[Congressional Record Volume 153, Number 10 (Thursday, January 18, 2007)]
[Senate]
[Pages S763-S764]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. DORGAN (for himself, Mrs. Murray, Ms. Mikulski, Mr. Akaka, 
        Mr. Leahy, Mr. Levin, Mr. Kennedy, Ms. Cantwell, Mr. 
        Rockefeller, Mr. Kerry, Mr. Inouye, Mr. Cardin, Mrs. Boxer, Mr. 
        Lieberman, Mr. Menendez, Mrs. Feinstein, and Mr. Lautenberg):
  S. 335. A bill to prohibit the Internal Revenue Service from using 
private debt collection companies, and for other purposes; to the 
Committee on Finance.
  Mr. DORGAN. Mr. President, today I am joined by Senator Murray and 15 
of our Senate colleagues in reintroducing legislation to stop the 
Internal Revenue Service from outsourcing part of

[[Page S764]]

its tax collection responsibilities to private collection companies.
  Last fall, the Internal Revenue Service, IRS, ignored objections 
raised by many Federal policymakers and tax experts, including the 
IRS's own National Taxpayer Advocate, and moved ahead with its 
controversial plan to hire private companies to collect Federal tax 
debts. When the IRS attempted a similar plan in 1996, it failed 
miserably. The 1996 initiative lost money. Taxpayers were harassed by 
private debt collectors. In many instances, private debt collectors 
violated Federal debt collection laws and confidential taxpayer 
information was not properly secured.
  Today, the IRS is planning to share more than 2.5 million taxpayer 
accounts with up to 12 private collection companies when its new 
private debt collection plan is fully implemented--even though there is 
compelling evidence that this new initiative will suffer from many of 
the same maladies experienced by the IRS and taxpayers in the ill-fated 
1996 plan.
  IRS Commissioner Everson readily admits that if the IRS hired and 
used trained IRS employees for this purpose, not private collectors, 
far more revenues would be deposited in the U.S. Treasury fund. Yet the 
IRS is ready to hand out very large commissions ranging from 21 to 24 
percent to private firms for every dollar they collect, when internal 
IRS reports suggest that it would cost the Federal Government just 3 
pennies on a dollar to have trained IRS employees collect tax debts 
that are owed.
  Stated another way, the IRS anticipates spending well over $300 
million in commission payments to private firms to collect an estimated 
$1.4 billion in tax debt over 10 years, when internal IRS reports 
suggest that spending $296 million to hire new IRS collectors could 
raise some $9.5 billion annually. At a time of exploding deficits and 
Federal debt, the IRS's use of private debt collectors is an 
inexcusable waste of taxpayer money.
  In fact, the Government Accountability Office, GAO, released a report 
last September revealing that the cost of implementing the IRS's 
initial phases of its tax debt collection initiative alone, excluding 
any commission payments, may actually exceed all of the tax revenues 
collected by these private collectors by millions of dollars. The IRS 
plan is riddled with hidden costs. For example, the three companies 
hired by the IRS in the initial phase of its private collection plan 
have some 75 employees working on what the IRS has described as 
relatively easy collection cases. However, at least 65 IRS employees 
have been tasked to monitor the work of these collectors. So from a 
revenue collection and efficiency standpoint, it doesn't take a 
calculator to figure out that IRS private collection plan is not worth 
the paper it's printed on.
  Using private debt collectors is also very troubling because it puts 
confidential taxpayer information at risk of public disclosure and 
misuse. Just over two years ago, a Treasury Inspector General for Tax 
Administration, TIGTA, investigation found that a contractor's 
employees committed security violations, placing IRS equipment and 
taxpayer data at risk. In some cases, TIGTA officials found that 
contractors ``blatantly circumvented IRS policies and procedures even 
when security personnel had identified inappropriate practices.''
  As I've mentioned, the IRS has agreed to pay three private collection 
firms at the outset of its initiative nearly a quarter for every dollar 
their employees collect on what the IRS has described as relatively 
easy cases. The IRS's use of very large commissions to pay private 
firms for their work on such cases is not only fiscally unsound and a 
shameful example of government waste, it also increases the potential 
for overzealous collection practices and the misuse of sensitive 
taxpayer return information. Private debt collection agencies are 
driven by profit motives, not public service.
  Let me emphasize, once again, one very important point. Everybody 
needs to pay the taxes they owe. If they do not, however, professional 
IRS employees, not private collectors in search of profits, should be 
the ones to ensure that outstanding tax debts are paid. If the IRS now 
says it needs more resources for tax enforcement and collection 
activities, then Congress should consider providing them.
  I fully agree with the recommendations by the independent Taxpayer 
Advocacy Panel last summer--and recently echoed by National Taxpayer 
Advocate Nina Olson in the Taxpayer Advocate's 2006 Annual Report to 
Congress--that the IRS should terminate its outsourcing of taxpayer 
debt collection and restrict collection activities to properly trained 
and proficient IRS employees. Indeed, the IRS should immediately 
reverse course and indefinitely suspend the implementation of its 
private debt collection activities.
  The House of Representatives voted last year to eliminate funding for 
this IRS initiative in its version of the Treasury Department spending 
bill, which was never approved by the full Congress. I will be working 
with Senator Murray and many of our colleagues early in this new 
Congress to get similar language passed by the full Senate at the first 
available opportunity.
  The IRS should act on its own to stop its use of private debt 
collectors and save any further expenditures of taxpayer money for this 
purpose. If it will not, however, I will do everything in my power to 
put the brakes on this initiative in the U.S. Senate. That's why I urge 
my colleagues to cosponsor this legislation and help us, as the 
Taxpayer Advocate has suggested, terminate the IRS's privatization 
collection initiative ``once and for all.''
                                 ______