The Privatization Scam Rolls On: The IRS Edition

File this under ‘those who forget history are condemned to repeat it’ (boldface mine):

Tucked into a dusty corner of the Senate’s Highway Trust Fund bill — legislation that must pass before the fund runs dry on July 31 — is a zombie proposal to hire private debt-collection agencies to hound delinquent taxpayers on behalf of the Internal Revenue Service.

The IRS has actually tried outsourcing tax collection activities to private debt collectors before, at Congress’s behest. Twice, in fact, over the last two decades.

Both times, the experiment was a disaster.

Privatizing delinquent tax collections led to complaints from taxpayers who got harassed and bullied by an industry known for rampant harassment and bullying, particularly of low-income people who don’t know their rights. In one oft-cited case, a private debt collector made 150 calls to the elderly parents of a taxpayer even after the collection agency learned that the taxpayer was no longer living at that address.

Perhaps more important, at least from a fiscal responsibility perspective, both times the program was scrapped because it actually cost taxpayers money on net, despite assurances ahead of time of the huge bounty it would lasso in.

The more recent period when privatization was piloted, from 2006 to 2009, Uncle Sam had been projected to gain more than $1 billion . Instead, it lost money. The net loss was small — a few million dollars — if you look only at the revenues brought in by the program versus the amount directly spent on it. But the net loss was actually more than $1 billion when you consider alternate uses for the money that the IRS was forced to spend on starting and administering the outsourcing program. (The IRS’s own unit for collecting the kind of delinquent tax debts the could be outsourced recovers about $20 for every $1 it spends.)

To start with, there’s a long history of revolts due to the privatization of tax collection. Why anyone would think attaching the profit motive to one of the fundamental roles of the state–the collection of revenue–would end well escapes me.

It’s also worth noting that this privatization is far less effective than government. Unless, of course, the goal is to enrich campaign contributors.

Someone might want to look into that.

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1 Response to The Privatization Scam Rolls On: The IRS Edition

  1. jrkrideau says:

    Privatized prisons have worked so well, I am sure privatized debt collection will do just as well.

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