In the highway finance bill currently under consideration, Congress threatens to lead the Internal Revenue Service back into a familiar dead end.
The House-approved version of the bill would allow the IRS to use private collection agencies to pursue unpaid income taxes. But this is not an innovation; it is a return to a practice that was previously tried and discarded. Congress authorized the IRS to use private bill collectors in 2004. Accounts were transferred to collection agencies beginning in 2006, but the IRS abandoned the practice only three years later. Subsequently, the IRS Taxpayer Advocate produced an analysis showing that aside from a short-term jump when collection agencies picked the fruit easier, using collection agencies did not actually generate more revenue compared to internal collections. from the IRS. Then-IRS Commissioner Douglas Shulman said, in stopping the program, “I think IRS employees do this job better.” (1)
The 2006-2009 race was itself a second try. The first, which lasted less than a full year in the mid-1990s, resulted in a net loss of $ 17 million to the government. The second program lost less, but still lost money from the government overall. The Taxpayer Advocate’s analysis concluded that “the IRS was significantly more effective than the [private collection agencies] in the collection of tax obligations in all but the first six months after receipt of the case, collecting approximately double as a percentage of the dollars available for collection. “
In other words, using private collection agencies is more expensive and less effective than giving the IRS the resources to do the job itself.
So why did Republican House leaders want to revive this bad idea? We can guess. They likely supported the measure in part because they needed money to pay the highway bill, and it’s fair to assume that $ 5 billion can be recovered through private debt collectors, even in the face of evidence to the contrary.
But House Republicans likely supported this addition to the bill primarily because the Republican Party is completely fed up with the Obama-era IRS partisan abuses and its blocking of Congressional investigators investigating those abuses. The idea of increasing the agency’s budget, even for a worthwhile purpose, such as raising money that is undoubtedly owed to the Treasury, is too distasteful for them to contemplate.
While your frustration with the political streak the Service is going through in its current incarnation is understandable, this supposed solution is desperately short-sighted. Bounty hunting is incompatible with a fair and efficient public administration. Whether states abuse unclaimed property laws, law enforcement agencies that rely on the seizure of civilian assets for funding, or governments that treat traffic cops as revenue collectors, call for fair enforcement of the laws. People operating for their own benefit is doomed to fail.
The IRS, in theory at least, does not care about collecting the maximum amount of taxes from citizens. The Service’s job is to determine and collect the correct tax, no more, no less. The bounty hunters, in this case, the private debt collectors, don’t mind being correct. You could paraphrase an old song this way: If squeezing you is wrong, we don’t want to be right.
IRS agents also have tools at their disposal to work with taxpayers, such as negotiable payment plan programs, as well as law enforcement tools, such as property ties, bank account liens, and wage garnishments. These coercive tools cannot be properly placed in the hands of private collectors acting without impartial oversight.
Overly aggressive tactics aren’t the only thing taxpayers have to worry about if the IRS decides to employ private collection agencies. Every day phone scammers claiming to represent the IRS seek to scam taxpayers and often succeed. Some estimates put the amount paid to these scammers at more than $ 23 million. The Service even has a hotline for reporting cases of this deception. IRS spokespersons have continually reminded taxpayers that the IRS initiates contact with taxpayers exclusively by mail and will never request immediate payment over the phone.
Debt collection agencies, however, generally rely on the telephone as the first method of contact. Now that the House wants to impeach the government-paid bounty hunters of the American population, ordinary citizens may have to find out which aggressive caller is actually willing to satisfy a valid tax debt and which is a scammer.
Good luck with that.
Let’s hope the Senate ends this bad idea when the highway bill goes to conference. You won’t pay a lot when it comes to road repairs and it will create all kinds of potholes on its own.
Source:
1) The Washington Post, “Congress could force the IRS to use private bill collectors for its taxes.”
