WASHINGTON — Trump has contracted out the collection of unpaid income tax.
And unlike employees of the Internal Revenue Service (IRS), who must follow strict guidelines when contacting delinquent taxpayers, the private debt collectors are free to harass, badger and intimidate people who owe back taxes.
What’s worse, they work on commission; they pocket one out of every four dollars they collect.
Tony Reardon, president of the National Treasury Employees Union (NTEU) says the collection agents will be getting paid to “harass taxpayers, many of whom need assistance, not threats.”
Chi Chi Wu, staff attorney with the National Consumer Law Center, says private debt collectors “don’t have any incentive to [assist rather than harass] because they get paid a commission for every dollar they bring in. Their main incentive is to collect money, come hell or high water.
“We’re concerned that some of these vulnerable taxpayers will agree to pay more than they can afford and more than they should be paying given the availability of these programs.”
Twice before, the government has privatized the collection of back taxes, and each time “this has been tried before, it has failed,” Reardon says.
A 1996 pilot program was cancelled after a year of rampant debt collector violations of the Fair Debt Collection Practices Act, and $17 million in net losses.
The private debt collectors got a second shot in 2006. They claimed they could bring in $2.2 billion in new revenue, but they wound up losing $4.5 million, after taking $86 million for “program administration” and $16 million in commissions.”
“In other words, the private debt collectors make money and the U.S. Treasury takes a hit,” Reardon said. He noted that the work of IRS employees has always yielded a net profit to the government and that they treat taxpayers fairly.
The National Taxpayer Advocate, a nonpartisan and neutral voice for taxpayers within the IRS, says private debt collectors place “a bulls-eye on the back of low income taxpayers.”
“Subjecting taxpayers who are struggling to make ends meet and can’t afford legal representation to private contractors whose sole motivation is to maximize their own profits at the taxpayers’ expense is a recipe for disaster,” Reardon said.
“Congress should reverse course and cancel this program before it wastes more money or exposes people to fraud.”
Writing in Slate magazine, Adam Chodorow points out that the reason Trump gives for contracting out tax collection is that there is a shortage of IRS agents. And the reason there is a shortage of IRS agents is that funding to the department has been cut, “even though studies suggest that every $1 spent on enforcement yields $10 of revenue.”
Chodorow is a professor of tax law at Arizona State University. According to Slate, “he has written on tax topics from the sublime to the ridiculous. His other scholarship can be found here.”
Chodorow concludes his article by saying, “Let’s take another path and start by fully funding the IRS.”
CONTRIBUTOR
Comments