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The latest example of why bipartisanship is not necessarily good: A bill proposed by senators Chuck Schumer (D-NY) and Pat Roberts (R-KN) to require the IRS to hire private debt collectors. The last time Congress made the IRS try this, the agency lost money. It was a terrible idea then and it is a terrible idea now.
Schumer and Roberts slipped the plan into the (now-stalled) Senate version of a measure aimed at restoring 50+ tax breaks that expired last December. A big reason it found its way into the bill: The congressional Joint Committee on Taxation reported it would generate $2.4 billion in extra revenue over 10 years.
As it happens, this is JCT’s estimate of the gross amount of new revenue the debt collectors would bring in. But after figuring administrative and other costs, the plan would likely end up in the red. When Congress forced the IRS to try this from 2006-2009, the net return on the investment was negative $17 million.
The idea has generated massive opposition from those who understand the tax collections business. IRS Commissioner John Koskinen panned it. So did Nina Olson, the agency’s taxpayer advocate. And on Tuesday, the independent IRS Oversight Board weighed in. The panel was nothing if not refreshingly candid:
The Board believes resurrecting and expanding the unfunded Private Debt Collection concept is a bad idea. The experiment has failed twice and there is nothing to lead us to believe it will not fail again. If Congress wishes to collect more tax revenue to shrink the budget deficit and the tax gap, it should reinstate the levels of funding for IRS collection programs with proven high returns on investment.It isn’t just the money, of course. For many taxpayers, these private debt collectors would become the public face of the IRS. And I’m not sure they are quite the people who should be playing that role. The agency already must deal with incendiary congressional rhetoric about jack-booted thugs. Imagine the possibilities when the service has only limited ability to oversee private tax collectors who are working in its name—and on commission. Of course, the agency could always put more resources into training and supervising these private firms. This, of course, would increase the program’s overhead. In contrast to private contractors, IRS employees have both more clout and more flexibility when it comes to debt collections. They have the hammer, including the ability to impose liens and even seize personal assets. On the other hand, they can also cut deals with taxpayers by granting them partial or installment payment opportunities or even effectively forgiving debts by declaring them not collectible. Privatization has been an on-gain off-again fad in Congress and the White House for years. And outcomes have sometimes been less than optimal. Contractors played major roles in the wars in Iraq and Afghanistan. They were deeply embedded in the NSA’s ambitious surveillance efforts (Ed Snowden was one). And, let us not forget, they built the technology backbone of the Affordable Care Act’s health exchanges. I’m not suggesting government contractors are always incompetent or unreliable. Indeed, they have become an integral part of government and are far more effective at doing some tasks than federal or state employees. But based on past experience, it’s pretty clear that collecting taxes is not one of them.