Plan to End Private Tax Collection Advances

By Jim Abrams
Associated Press
Thursday, July 19, 2007

The House Ways and Means Committee voted to repeal the Internal Revenue Service's authority to contract with private companies to collect federal income taxes.

Ending the program would cost the government a half-billion dollars in the next five years, according to a congressional estimate. The legislation would make up the drop in revenue mainly by imposing a tax on people who renounce their U.S. citizenship, often to avoid paying taxes.

Committee member Rep. John Lewis (D-Ga.) said that collecting taxes was a core government function and that turning the responsibility over to private collection agencies was "an insult to the American taxpayer and our federal tax system."

The 23 to 18 vote, along party lines, came several weeks after House opponents unsuccessfully tried to limit the program through another bill that provides money for Treasury Department operations.

The Senate Appropriations Committee, putting together its Treasury spending bill last week, also imposed restraints on the program.

The program, approved by Congress in 2004, began operations in September last year. The aim was to turn over to private agencies those lower-level delinquency cases, often ranging from $5,000 to $10,000, that the IRS lacks the manpower to pursue.

The IRS set up standards to assure that the private agencies do not have access to the personal records of taxpayers and to prevent taxpayers from harassment. The first 25 percent of money collected can go to IRS enforcement programs, while the collection agencies can claim as commission up to 24 cents of every dollar collected.

A tax fairness coalition that represents the collection agencies said it has collected $24 million in delinquent taxes and expects to recover between $1.5 billion and $2.2 billion in delinquent revenue over 10 years. The coalition said the initiative will recoup its start-up costs by the end of this fiscal year in September.

"It is absurd to kill a program for purely political reasons when it continues to return significant revenue to the U.S Treasury and taxpayers," it said in a statement.

But Colleen M. Kelley, president of the National Treasury Employees Union, a leading opponent of the program, welcomed the Ways and Means committee action, saying that IRS employees can enforce tax laws more efficiently and that there is evidence of private collectors harassing people over back taxes.

The congressional Joint Committee on Taxation estimated that repeal of the program would result in revenue losses of $507 million over the next five years. The bill includes several measures to make up the lost revenue, including the revision of tax rules for expatriates that would bring in $376 million over five years.

© 2007 The Washington Post Company