FacebookTwitterGoogle+RedditEmail

Privatizing the IRS

Here are two idioms that have no applicability to the United States Congress: “Once bitten, twice shy;” “The third time’s a charm.”

It was all brought to mind upon seeing the headline in the New York Times on January 10, 2018, a few short days before Congress decided it was easier to shut down the government than to legislate.  The headline announced that the I.R.S.  “paid $20 million to collect $6.7 million in Tax Debts.” At first blush the reader assumed this was a story that had somehow crept into the newspaper by mistake and escaped the attention of the articles editor.  The reader who thought that could be forgiven for being surprised at seeing the story.  That is because that story had appeared in the New York Times and other publications on two earlier occasions.

In 1996 Congress decided that the Internal Revenue Service could be assisted in collecting unpaid taxes by hiring Private Collection Agencies known as PCAs.  Their task was to undertake collections from delinquent taxpayers.  The program lasted one year before it was terminated.  It was terminated because instead of making money for the government by collecting back taxes, it cost the government $17 million.   In addition, it was learned that the PCAs had regularly violated the terms of the Fair Debt Collection Practices Act.

Those interested in collecting past due debts might find themselves leery of giving such a failed effort a second chance.  Proving that “once bitten, twice shy” does not apply to Congress, however, the program was re-introduced again in 2004 as part of the American Jobs Creation Act. According to projections at the time that Act was passed, and contrary to empirical evidence from less than 10 years earlier, its Congressional supporters said that the PCAs would collect $1.3 billion and receive commissions of $350 million. It was, so the Congress believed, a sure fire winner.

In 2008 the House Ways and Means Committee held hearings to determine how well the program was working.  Here is what it learned.  It learned that 85 percent of the people contacted by the PCAs did not owe any back taxes.  It learned that, whereas it cost the IRS $.07 for every dollar it collected, it cost the PCAs $.24 to collect the same amount.  The IRS had an 11 percent success rate whereas the PCAs had a 4 percent success rate.  The PCAs did not collect the promised $1.3 billion.  They collected $4.5 million.  By most measures that would not be considered a success.  Nonetheless, the program continued until it was ended in 2009 by President Obama, who looked at the statistics and came to the conclusion that the program was not working as advertised by its proponents in 2004.  Ending the program infuriated Senator Chuck Grassley (R. IA) who had always been a strong supporter of the program and believed that notwithstanding its obvious failures, the fact that the collections were handled by the private sector rather than the public sector was reason enough to continue the program. (Senator Grassley also observed that 60 people in his home state of Iowa would lose their jobs as a result of termination of the program.) And that brings us to the present when we learn that “the third time’s a charm” has no applicability to congressional actions.

In December 2015, Congress enacted a law that required the IRS to use PSAs yet again, in order to collect a part of the $138 billion delinquent taxpayers owed the government. On September 26, 2016, the IRS announced that, following the Congressional mandate, it planned “to begin private collection of certain overdue federal tax debts [in 2016] and has selected four contractors.” The program was in effect during 2017.  It was not only Congress that thought the idea of private debt collection was a great idea. Treasury Secretary Steven Mnuchin, (whose name suggests his ancestors came from the land of Oz) was asked about the program during his confirmation hearing and said: “it seems like a very obvious thing to do.”  It may have been obvious.  It was not successful. According to the I.R.S.’s taxpayer advocate, in 2017 the I.R.S. received $6.7 million in taxes collected by the PSAs whereas the PSAs received $20 million in commissions. In addition, in some cases, the PSAs received 25% commissions on collections that they had no role in obtaining. As of this writing, there is no suggestion that Congress intends to end this program.  Instead, Congress has been cutting the I.R.S.’ budget.

When John Koskinen ended his tenure as commissioner of the IRS in early November 2016, he was open in his criticism of how Congress was funding the IRS. Among other things, he observed that the agency has lost 20,000 full time staffers since 2010.  It has lost one-third of its compliance officers. (They are the ones who make the recalcitrant tax payer pay and the ones whose tasks are now being be supplemented by the PSAs.) Things are not all bleak for the PSAs, however.  If Congress continues to cut the IRS’s budget, as it seems certain to do, and if, as a result, the agency continues to lose compliance officers, its ability to collect delinquent taxes will get even worse than it now is, and if its budget is cut far enough, the PSAs will look good by comparison, thus justifying their continued employment. Go figure.

