Fending off private tax collection.

• Author: Schnepper, Jeff A.
• Position: Economic Observer

DOES ANYBODY REMEMBER the song lyrics. "They're Coming to Take Me Away--Ha, Ha"? Treasury Inspector General for Tax Administration Pamela J. Gardiner announced that the IRS annually planned to place 2,600,000 delinquent taxpayer accounts with private collection agencies. Happily for taxpayers, the House Ways and Means Committee subsequently dropped the proposal. Yet, who knows when it will rear its ugly head again.

The privatization of tax collection, sometimes called "tax farming," is an ancient practice. The Ptolemaic Egyptians apparently engaged to it first, followed by the Greeks. Romans, and English (the latter in the Middle Ages). Private collection for real estate taxes is practiced today by most jurisdictions in the U.S.

Pres. Bush included a proposal for private collections in the Administration's fiscal year 2004 budget request to the Internal Revenue Service. H.R. 1169, which would have implemented the new guidelines, was introduced by House Ways and Means Oversight Subcommittee Chair Amo Houghton (R.-N.Y.) in March, 2003. According to Treasury Dept. estimates, the initiative would have generated an additional $46,000,000 in revenue for 2004, $476,000,000 during the five-year period ending in 2008, and as much as $ 1,000,000,000 by the end of 2013.

IRS feels pinch

During the 1990s, the IRS saw its personnel levels decline, and felt hamstrung by a 1998 law that greatly restricted its agents' activities. Soaring levels of uncollected taxes have been the result. Outstanding back taxes are estimated at around $13,000,000,000. This is not the first lime the government has tried to utilize private tax collectors. In 1996 and 1997, Congress earmarked $13,000,000 for that purpose. Collectors, however, were employed to help the IRS locate and contact taxpayers only. They reminded citizens of their outstanding liabilities mad suggested payment options. If the taxpayer agreed, he or she would be transferred from the investigators to the IRS. Agency workers were paid a flat fee, regardless of the amount eventually collected by the government.

This pilot program was discontinued because of what the General Accounting Office called "disappointing results." While the IRS garnered aa additional $3,100,000 from the initiative, thai only covered expenses. The argument for privatization is simple. There is $13,000,000,000 out there that belongs to the government. If it cannot collect, that is $13,000,000,000 more the rest of us have to come up...