Do we have a deficit? Yes. Should we do all that we can to reduce it? Yes. So why would we outsource the collection of delinquent taxes and pay a commission to collections agencies when the IRS could better collect the money? Because we have idiots in Washington.
From this story, we learn that the Internal Revenue Service will be turning over some 12,500 delinquent accounts to private debt collection agencies. These are “small” accounts, where the debtors owe $25,000 or less.
The move, an initiative of the Bush administration, represents the first step in a broader plan to outsource the collection of smaller tax debts to private companies over time. Although I.R.S. officials acknowledge that this will be much more expensive than doing it internally, they say that Congress has forced their hand by refusing to let them hire more revenue officers, who could pull in a lot of easy-to-collect money.
The private debt collection program is expected to bring in $1.4 billion over 10 years, with the collection agencies keeping about $330 million of that, or 22 to 24 cents on the dollar.
By hiring more revenue officers, the I.R.S. could collect more than $9 billion each year and spend only $296 million — or about three cents on the dollar — to do so, Charles O. Rossotti, the computer systems entrepreneur who was commissioner from 1997 to 2002, told Congress four years ago.
I.R.S. officials on Friday characterized those figures as correct, but said that the plan Mr. Rossotti had proposed had been forestalled by Congress, which declined to authorize it to hire more revenue officers.
[…]
Privatizing government services is often promoted as a way to cut costs. But the government would probably net $1.1 billion from private debt collectors over 10 years, compared with the $87 billion that could be reaped if the agency hired more revenue officers, as Mr. Rossotti had recommended.
I know everybody hates the IRS. But until our tax system is replaced with something else, it is necessary. What sense does it make to bite off the hand that feeds you, which Congress is doing in this instance? Think of what we could pay for with the additional $85.9 billion!
And about those collectors:
One of the three companies selected by the I.R.S. is a law firm in Austin, Tex., where a former partner, Juan Peña, admitted in 2002 that he paid bribes to win a collection contract from the city of San Antonio. He went to jail for the crime.
Great, just great. Now we have convicted criminals collecting our tax dollars. Hey – I have an idea. Why don’t we just use folks already in prison to do the collections? Or perhaps I should just start my own debt collection agency and get a piece of that $330 million for myself.
And as an insult to the sensibilities of business people everywhere:
Under federal budget rules, money spent to hire tax collectors is treated as a discretionary expense, and Congress is cutting discretionary spending. In business terms, the rules treat the I.R.S. as a cost center, not as the government’s profit center.
This is ludicrous. A revenue-generating operation should be treated as a profit center, not a cost center. What are those dummies in Washington smoking? Are there no business people in Congress? Hello?
Since back in the day when I worked at the IRS (I left in 1985), the agency has always been treated as the black sheep of the government family. No other agency generates the revenue that the IRS does. At some point, we have to stop cutting off our noses to spite our faces and give the IRS the resources they need in order to do the job. The tax gap, which is the difference between what taxpayers should pay and what they actually pay on a timely basis, is in excess of $300 billion per year.
Trimming small amounts from the budget while billions go unassessed and uncollected makes no sense. It is time for Congress to do the right thing by the IRS.
VIVIAN J. PAIGE | All Politics is Local 
And yet the National Treasury Employees Union (NTEU) continues to support Tom Davis, the Congressman from the 11th Congressional District, as does the American Federation of State, County and Municipal Employees (AFSCME), and the American Federation of Government Employees (AFGE).
They’ve all contributed thousands of dollars to his campaigns and endorsed him in the past. Yet he votes 0% on their interests, including bills to limit government privatization, make the competitions between private contractors and federal employees more fair, and save taxpayers’ money.
Davis has a 100% rating from the National Association of Government Contractors.
If the unions whose very life blood is affected by these ludicrous privatization schemes that cost taxpayers’ money in the long run and also threaten their jobs, what hope is there to get those idiots out of Washington?
I know I’m contributing to Andy Hurst, who is challenging Davis in the 11th CD. I hope others consider this to save taxpayer money, restore common sense to Washington and to preserve the jobs of federal workers when they are truly the obvious choice to do the job properly. Collecting taxes should be an inherently governmental function, not a commerical function, even under A-76 rules.
While not making any judgments on this issue, I did want to clear up one factual inaccuracy. You say we have “criminals” collecting the debt. However, your linked text says a FORMER partner in the firm got in trouble. Doesn’t sound like anyone doing the collections is accused of any wrongdoing. If you’re going to call the law firm criminals because of the actions of one of its former partners, you’re saying the same thing about any person in any business where any co-worker has done something wrong. Under that logic most of us (probably you included) would be “criminals.” I’m sure you wouldn’t be saying that.
Actually, I intentionally said that to be inflammatory 🙂 (Heck, “journalists” do that all the time.)
And nope, I don’t work for a firm where there are any criminals. I work for myself 😉
Seriously, though, I wondered why the original article pointed out that the former partner of the firm had been convicted. I think they were using that in the context of the other part, where the firm has been accused of using its political influence to obtain a city contract (which everyone denied). I will say, though, that oftimes a firm is prohibited from doing business with the government when a partner has been convicted of a crime, even if the partner is no longer there. So I am suprised that the firm was allowed to win this contract.
Everyone is overlooking the IRS website. Every taxpayer can opt out of being picked on by a collection agency. The collection will automatically return to the IRS by merely sending a letter to the collection agency. If EVERYONE opts out, I believe the collection agencies will not bid on that contract again. 24% of -0- is -0-.
Why is no one reading the IRS website for information? We have an opportunity to effect a grassroot change to the law. Once the letters go out and if EVERYONE opts out then what happens? Will Congress give the IRS the moeny it needs to hire more collectors? Let’s give it try, but somehow this part of the news is not getting out. Oh well, I am sure that if EVERYONE did opt out would there be a change in the law. Of course, only those persons owing less than $25,000 are being turned over to collection agencies. The IRS is letting go 1/3 of their auditors that handle the large estate and large taxpayer amounts. Sound like our President?
I have looked all over the IRS website (in particular here) and can’t find anything about opting out. Can you give me a link?