OMB Watch yesterday published a good summary of the efforts to end the use of private companies to collect Federal taxes. Congress Seeks to End Private Collection Program, OMB Watch (Feb. 21, 2007). Influenced perhaps by the Taxpayer Advocate's placing ending the private collection efforts begun in September of last year, bills have been introduced by Representatives Van Hollen and Rothman (H.695) and Senators Dorgan and Murray (S.335).
Private collection was instituted in 2006, after Congress authorized it in the so-called "Jobs Act" of 2004. See the IRS website discussion of private debt collection procedures, at this link. As I've noted in prior postings, it is hard to understand efforts to privatize this most sensitive of government functions when costs of privatization far outweigh costs of the government agency doing the government's work. "Private collection agencies can make up to a 24 percent commission fee on all the revenues they collect." OMB Watch. Even the IRS admitted when the private contracting began that private collection would cost much more than having IRS employees do the job. See David Cay Johnson, IRS Enlists Help in Collecting Taxes, New York Times (Aug. 20, 2006). The IRS claimed its hands were tied because Congress wouldn't provide it enough resources to do the job itself. Id.
Yet the National Taxpayer Advocate notes that the three private companies that won contracts have dedicated only 75 employees to the task, while the IRS has had to delegate 65 employees to oversee the private companies' efforts. OMB Watch (citing the National Taxpayer Advocate's report). That means that the government should have been able to do the work directly, with available resources and without the loss of the substantial sums paid in private collection agencies' commissions. The privatization plan, like so many, simply doesn't add up.
Privatization of government functions has advanced very rapidly under Bush. Private mercenaries are doing much of the work of war in Iraq and Afghanistan, and at great cost to the federal fisc. Private contractors doing governmental functions still have to be reviewed, so there are still government costs, as in the IRS case. But much of the accountability is lost. We simply don't know how well the private agencies are handling their government responsibilities, and there are different remedies and penalties when there are screw-ups (which there inevitably will be). Furthermore, privatizing functions that are currently handled by employees represented by unions (as are the Treasury employees) is a way of further weakening the power of employees and disabling unions from what they do best--represent US workers in negotiations with their powerful employers. See this article about the concerns of Treasury Union members. Not insignificant among the concerns expressed--the fact that debt collection agencies are "the most complained about industry in America." Id. (quoting the NTEU President Colleen Kelley).
For a variety of other perspectives on the privatization of tax collections, see, e.g., Sallie Mae Corporation's disclosure that its subsidiary, Pioneer, has been awarded one of the three contracts; Brian Tumulty, IRS Uses Private Collection Agencies: Psychological Tactic Questioned (Detroit Free Press, Feb. 15, 2007); Journal of Business Society (Illinois Student online journal); ACA International Statement in Support of IRS Private Collection Contracts (that's the Association of Credit and Collection Professionals); and GAO 1997 assessment of the pilot program for private tax collection.
Recent Comments