With Help of GOP Congress, Bush Administration Pushes for IRS Privatization

Apparently unable or unwilling to collect taxes from those who are cheating the system, the Internal Revenue Service under the Bush administration is now taking the bold step of privatizing its services in the hope of recouping missing taxes, as David Cay Johnston reports for The New York Times.

If you owe back taxes to the federal government, the next call asking you to pay may come not from an Internal Revenue Service officer, but from a private debt collector.

Within two weeks, the I.R.S. will turn over data on 12,500 taxpayers -- each of whom owes $25,000 or less in back taxes -- to three collection agencies. Larger debtors will continue to be pursued by I.R.S. officers.

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.

The irony of this article is that the Bush administration is trying to put the squeeze on small-time tax cheats -- albeit inefficiently -- at the same time as it is letting go close to half of IRS lawyers charged with rooting out tax fraud among the wealthy. And those fired tax attorneys were extremely effective, bringing in about $2,200 in every hour they work.

Now railing against the Bush administration for not doing a good enough job taxing Americans might not seem, at its surface, a strategy with much upside. However, when voters learn that the White House, with the help of the Republican Congress, is not only making it easier for the rich to cheat at their taxes at the same time as it is clamping down on those with smaller tax debts but it is also doing so with an alarming lack of efficiency, they will realize that this course of action only increases the relative tax burden of the hardworking Americans who play by the rules and pay their fair share of taxes. And when the issue is layed out as such, they will no doubt oppose the policies implemented by Bush's IRS.

Update [2006-8-19 20:32:47 by Jonathan Singer]: Reading the story a little more closely than before, a disturbing fact comes out: this privatization scheme is 64 times less efficient than doing the same actions in-house. 6,429 percent.

Tags: corporatism, IRS, Privatization (all tags)



Tax Farmers n/t

by antiHyde 2006-08-19 04:56PM | 0 recs
Re: With Help of GOP Congress, Bush Administration

I have some questions about this:

1) Is the government selling the uncollected debt to the private agendies?

2) Or is the government simply contracting out the ability to collect debt? If so, how much are the agencies getting?

3) How will this affect the rights of those who are contacted by agencies?

I read Johnston's book Perfectly Legal. It was really interesting.

by jiacinto 2006-08-19 05:05PM | 0 recs

I had the same thought when I heard rumors of this a few weeks ago.  How will this bold offensive jibe with the FDCPA and FCRA?

Students loans have their own set of rules for Statute of Limitations  and collection, which basically defy the rules of the FDCPA.  Federal tax liens already have special status in the FCRA, so I have to wonder if the FDCPA will also be affected by this.

The idea of a 3rd party gaining access to even more citizens' private information makes me more than a little uncomfortable, and debt collectors are notoriously inaccurate and unethical in their operations.

I don't like the sound of this at all.

by Ripley 2006-08-20 06:39AM | 0 recs
Dumb it ALL down, R2!

SO...now....they are paying more, chasing debt with less chance of recouping as much. Boy that sounds smart.

More Bush Wisdom.

by Nezua Limon Xoloquinta Jonez 2006-08-19 05:10PM | 0 recs
Re: With Help of GOP Congress, Bush Administration


Bush is so ideologically opposed to the existence and health of government that he would rather waste tax dollars into the hands of private collection agencies than collect those taxes at a massive return on investment.

Bush is committed with a pure heart to killing off the fiscal safety of the government.  It's not govern spending that he fears, it's government revenues.  When he can't spend the money to get it out of the hands of government, he takes every chance he can to prevent the filthy lucre from entering the hands of government by.... diverting it with extreme prejudice into the hands of tax collectors.

A number of aircraft manufacturers went into the debt collection business a few years ago, one of them services the child support debts in metro Baltimore.  Why do I have the feeling that Halliburton is going to be the holding company of the winning bidder?

As a tax attorney, I am appalled.

by Bruce Godfrey 2006-08-19 05:17PM | 0 recs
Just horrible!