More articles by:

January 22, 2019
Patrick Cockburn
On the Brink of Brexit: the Only Thing Most People Outside Westminster Know About Brexit is That It’s a Mess
Raouf Halaby
The Little Brett Kavanaughs from Covington Catholic High
Dean Baker
The Trump Tax Cut is Even Worse Than They Say
Stanley L. Cohen
The Brazen Detention of Marzieh Hashemi, America’s Newest Political Prisoner
Karl Grossman
Darth Trump: From Space Force to Star Wars
Haydar Khan
The Double Bind of Human Senescence
Alvaro Huerta
Mr. President, We Don’t Need Your Stinking Wall
Howard Lisnoff
Another Slugger from Louisville: Muhammad Ali
Nicole Patrice Hill – Kollibri terre Sonnenblume
The Scarlet “I”: Climate Change, “Invasive” Plants and Our Culture of Domination
Jonah Raskin
Disposable Man Gets His Balls Back
Thomas Knapp
Now More Than Ever, It’s Clear the FBI Must Go
January 21, 2019
W. T. Whitney
New US Economic Attack Against Cuba, Long Threatened, May Hit Soon
Jérôme Duval
Macronist Repression Against the People in Yellow Vests
Dean Baker
The Next Recession: What It Could Look Like
Eric Mann
All Hail the Revolutionary King: Martin Luther King and the Black Revolutionary Tradition
Binoy Kampmark
Spy Theories and the White House: Donald Trump as Russian Agent
Edward Curtin
We Need a Martin Luther King Day of Truth
Bill Fried
Jeff Sessions and the Federalists
Ed Corcoran
Central America Needs a Marshall Plan
Colin Todhunter
Complaint Lodged with European Ombudsman: Regulatory Authorities Colluding with Agrochemicals Industry
Manuel E. Yepe
The US War Against the Weak
Weekend Edition
January 18, 2019
Friday - Sunday
Melvin Goodman
Star Wars Revisited: One More Nightmare From Trump
John Davis
“Weather Terrorism:” a National Emergency
Jeffrey St. Clair
Roaming Charges: Sometimes an Establishment Hack is Just What You Need
Joshua Frank
Montana Public Schools Block Pro-LGBTQ Websites
Louisa Willcox
Sky Bears, Earth Bears: Finding and Losing True North
Robert Fisk
Bernie Sanders, Israel and the Middle East
Robert Fantina
Pompeo, the U.S. and Iran
David Rosen
The Biden Band-Aid: Will Democrats Contain the Insurgency?
Nick Pemberton
Human Trafficking Should Be Illegal
Steve Early - Suzanne Gordon
Did Donald Get The Memo? Trump’s VA Secretary Denounces ‘Veteran as Victim’ Stereotyping
Andrew Levine
The Tulsi Gabbard Factor
John W. Whitehead
The Danger Within: Border Patrol is Turning America into a Constitution-Free Zone
Dana E. Abizaid
Kafka’s Grave: a Pilgrimage in Prague
Rebecca Lee
Punishment Through Humiliation: Justice For Sexual Assault Survivors
Dahr Jamail
A Planet in Crisis: The Heat’s On Us
John Feffer
Trump Punts on Syria: The Forever War is Far From Over
Dave Lindorff
Shut Down the War Machine!
Glenn Sacks
LA Teachers’ Strike: Student Voices of the Los Angeles Education Revolt  
Mark Ashwill
The Metamorphosis of International Students Into Honorary US Nationalists: a View from Viet Nam
Ramzy Baroud
The Moral Travesty of Israel Seeking Arab, Iranian Money for its Alleged Nakba
Ron Jacobs
Allen Ginsberg Takes a Trip
Jake Johnston
Haiti by the Numbers
Binoy Kampmark
No-Confidence Survivor: Theresa May and Brexit
Victor Grossman
Red Flowers for Rosa and Karl
FacebookTwitterGoogle+RedditEmail