Rangel Supports Moves To Axe Private Tax Debt Collection

by Leroy Baker, Tax-News.com, New York

15 January 2007

House Ways and Means Committee Chairman Charles Rangel (D - NY) has said that he will support a repeal of legislation which handed the collection of tax debts from the Internal Revenue Service to private debt collection agencies.

The campaign against the IRS's unpopular tax debt collection privatization initiative was given new impetus last week by National Taxpayer Advocate Nina E. Olson's report to Congress which raised numerous concerns about the project that has been in operation since September 2006, and she called for the scheme to be axed.

"I am very encouraged that the Taxpayer Advocate seeks to end the use of private debt collectors," Rangel said.

"Private collectors are driven and paid by commission, costing the taxpayer additional money to do the same job an IRS official can do more efficiently. I will work with my colleagues on the Committee and with IRS officials to make good on this proposal and return the job of enforcing our volunteer tax laws to the trained, courteous professionals at the IRS," he added.

Olson warned that the potential for private debt collection firms to abuse taxpayer rights through "psychological techniques" to coax debtors into paying and privacy abuses was "significant." The report concluded that the benefits of the private debt collection initiative were limited in revenue terms and urged Congress to repeal the IRS’s authority to outsource tax collection.

According to Rep. Steve Rothman (D - NJ), the private collection scheme lets private debt collection agencies charge 25 cents for every dollar collected, whereas additional IRS employees will only cost the government 3 cents for every dollar collected.

Rothman attempted to block the outsourcing of tax debt collection last year with an amendment to the budget of the Treasury, Transportation and other agencies, from which the IRS receives its funding.

The IRS's tax debt collection outsourcing project aims to collect $1.4 billion in outstanding taxes over 10 years.

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