Director of Federal Tax Policy
A bill to extend various temporary corporate tax breaks (“tax extenders”), which failed to advance in the Senate last week, will likely reemerge in coming weeks. While it suffers from several flaws, one is easy — and important — to correct. The bill would outsource to private debt collectors the job of collecting back taxes from taxpayers whom the IRS has been unable to locate. Senator Ben Cardin (D-MD) has filed an amendment to strike this unwise provision.
The IRS has already tried this outsourcing policy and it failed — actually losing money for the government, according to IRS Commissioner John Koskinen. As Nina Olson, the IRS’s National Taxpayer Advocate, who helped develop the previous (2006-2009) program, recently told Congress:
Based on what I saw, I concluded the program undermined effective tax administration, jeopardized taxpayer rights protections, and did not accomplish its intended objective of raising revenue. Indeed, despite projections by the Treasury Department and the Joint Committee on Taxation that the program would raise more than $1 billion in revenue, the program ended up losing money. We have no reason to believe the result would be any different this time.
Moreover, this is a particularly inopportune time to outsource part of the IRS. As Koskinen recently told the House Ways and Means Committee:
[O]ver the last year, one of the major tax scams that we’ve been trying to warn the public about [has] been people calling up, saying they represent the IRS and demanding that people either make immediate payments to them or provide them personal information. We normally don’t contact people by phone to begin with. We send you notices and letters.
The IRS has a clear message to warn taxpayers about this scam: we don’t contact you by phone. It makes no sense for the Senate to muddle this message by hiring private debt collectors to phone taxpayers — the only way they’d have to reach these people, according to Koskinen — on behalf of the IRS.
Collecting taxes is one of government’s most essential functions, yet budget cuts in recent years have made it harder for the IRS to enforce tax laws. Rather than outsourcing part of this extremely sensitive function to private debt collectors, policymakers should give the IRS sufficient resources to carry out its mission.