Wednesday, January 31, 2007

Democrats Seek to End IRS Private Debt Collection

Awhile back I referenced the IRS' plan to pay private debt collectors to go after tax scofflaws, a policy that would cost more than having IRS employees do it themselves. Two Democratic members of the House are introducing a bill to put an end to that practice (via Talking Taxes):
The program began last fall with 12,500 delinquent cases handed to private debt collectors and is expected to expand to hundreds of thousands of cases over two years, all of them considered easy to resolve. The problem is that the private collectors will receive a commission of 25 cents for each dollar they collect, while it's argued that IRS employees could do the same work for just 3 cents for every dollar collected. IRS Commissioner Mark Everson admitted last year that the IRS staff could collect these debts for less cost but said that the agency lacked the funding to do so.

This was due to a budgeting oddity which would recognize the cost of new employees to collect unpaid taxes, but fail to account for the extra money these employees would then bring in that would pay for the additional employees and bring additional funds into the government besdies. Unfortunately the legislation does not appear to address that problem, though as Steve W points out in his blog post, "the IRS estimates that somewhere between $5 and $30 could be collected for every new dollar of funding for enforcement."

1 comment:

Nat-Wu said...

Good. That plan was just nonsense.