by Jonathan Singer, Sat Aug 19, 2006 at 04:24:43 PM EDT
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.