[Congressional Record (Bound Edition), Volume 154 (2008), Part 5]
[Senate]
[Pages 5974-5975]
[From the U.S. Government Publishing Office, www.gpo.gov]




                 IRS PRIVATE DEBT COLLECTION ACTIVITIES

  Mr. CARDIN. Mr. President, today is April 15, the day when millions 
of Americans are hurrying to file their income tax forms to meet the 
midnight deadline. Many of my colleagues have spoken today about the 
need to make more effective and responsible use of Federal tax dollars, 
and I agree that we must do so. One place to start is with the IRS's 
own private debt collection program.
  Today, the Washington Post reported that the Internal Revenue 
Service's use of private debt collection agencies is expected to cost 
taxpayers more than $37 million this year. Throughout our Nation's 
history, the Federal Government had always assumed responsibility for 
tax collection. But in 2004, through legislation that I opposed, 
Congress gave the IRS authority to use private debt collection 
companies to collect undisputed tax debts of less than $25,000. The 
companies also would receive a 25-percent commission on all receipts. 
Although the stated goal was to improve the efficiency of tax 
collections, it is clear that this plan is not working.
  In fact, even before Congress adopted this approach, former IRS 
Commissioner Charles Rossotti estimated, in a

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2002 report to the IRS Oversight Board, that if Congress were to 
appropriate an additional $296 million to hire more compliance 
employees, the agency could collect an additional $9.47 billion. In 
other words, every dollar spent on collection would net $31. But rather 
than increase the number of IRS employees, Congress ignored 
Commissioner Rossotti's advice and instead spent scarce taxpayer funds 
to privatize IRS functions, with dismal results.
  In March 2008, Nina Olson, the National Taxpayer Advocate, reported 
to Congress that the program actually is losing money. Testifying 
before the House Ways and Means Committee, Ms. Olson said that the IRS 
is losing at least $81 million a year by using private debt collection 
companies. The IRS spent $71 million to start the program and it spends 
$7.65 million annually to operate it, plus on average $4.6 million in 
commissions that are paid to the private collectors. Despite using 
aggressive tactics, the companies have collected only $49 million, 
little more than half of what it has cost the IRS to implement the 
program. By contrast, Ms. Olson testified, and I quote, ``if the 
program did not exist and the IRS instead allocated $7.65 million in 
appropriated funds to its automated collection system, ACS, function, 
the return on investment would be vastly greater. IRS data shows that 
the average return on investment for the ACS program is about 20:1, 
which would mean that an expenditure of $7.65 million would generate 
annual revenue of $153 million.'' Ms. Olson then recommended that the 
private debt collection initiative be terminated. I concur.
  The privatization initiative is also putting millions of Americans' 
personal information at risk. I do not believe that Americans want 
private collection agencies tio have access to their sensitive, 
personal information that should only be reserved for the Federal 
Government and the qualified, trained, accountable personnel who work 
at the IRS.
  The Ways and Means Committee recently considered legislation that 
would repeal the IRS's authority to use private debt collection 
agencies. The Taxpayer Assistance and Simplification Act was reported 
out of committee in a bipartisan vote. My distinguished colleague from 
North Dakota has introduced similar legislation that would prohibit the 
IRS from using private debt collection companies, and I am pleased to 
be an original cosponsor of that bill.
  The private debt collection program also has generated considerable 
confusion among taxpayers. Under the rules of the program, collectors 
cannot say they are working for the IRS or that they are calling about 
a tax matter without first receiving proof of a taxpayer's identity. 
This has led to numerous complaints from consumers who have received 
calls from collectors, pressing them to provide Social Security numbers 
and other personal information without first identifying the purpose of 
the call. Citizens are justifiably fearful of being scammed, and so 
they refuse to provide the companies with any information. By any 
measure, this program is not working.
  Mr. President, the private debt collection experiment has failed. Tax 
collection is a fundamental responsibility of Government, and Congress 
should provide the IRS with the staff and other resources needed to 
fulfill this responsibility, not enrich private companies at the 
expense of American taxpayers. Today on April 15--Tax Day--millions of 
Americans are rushing to file their taxes before the midnight deadline. 
Many are writing checks to the IRS, and so it is an appropriate time to 
reconsider the millions of dollars they are spending on the private 
debt collection program. It is time for this body to pass Senator 
Dorgan's bill and end this inefficient use of taxpayer dollars.

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