Dems Push to End Private Debt Collection

Published 12:00 am Monday, December 26, 2005

WASHINGTON – House Democrats renewed their attempt Wednesday to kill a program under which private debt collectors are commissioned to go after delinquent taxpayers. Ending the program would cost the government a half-billion dollars in the next five years, according to a congressional estimate.

The House Ways and Means Committee voted to repeal the Internal Revenue Service’s authority to contract with private companies to collect federal income taxes. The legislation would make up the drop in revenue mainly by imposing a tax on people who renounce their U.S. citizenship, often to avoid paying taxes.

Committee member Rep. John Lewis, D-Ga., said collecting taxes was a core government function and turning that responsibility over to private collection agencies was “an insult to the American taxpayer and our federal tax system.”

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The 23-18 vote, along party lines, came several weeks after House opponents unsuccessfully tried to limit the program through another bill that provides money for Treasury Department operations.

The Senate Appropriations Committee, putting together its Treasury spending bill last week, also imposed restraints on the program.

The program, approved by Congress in 2004, began operations in September last year. The aim was to turn over to private agencies those lower-level delinquency cases, often in the $5,000 to $10,000 range, that the IRS doesn’t have the manpower to pursue.

The IRS set up standards to assure that the private agencies do not have access to the personal records of taxpayers and to prevent taxpayers from harassment. The first 25 percent of money collected can go to IRS enforcement programs, while the collection agencies can claim as commission up to 24 cents of every dollar collected.

The Tax Fairness Coalition, which represents the collection agencies, said they have already collected $24 million in delinquent taxes and expect to recover between $1.5 billion and $2.2 billion in delinquent revenues over a 10-year period. The coalition said the initiative will recoup its start-up costs by the end of this fiscal year in September.

“It is absurd to kill a program for purely political reasons when it continues to return significant revenue to the U.S Treasury and taxpayers,” it said in a statement.

But Colleen M. Kelley, president of the National Treasury Employees Union, a leading opponent of the program, welcomed the Ways and Means committee action, saying IRS employees can enforce tax laws more efficiently and that there is already evidence of private collectors harassing people over back taxes.

The congressional Joint Committee on Taxation estimated that repeal of the program would result in revenue losses of $507 million over the next five years. The bill includes several measures to make up the lost revenue, including the revision of tax rules for expatriates that would bring in $376 million over five years.

The bill is H.R. 3056

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A service of the Associated Press(AP)