collections

The House has approved legislation that would end the extremely unpopular program that allows private collection agencies to collect tax debts for the IRS. The IRS had previously argued that the policy was not financially viable.

Of the $32 million brought in since the collection bill went into effect, the IRS collected $7 million on its own. The collection agencies received almost 25% of the total. That leaves a net collections by the agencies of less than $20 million, which pales in comparison to the $71 million in start up costs. Further, it has been estimated that spending that $71 million on more agents would have resulted in $1.4 billion in revenue.

Senate Republicans claim that the bill won’t pass. However, if it does, the White House threatened a veto by President Bush. Hmm, anyone else find that interesting considering that one of the three collection agencies is a Texas law firm?

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What? You think that’s crazy talk? You would if you have been following the debacle that is allowing private debt collectors to pursue the collection of taxes even though it is more expensive and is expected to collect fewer tax dollars. Government at its finest, no?

Concerns about privatizing tax collections have included privacy issues, the integrity of the collections agencies selected and the consequences of an incentive-based collections system. With this in mind, the Ways and Means Committee had a hearing to investigate whether the relatively short-lived system should be abolished.

They decided it should. On July 18, the Ways and Means Committee passed H.R. 3056, the Tax Collection Responsibility Act of 2007, which would repeal the use of private debt collection companies for purposes of collecting federal income taxes. The Committee approved the measure by a vote of 23 to 18. “The private debt collection program is an insult to the American taxpayer and our Federal tax system,” said Oversight Subcommittee Chairman John Lewis (D-GA).

The Act also includes provisions for, among other things, delaying the application of a 3% withholding requirement on businesses, increase the estimated payment requirements for large corporations and immediately taxing US citizens who renounce their citizenship (that’ll teach ‘em!).

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Voting and paying taxes are still hand in hand. The IRS has admitted that it has collected information on the political party affiliations of taxpayers in 20 states, while vowing that it has never used the information. This, of course, begs the question “why do it?”

The states for which political party affiliation data were collected are Alaska, Arkansas, Colorado, Connecticut, Delaware, Florida, Louisiana, Massachusetts, Michigan, Nevada, New Jersey, New York, North Carolina, Ohio, Oklahoma, Rhode Island, South Carolina, Texas, Utah and Wisconsin. In these states, voters must register as a member of a party and this information is publicly available.

The IRS has advised that outside vendors collected this information while scouring databases searching for those who owed money for tax debts. This is troubling. Congress has debated whether collections from outside agencies should remain, addressing concerns about the policy including charges of corruption from the agencies chosen as vendors. It is disconcerting that this information will be in the hands of those who might use it for inappropriate reasons and might, as a result, discourage citizens from registering to vote.

And again, if the IRS claims that the information is not relevant and not used, why collect it at all?

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