House Committee Throws Out IRS Plans To Privatize Tax Collection

by Glen Shapiro, LawAndTax-News.com, New York

08 June 2006

An amendment put forward by Rep. Steve Rothman (D-NJ) designed to prevent the IRS from putting in place measures to outsource tax collection on Tuesday garnered bipartisan support.

Voting on the federal spending bill containing the proposals, the House Appropriations Committee supported the Rothman Amendment by a 29-27 margin.

"With personal identity theft on the rise, it makes no sense to hand over 2.65 million taxpayer files to private debt collection companies. I am proud that my colleagues joined me in saying 'no' to President Bush's harebrained idea to create a new, privatized tax collection system. It would cost taxpayers more while protecting their personal financial information less," Rothman announced following the vote.

The IRS was authorized to hire private firms to collect federal tax debts to assist the agency in its collection of back taxes by the 2004 American Jobs Creation Act.

President Bush had requested $54 million to allow the IRS to set up a system from scratch to subcontract private collection companies to do the job for up to twenty-five cents per taxpayer dollar collected. The Rothman Amendment blocks the IRS from spending that $54 million to outsource tax collection.

"Currently, a system of checks and balances that has been refined over the years ensures that IRS employees protect taxpayers' private information. If we allow that information to be handed over to private collection agencies, we put taxpayers the mercy of these private, for-profit companies. That's not good enough for me or the people of this country," added Rothman.

The full House of Representatives is expected to vote on the FY2007 Transportation-Treasury spending bill with the Rothman Amendment next week, at which point some observers are predicting that the provision will be removed.

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