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.

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Bush Continues to Shift Tax Burden Away from Ultra-Rich

A central tenet of George W. Bush's governing ideology during the last five and a half years as President, as well as six years as Texas Governor, has been to shift the burden of taxes away from the wealthiest among us to those who have a more difficult time making ends meet. When this ultimate goal cannot be achieved through policy -- i.e. through legislation -- Bush has signaled a desire and willingness to use administrative fiat to make life easier for the extremely wealthy. The New York Times' David Cay Johnston details the latest example of this effort.

The federal government is moving to eliminate the jobs of nearly half of the lawyers at the Internal Revenue Service who audit tax returns of some of the wealthiest Americans, specifically those who are subject to gift and estate taxes when they transfer parts of their fortunes to their children and others.

The administration plans to cut the jobs of 157 of the agency's 345 estate tax lawyers, plus 17 support personnel, in less than 70 days. Kevin Brown, an I.R.S. deputy commissioner, confirmed the cuts after The New York Times was given internal documents by people inside the I.R.S. who oppose them.

As Johnston explains, it is not as if these lawyers are not needed, or that the current staff is not effective.

Estate tax lawyers are the most productive tax law enforcement personnel at the I.R.S., according to Mr. Brown. For each hour they work, they find an average of $2,200 of taxes that people owe the government.

Unless the firing of half of all estate tax lawyers at the IRS doubles the efficiency of the remaining attorneys -- and I'm extremely skeptical that it will -- this will be yet another tax cut given by George W. Bush to his super-rich allies. And at a time at which working Americans are hurting at the pump, the country is embarked in a never-ending military engagement in Iraq and the federal deficit continues to stand close to an all-time high, we simply cannot afford to give those least in need more tax cuts, particularly outside of the normal legislative process.

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Another Brick in the Wall: CREW Files Against Grover Norquist

The Republican machine is quite formidable, and it is largely based on a mix of corruption, strong-armed tactics, and fear-mongering.  It is in other words a Federal version of an exceptionally large big-city corrupted political machine.  It is a system.  And if you start to pull pieces out of that system, it stops working.  For instance, take another machine that is now non-functional.  The Democrats.  A lot of the reason the Democratic Party is crippled is because the props underneath it - governing power and a strong Democratic President - aren't there anymore.  This is not to say the Democratic Party was corrupt, because it basically wasn't as a system.  But the dynamics are the same, when you pull the props out of that system, the players sort of flounder around, without the money, the resources, or the know-how to operate in a new environment.  They are middle managers in an entrepreneurial setting.  The right-wing is similar, only their machine is based on streams of money that flow, often in a corrupt fashion, through a broker class of operatives that include among others Jack Abramoff, Grover Norquist, Scooter Libby, and Karl Rove.  There's a reason, for instance, Abramoff was involved in bribing right-wing members and right-wing pundits.

It looks like another piece in the GOP house of cards may go down: Grover Norquist, a truly brilliant, calm, optimistc, and creepy man with a laser focus on expanding the culture of greed.

The complaint alleges that Norquist used either or both ATR and ATR Foundation as commercial enterprises by laundering money derived from Indian casino clients of former lobbyist and convicted felon Jack Abramoff. The casinos made contributions to ATR, which then skimmed a fee off the top before passing the money on to former Christian activist Ralph Reed and other anti-gambling activists. In this way, Norquist, Reed and Abramoff were able to disguise the fact that the money used to fund anti-gambling activities was generated through Indian gambling. The point of the anti-gambling campaigns was to prevent competition to the Indian casinos.

Reed originally denied knowing the funds came from Indian casinos, but during hearings held by the Senate Indian Affairs Committee, Sen. John McCain released numerous e-mails clearly demonstrating that he did, in fact, know where the money came from. The e-mails show that Reed and Norquist worked with Abramoff to create the anti-gambling campaigns and to develop the scheme to hide the origins of the money.

The complaint also alleges that the money ATR received from the Indian casinos constitutes taxable business income because ATR was providing services unrelated to its tax-exempt purpose: to increase public awareness about the size and regulations of government and rally support for lower taxes and smaller government. Charging a fee for serving as a pass-through for money used to finance anti-gambling campaigns bears no relation to ATR's stated tax-exempt purpose.

Finally, the complaint alleges that ATR violated IRS public disclosure requirements by refusing to provide a copy of its application for tax-exempt status when requested to do so.

"Mr. Norquist's misuse of his non-profit organizations as commercial enterprises violates the IRS code, and necessitates an immediate investigation," Melanie Sloan, executive director of CREW said today. "The IRS has been quick to step in and investigate liberal organizations, but has so far failed to demonstrate a similar appetite for examining the activities of conservative groups. There is no better place to start than with an exhaustive review of how Jack Abramoff, Ralph Reed and Grover Norquist exploited the laws intended to promote charitable works."

Now, the IRS is a black box in terms of investigations, so we'll hear nothing until they actually move on it.  But the pressure is increasing on these guys.  With Abramoff gone, Delay crippled, and Josh Marshall's nascent media empire detailing the growing circle of losses, the machine that is the conservative movement is going to find it harder and harder to get lobbyists to write their bills for them.  Already their legislative priorities have been gummed up.  

Once this machine breaks down, they will be the ones floundering politically.  You can already see the outlines of their fecklessness now.  It's what happens when the corruption is gone, and only cowardly incompetence remains.

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