“Congress moves to turn back taxes over to debt collectors”

Law enforcement for profit to take another big leap forward? [Washington Post]:

The Internal Revenue Service would be required to turn over millions of unpaid tax bills to private debt collectors under a measure before the Senate, reviving a program that has previously led to complaints of harassment and has not saved taxpayers money.

The provision was tucked into a larger bill, aimed at renewing an array of expired tax breaks, at the request of Sen. Charles E. Schumer (D-N.Y.), whose state is home to two of the four private collection agencies that stand to benefit from the proposal.

It requires all “inactive tax receivables” to be assigned to private debt collectors if the IRS cannot locate the person who owes the money or if IRS agents are unable to make contact within a year.

The idea has been tried twice before, but was discontinued both times after poor results including net losses on the program. Nina Olson, who holds the position of Taxpayer Advocate in the U.S. government (and is no relation), strongly opposes the program, noting that some of the money would be recouped by the Treasury anyway through means such as future withheld refunds without the need for paying 25 percent contingency fees to the middlemen. Bounty-hunting freelancers are more likely to resort to tactics such as day-and-night harassing calls, and have less flexibility to work out payment plans for those getting back on their feet after reverses or, in the case of estate taxes, heirs who may have not yet received the inheritances from which they need to pay the tax due.

Compare many state governments’ practice of putting out plaintiff’s-side litigation opportunities to private lawyers at contingency fee, which has created a durable lobby for hardball extractive lawsuits of dubious social benefit as well as showering large sums on law firms that already are or soon become influential political players in their states.


  • Are the debt collectors who buy debt from the Treasury in hope of a cut of the recovery bound by the Fair Debt Collection Practices Act? IIRC, collectors working directly for the Treasury are exempt from that act although private debt collectors are bound by it. And, can the private debt collectors seize assets the Treasury can take, such as homesteads and IRA’s? Note: I am no relation to either Walter or Nina.

  • I’ve always assumed you were his brother…

    I think the IRS should feel free to collect its debts however it likes. (The IRS is a person, too, after all.) If it works, great, if it doesn’t stop doing it. I don’t think prior failures necessarily doom the program. People can learn from mistakes.

    This seems like the kind of work where hiring lawyers is overkill. Judgments are not going to scare these people. They have the federal government staring them down and they are not blinking. But would a collections agency work? I have no idea.

    But you are 100% right about who would get this work. But sometimes I think it works a little different than you might think. You have a leadership in a lawyers’ group that has lots of PAC money? Here is a thank you for convincing your membership to look the other way while I only pretend to support you.

  • Another case where a libertarian is against privatizing government services… It seems as though this only occurs when the libertarians think the private sector will affect liberties they hold dear. When the private sector performs government functions that they do not think will affect their liberties, they have no such compunction.

    IMHO, all transfer of government functions transfers wealth from the publich sector (you and me) to the favored private sector. If government is going to be in a business, it should be in a business and not contract it out. That goes for prisons, defense, money collection, education, etc.

  • So, will these debt collectors go after the IRS folks who owe back taxes. Doubt it.

  • Allan, I believe, is being the captive of his ideology rather than open to the evidence of experience. Privatization and contracting have produced huge efficiency gains and service improvements in areas like cafeteria, janitorial, and groundkeeping service in federal facilities. The G.I. Bill, providing vouchers for use at private colleges, was a vast improvement over the idea of establishing universities run by the military to serve returning servicemembers. One difference is that cafeteria managers, groundskeepers and colleges receiving G.I. vouchers do not in general wield coercive power over their clientele; they cannot fine or imprison them for talking back on the lunch line or dropping out before completing their degree. Nor can they exercise subpoena or discovery power to inflict massive legal response costs and invade the privacy of those drawn into involuntary dealings with them. Privatized tax farming, probation services, traffic enforcers, and attorneys general can invoke exactly these forms of coercion. So, yes, in his way, Allan is right about the one class of privatizations putting at risk liberties we hold dear, and the other not. If he believes using private contractors to run the cafeteria service at the Smithsonian or repave a parking lot at the FDA endangers liberties we hold dear in the same way, I hope he will explain his logic.

  • I am worried less about liberties enshrined in the constitution. I am worried more about graft and corruption caused by privatization.

    For example, private prisons. I have two concerns. First, we have private entities weilding coercive power. Second, we have private entities lobbying for continuation of a program that might not be succeeding. With non-coercive functions, i.e., cafeteria workers, my concern is simply with the second.

    I do not ascribe to the notion that we had “great efficiencies” from privatization. I just don’t know. We should have competitions. I think we should put competition to the test. For example, in the Smithsonian, let’s have two cafeterias, one run by contractors and one run by government employees. Give each the same amount of money to run operations. Then see who succeeds.

    Why do you think the GI bill was better than establishing government run universities? We never tried national universities (except for the service academies), so we don’t know how they would do. In any case, I would guess that a majority of the GI bill money went to government run universities in any case (i.e., those run by city and state governments).

  • I guess, to put it another way, I trust government more than I trust for-profit corporations. Government (in theory) has the good of the people in mind. For-profit corporations only have one goal: to make more money.

  • Da, Allan, da! Theory is much more important than experience!