IRS Outsourced Collection Program Under Political Fire, Again

The powerful House Ways and Means Committee yesterday passed a measure that would end the Internal Revenue Service’s Private Debt Collection program. Following the vote approving H.R. 5719, legislators held a press conference to voice their opposition to the program.

Rep. Chris Van Hollen, a Maryland Democrat who authored an earlier measure to end the outsourcing of collections to private firms, told reporters that the private firms receive 24 percent of all monies collected, while collections by IRS employees do not involve any commission or fee payments.

“This program has resulted in a loss of $50 million in its first year of operation and could generate up to half-a-billion dollars in foregone Treasury revenue over the next six years,” Van Hollen said.

The bill approved Thursday was sponsored by Rep. Charles Rangel (D-N.Y.), the chair of Ways and Means who has been a vocal critic of the IRS use of private tax collectors. However, similar legislation that was approved by the committee a year ago and passed by the full House is still awaiting action by the Senate.

Proponents of the privatization program downplayed Rangel’s new proposal. “It’s the same old pony show,” said Jeff Trinca, a spokesperson for the Tax Fairness Coalition, an organization representing the two firms currently on the IRS contract, CBE Group and Pioneer Credit Recovery, a division of SLM Corp., or Sallie Mae.

“April 15th is coming up and this is a way for the committee to maximize the press coverage,” said Trinca, who likened the vote and the ensuing press conference to the movie Groundhog Day where the same events are relived by the lead character.

Trinca noted that the non-partisan Joint Tax Committee has said that privatization will bring in at least $500 million for the federal government.

The latest legislation comes on the heels of a letter from Sens. Byron Dorgan (D-N.D.) and Patty Murray (D-Wash.) to new IRS Commissioner Douglas H. Shulman seeking a review of the program with an eye toward ending it. Both senators have sharply criticized the use of private collectors (“Senators Ask IRS to Review Outsourced Collection Program,” April 9).