July 03, 2007

Privatized Tax Debt Collection Lives On

Last week, before leaving for the 4th of July recess, opponents of the IRS's use of private collection agencies failed in their bid to effectively kill the program. As explained in the earlier post on this issue, there had been worries that supporters of the program would use procedural rules to to strip the provisions in the Financial Services appropriations bill that would limit funding for the program to $1 million, effectively assuring its death. And that's exactly what happened. According to BNA Tax Notes (sorry subscription required) the Democrats decided not to contest a point of order when it was clear that the parliamentarian would rule against them.

Part of the issue seems to be that the Joint Committee on Taxation projected that doing away with the program would result in a loss of revenues of $69 million next year, and over a billion if the program stayed dead for a decade. This is absurd. The traditional tax collectors at the IRS got an increase in funding, but as far as I know that was not "scored" to result in greater revenues even though it will increase revenues several times over.

The other problem apparently was that the issue was found to be in the jurisdiction of the Ways and Means Committee rather than the Appropriations Committee. Which is a little weird for sort of the same reason. Funding the tax collectors at the IRS - or for that matter, cutting the funding, which Congress did a lot of in the 1990s - does not fall under the jurisdiction of Ways and Means. Maybe it should, but whatever rule applies ought to apply consistently.

Now the ridiculous program lives on. We continue to pay private debt collectors 21 to 24 cents for every dollar they collect when IRS employees could do the same job for 3 cents on the dollar. And keep in mind that a provision to kill the program has been passed before when Congress was controlled by the other party. There are currently other bills in Congress to kill the program, and they should get a fair hearing.


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