Part of the Tax Reform Act of 2014, written by House Ways and Means Committee Chairman Dave Camp (R-Mich.), would require the Treasury Department to contract with private collection agencies to pursue tax debts not addressed by the Internal Revenue Service. Now, Taxpayer Advocate Service and the National Treasury Employees Union are releasing findings and statements that run counter to the proposal.
In a 2013 report on the IRS Private Debt Collection Program, Taxpayer Advocate Service found that the IRS collected about $53 million, or 62 percent, more over the course of two years than private collection agencies (PCAs). Also, the IRS collected a greater percentage of available dollars than private collection agencies, 9.2 percent to 5.4 percent.
The study compared private collections and IRS collections during four consecutive six-month intervals. Taxpayer Advocate Service found that while private collectors collected more tax dollars in the first six-month period than the IRS, over time IRS collections were more consistent. Private collection agencies had six months of success, before drastically decreasing the dollar amount and percentage of available taxpayer dollars collected.
“The abrupt decline in PCA collections after the first six-month period is consistent with our earlier observation that the PCAs worked all the cases before the IRS, and had an opportunity to close the ‘easy’ ones, i.e., liabilities owed by taxpayers who responded quickly to telephone contact,” Taxpayer Advocate Service writes in the report. “The IRS was significantly more effective than the PCAs in collecting tax liabilities.”
Monday, the National Treasury Employees Union also said in a statement that a similar program from 2006 to 2009 cost the government $102 million, and wasn’t very effective at collecting the millions of dollars out there in potential tax revenue.
As it stands, the proposal to privatize tax collection has bipartisan support. In the Senate, Sens. Pat Roberts (R-Kan.) and Charles Schumer (D-N.Y.) proposed similar changes in an amendment to a bill that would extend dozens of tax breaks that expired this year. According to GovTrack, that bill has a zero percent chance of being enacted.