CCH: "House Subcommittee Debates Private Tax Collection" +...
>>>May 14, 2003
House Subcommittee Debates Private Tax Collection
Using private collectors to chase down tax debts would allow the IRS to focus on higher priorities, House Ways and Means Oversight Subcommittee Chairman Amo Houghton, R-N.Y., said at a May 13 subcommittee hearing. However, the federal government could collect the debts more efficiently by funding more IRS agents, said ranking committee member Earl Pomeroy, D-N.D. In March, Houghton introduced HR 1169, which would implement a proposal by the Bush administration to collect tax debt through private contractors.
The IRS plans to eventually place 2.6 million cases annually with collection companies and produce up to $1 billion of additional revenue through 2013, said Pamela Gardiner, Acting Inspector General for Tax Administration. By contrast, the Service had $280 billion in accounts receivable at the end of fiscal year (FY) 2002.
Congressmen Take Opposing Views
The IRS lacks the resources to get much of the $78 billion it estimates is collectible tax debt, said Houghton. As a result, tax collection is inconsistent,as some taxpayers pay while others do not. Private tax collection could resolve this, according to Houghton. The federal government already uses private companies to collect student loans, he explained, while more than 40 states also employ collection agencies for tax debts.
However, using private collectors "is an idea that is not ready for prime time, "said Pomeroy. Tax collection is a core function of government, he argued, and it is done efficiently by the IRS at a rate of $900,000 per employee, he added. Simply funding more IRS staff will enable it to collect more, he said, and will also avoid paying commissions to private collectors.
Private collectors could also single out middle- and lower-income taxpayers because they are easier to collect from than complex tax shelters, added Pomeroy. He also expressed concerns that private tax collectors may not follow the same taxpayer protections that restrain the IRS from illegal or extreme collection techniques. "We should pause before going down this road, "he concluded.
Tax Officials Debate Plan
Several representatives from the IRS and tax-related agencies debated the proposal at the hearing. Employing private collection firms could be useful to the Service, said IRS Commissioner Mark Everson. Enhancing tax enforcement is one of the top three goals of the IRS, he explained, noting that improving customer service and modernizing information technology are the other two.
The IRS must use all available tools to collect unpaid taxes, including private collectors, Everson told the subcommittee. The Service would refer cases where taxpayers were likely to pay immediately if contacted by telephone. Taxpayers who make three or more voluntary payments would also be candidates for referral, he added. Cases requiring enforcement action would not be referred, he said.
The IRS would closely supervise collection agencies, according to Everson. They could not threaten or intimidate taxpayers and would be governed by the same rules as IRS employees, he promised, adding that the program would return $1.01 billion to the Treasury during the next 10 years.
Safeguards are a concern, said National Taxpayer Advocate Nina Olson. Agencies could pressure taxpayers to accept arrangements just to collect a fee, she said. By contrast, IRS employees get paid regardless of collections. Private companies also may be outside laws terminating IRS employees for egregious conduct.
However, Olson concluded that government could use private contractors in a fair and accurate manner even if she does not prefer the approach. The IRS has many demands on its limited resources, she explained, and there is a clear need to address collectible debt.
The National Treasury Employees Union strongly objects to the bill, said its president, Colleen Kelley. It will cost taxpayers more than hiring more IRS employees and put taxpayer information in the hands of private corporations, she said. IRS personnel levels declined from 115,205 in FY 1992 to 95,511 in FY 2001, claimed Kelley, citing a September 2002 report to the IRS Oversight Board from former IRS Commissioner Charles O. Rossotti. The report found that spending $296 million on more IRS employees would collect an additional $9.47 billion, she noted.
A prior privatization project failed in 1996, Kelley added. The program cost millions to train contractors and fell millions short of collection goals, she argued, adding that contractors also did not protect taxpayer privacy and IRS oversight was lax, she said.
However, the IRS has a better idea of what to be cautious about, said Gardiner. The 1996 program did not analyze state use of private collectors and selected cases up to nine years old. This time, cases will be no more than six years old, she explained, and collection agencies will be allowed payments for alternative collections, not just a flat payment per case.
Houghton Hopes for Summer Markup
The Ways and Means Committee will hopefully mark up HR 1169 before August, Houghton told CCH after the hearing. The bill already contains many taxpayer safeguards, he commented, and if there are not enough, more can always be added.
Pomeroy told CCH that the hearing had not changed his opinion that middle-income taxpayers would be the target of agencies and that the IRS could collect more efficiently.
Pomeroy claimed that the budgetary scoring of bills favors the program. If the IRS hired more personnel, budget scoring would count it as an added expense without offsetting it by extra raised revenue. However, HR 1169 would be viewed through a cost-benefit analysis, he explained.
By Dave Hansen, CCH News Staff
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Senate Finance Committee Fixes Technical Glitch in Tax Bill
The Senate Finance Committee (SFC) on May 13 corrected a minor technical error in the Chairman's Mark of a $441 billion tax cut package, Sen 2, following an earlier ruling by the Senate Parliamentarian that the bill approved by the SFC was not an original bill as specified in reconciliation instructions. The ruling neccesitated changing the bill title to the Jobs and Growth Tax Relief Reconciliation Bill of 2003, which the tax writing panel approved by a vote of 12 to 9. As in the first markup, Sen. Blanche Lincoln, D-Ark., was the sole Democrat voting for the measure.
The legislation remains the same as the mark approved by the SFC on May 8 with one minor adjustment to the threshold figure for the refundability of the child tax credit, according to a senior aide on the SFC. Under an agreement reached earlier in the day by Senate leadership, the Senate will start 14 hours of debate on the measure May 14 with a final vote planned for late in the night on May 15.
Meanwhile, SFC Chairman Charles E.Grassley, R-Iowa, told reporters that Senate Republican leaders would be meeting over the next 48 hours to try to determine how to increase the size of the dividend tax cut. "Apparently, some people don't think I've done enough," said Grassley. Under the Jobs and Growth Tax Relief Reconciliation Bill of 2003, reported out of Committee, taxpayers would be granted a $500 dollar exclusion from dividend income with an additional 10 percent exclusion on top of that through 2007, increasing to 20 percent through 2012.
Senate Republicans would like to bring their tax bill dollar amount closer to the $550 billion House bill (HR.2). But Grassley said that would require more offsets and that House Republicans already had a problem with his offsets, especially the tax on foreign income (Code Sec. 911), up to $80,000 which would raise $35 billion in revenue. "Offsets will definitely be dealt with in conference," said Grassley. "And we might have to deal with some of them on the (Senate) floor".
Speaking to reporters, Senate Democratic leader Thomas A. Daschle, D-S.D., said Democrats planned to offer an amendment on the Senate floor that would repeal that particular revenue provision in the mark. Moderate Senator John B. Breaux, D-La., regarding the addition of the provision during the markup on May 8, told the panel that the new tax would be especially hard on Louisianan oil workers who worked abroad.
In addition, Daschle said Democrats would offer amendments calling for a repeal of the dividend tax cut if it were paid for with the Social Security Trust Fund, a tax deduction for college tuition, and a 50 percent health care tax credit to help small businesses offset the cost of insurance premiums.
By Jeff Carlson, CCH News Staff <<< |
