Buried in the Senate-passed version of the big highway bill is a provision that would require the Treasury secretary to use private debt collectors to collect unpaid back taxes.
Buried in the Senate-passed version of the big highway bill is a provision that would require the Treasury secretary to use private debt collectors to collect unpaid back taxes.
The provision, added to the bill by Republican leaders, is ostensibly intended to help pay for highways. But it’s a bad idea that should be kept out of the House version of the bill and out of any final compromise version.
Private tax collection was tried in the 1990s and in the 2000s. Both times it lost money. It increases the cost of handling complaints and appeals at the Internal Revenue Service, and it is far less efficient than simply increasing the collection budget of the IRS.
Worse, it fosters taxpayer abuse. The debts involved are ones that the IRS has not been able to collect, in part because the taxpayers are too hard-pressed to pay up. A private company is probably not going to have better luck unless it uses abusive tactics.
And yet, private tax collection is an idea that keeps resurfacing. Why? One reason is that it would be a cash cow for the four companies likely to win tax-collection contracts, two in New York, one in California and one in Iowa.
Sen. Chuck Schumer, D-N.Y., has argued in the past that using federal money to pay private companies for tax collection would create jobs at those companies. But it would be better to increase the IRS budget to create middle-class public-sector jobs in professional tax collection than to throw money at low-paying private-sector contractors who cannot do the job as well.
One of the potential tax-collection contractors, Pioneer Credit Recovery in New York, recently lost its contract with the U.S. Department of Education to collect past-due student debt because it repeatedly gave borrowers misleading and inaccurate information.
Collecting taxes and maintaining highways are essential functions of government. By attempting to privatize tax collection to finance highways, the Senate fails to serve the public interest. Will the House do better?
© 2015 The New York Times Company