House Votes to End Use Of Private Tax Collectors

Wednesday, April 16, 2008

The House voted 238 to 179 yesterday to kill an Internal Revenue Service program that relies on private debt collectors to pursue scofflaws for back taxes.

Fourteen Republicans joined 224 Democrats in voting to shutter the two-year-old effort, which has the IRS on track to lose more than $37 million as it pays contractors to do what the government's own tax experts say IRS agents could do more efficiently. Despite aggressive collection tactics, the contractors have brought in only $49 million in revenue, little more than half of what it has cost the IRS to implement the program.

"This program violates the public trust and must end," Rep. John Lewis (D-Ga.), a chief sponsor of the bill, said in a statement.

Similar legislation has passed the House before. The real battle will be in the Senate, where one of the program's staunchest defenders, Charles E. Grassley (Iowa), is the top Republican on the Finance Committee, which must approve the bill.

Grassley's state is home to one of the two private debt collectors still used by the IRS. He said that over time, the program can help narrow the $345 billion "tax gap" -- the gulf between what taxpayers owe and what the IRS collects.

"Detractors claim the IRS would be more effective than private companies," he wrote yesterday in a letter to Sen. Byron L. Dorgan (D-N.D.), who has introduced a bill to stop the program. "The IRS has no interest and no will to pursue these debts."

-- Christopher Lee

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