House votes to bar IRS from outsourcing tax collection

The House on Wednesday passed a legislative provision that would prevent the Internal Revenue Service from hiring contractors to collect tax debt.

The measure, introduced by Rep. Shelley Moore Capito, R-W.Va., as an amendment to the fiscal 2005 Transportation-Treasury appropriations bill (H.R. 5025), prohibits the IRS from using private collection agencies to help out federal collectors. House members passed Capito's language on a voice vote.

Capito's amendment drew bipartisan support. "We shouldn't turn [IRS tax collectors] into bounty hunters for their own personal profit," said Rep. Chris Van Hollen, D-Md., during a floor debate over the amendment.

In his fiscal 2005 budget proposal, President Bush asked lawmakers to let the IRS hire private agencies to supplement debt recovery efforts. Current law doesn't allow the agency to contract out collections.

"At a time when both chambers of Congress look to be significantly reducing the administration's 2005 budget request, we need this authority to help us collect taxes and ensure [that] all taxpayers pay their fair share," IRS Commissioner Mark Everson said Wednesday. "If this is approved, we will ensure that taxpayer privacy is protected."

Lawmakers supporting the Capito amendment argued that private sector collection companies can't be trusted with taxpayers' personal information. Wrongful disclosure of taxpayer information could do "irreparable" harm to the system, said Rep. Mike Ferguson, R-N.J.

Tax collection should be considered inherently governmental and should be left to federal employees, Capito's supporters argued. Past attempts to use private sector collection agencies have failed miserably, Van Hollen noted.

But opponents said Congress shouldn't prevent the IRS from exploring options for improving efficiency and collecting more debt. Rep. John Olver, D-Mass., said he finds the "idea of putting private, sensitive information in the hands of [private sector] debt collectors very troubling," but said he sees no problem with allowing companies to "go after monies already adjudicated but not collected." The contractors would merely "try to negotiate a payment" from taxpayers found to have evaded the system, Olver argued. Any plan to contract out collections "needs to be looked at carefully" because previous attempts at private collections have failed, he acknowledged. "But I don't think we should eliminate that arrangement as a possibility," he said.

Lawmakers opposed to Capito's provision also noted that the federal government has already outsourced other debt recovery efforts. For instance, private collection agencies help the government track down delinquent student loan payments, said Rep. Ernest Istook Jr., R-Okla.

The outsourcing of some collection work wouldn't jeopardize the jobs of any federal employees, Istook said. A number of states employ private tax collection agencies, he added.

"More than 40 states already use private collection agencies, so why shouldn't we?" Everson asked.

But Colleen Kelley, head of the National Treasury Employees' Union, said the IRS would be better off devoting more resources to enforcement. "The IRS itself has said that, given a modest increase in enforcement resources, agency employees could collect more than $9 billion, or nearly 10 times as much as private debt collectors," Kelley stated.

Istook also argued that Capito's amendment is superfluous because it is already illegal for the IRS to outsource debt recovery work. A measure adopted as part of corporate tax legislation would allow the agency to begin hiring private sector collectors on a limited basis, but that bill hasn't been signed into law yet.

In other developments Wednesday, the House deleted a section from the Transportation-Treasury spending bill that allowed in-house employees to organize into teams and submit a bid in any public-private job competition involving more than 10 full-time positions. The language deleted would have also afforded those teams a cost advantage of 10 percent or $10 million.

The House leadership used a "point of order" to drop the section from the bill. Under House rules, lawmakers can eliminate authorizing language from appropriations bills using that procedure.

The American Federation of Government Employees was "surprised and disappointed" to see the provision deleted, said John Threlkeld, a lobbyist for the union. The move makes the passage of a Van Hollen amendment asking the Office of Management and Budget to once again rewrite the rules on competitive sourcing all the more critical, he said.

Van Hollen plans to offer his amendment when the House resumes consideration of the Transportation-Treasury bill next week.