the expected revenues. Revenues are now being collected at a very slow pace, and according to the IRS National Taxpayer Advocate, many of the cases that have been given to the private collectors may be too complex for the PCAs to effectively prosecute. Plus, the last time the program was tried -in 1996- it actually lost money in net! The same thing has been happening so far- $71 million has been spent, but less than $50 million in new revenue has been brought in.
And it's undisputed that the IRS could do this work more efficiently in-house. Period. Even the IRS has admitted that. Program defenders say they're comparing apples to oranges- IRS employees have more powers than private companies and so are more efficient. But that's like saying you can't say that Muhammad Ali is a better boxer than, oh, President Bush, because Ali has natural gifts, training, and experience. Just because the IRS is better doesn't mean you can't compare them.
There's no business case for this program- and let's no forget that the program puts taxpayer information at risk, and has exposed people to abusive tactics by for-profit companies who are paid on a commission basis. End this program now! Pass HR 3056!
Posted by Matt Lewis
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