On the one hand, it fits the pattern favored by the regime: a slide towards corporatism, following the example of the growth of the military-industrial complex since WW2 - such that it's now often difficult to be sure where government ends and business starts. Medicare Part D is a good (ie bad) example.

For the regime, the MO is designed to flush Joe Sixpack's moolah (whether directly, or in the form of his taxes) through an opaque channel in which private business can take a rakeoff (and the regime's friends in and out of Congress can take a rakeoff of the rakeoff).

On the other hand, the debt collector deal in itself is pretty small potatoes.

Perhaps this is a tryout for something more lucrative in moving IRS operations to private contractors.

(The comparative efficiency rate is poke-in-the-eye monstrous. As if the regime is daring the Dems to call them on it, in the certain knowledge that they won't.

Have they, I wonder?)

As for the IRS being a cost center, not a profit center, I wonder how long that rule has been in operation? How did it come to be that way? Has anyone suggested changing it?

In theory, there should be propaganda value for the Dems in such a grotesque piece of bad government.

Trouble is, one, it's taxes (therefore unsexy) and, two, I suspect Dems are guilty of (at least) being accessories to some elements of the crime.

[A durable link to the piece is here.]

by skeptic06 2006-08-19 05:24PM | 0 recs
Re: With Help of GOP Congress, Bush Administration

Singer's update:

Reading the story a little more closely than before, a disturbing fact comes out: this privatization scheme is 64 times less efficient than doing the same actions in-house. 6,429 percent.

What a shock!

by blues 2006-08-19 05:26PM | 0 recs
Re: With Help of GOP Congress, Bush Administration

Read: Credit Card Company Hell into all this: you know, they "misplaced" your records, they "know" you owe a debt, combine this with all the bullshit that the student loans have had lately, and it's truly a horror beyond conception...

by Mumon 2006-08-19 05:40PM | 0 recs
Juyst say "Sure"

I would normally say stand on principle and resist such foolishness, but since this is just a hollow rovian electoral stunt to motivate the GOP base that will go nowhere anyway, Democrats should just say, "Sure. Why not?" and move on.

Kill in Congress later if necessary, but for now keep the rhetorical  focus on Iraq and Bush's other failures and Democrats' positive ideas.

by Sitkah 2006-08-19 06:28PM | 0 recs
Re: Juyst say "Sure"

Disregard the previous post. I was harried and didn't read the entry correctly.

by Sitkah 2006-08-19 06:39PM | 0 recs
First, privatize...then, outsource.
"[T]the next call asking you to pay may come not from an Internal Revenue Service officer, but from a private debt collector."
...and the call after that will come from the Mumbai-based call center of a debt collector.
by ideahamster 2006-08-19 08:26PM | 0 recs
Part of the President's Management Agenda

This is another part of the President's Management Agenda. I can attest to the ehm, efficacy of the PMA as I work for a Federal agency in IT management.  The PMA's chief accomplishment in my experience has been to compel outsourcing of government services and to create layers of reporting and management requirements that  increase the cost of Federal IT projects without providing any benefit.

All of this has been done through the Office of Management and Budget, with no Congressional oversight. In the past, new or changed programs must be submitted as part of the President's annual Budget request to the Congress, where they are broken up, reviewed, analyzed and modified by Committees and Subcommittees.  Not so with PMA initiatives.  Another example of the Unitary Executive theory of which this Administration is so enamored.

Welcome to the world of our MBA President and his cadre of consultants.

by scory 2006-08-20 05:42AM | 0 recs
It's already happening

Shirah at Unbossed has been covering the slow descent of the IRS into privatization since 2005. Several of her IRS diaries are archived here.

From outsourcing work functions to battling the National Treasury Employees Union (NTEU), the Bush Administration has been implementing this plan for some time now in small fits and starts while keeping it all under the radar.

Thanks for bringing this important issue to the fore.

by em dash 2006-08-20 07:21AM | 0 recs
These people are not conservatives

They are plain corrupt.

by jasmine 2006-08-20 05:13PM | 0 recs


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