TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Tuesday, April 18, 2017

Chodorow:  The IRS's Use Of Private Debt Collectors Will Not End Well (Again)

Slate (2017)Slate:  The IRS Is Using Private Debt Collectors Again. And It May Not End Well, by Adam Chodorow (Arizona State):

Last year, Congress authorized the Internal Revenue Service to use private debt collectors to go after unpaid tax liabilities — and this month, if you are one of the unfortunate, you may have already had the pleasure first-hand. The U.S. Treasury hopes to assign up to 1,000 delinquent accounts a month to each of four different companies, which will be able to keep 25 percent of the tax bills they collect.

We’ve been here before — twice, in fact — and the government actually lost money. It is not at all clear why this time should be different. And even if the program does save the government money, as its proponents promise, turning over delinquent tax accounts to private debt collectors raises a host of issues that should give us pause. ...

We have come to a point where audits have fallen to their lowest levels in over a decade, in large part because we have refused to fund the IRS at levels sufficient for it to carry out its mission. While these cuts have been touted as necessary in an era of tight budgets, the IRS falls into that rare category of government spending that actually raises revenues. Studies suggest that every $1 spent on enforcement yields $10 of revenue. And it is hard not to notice the distributional impact of our current policy, which reduces enforcement for larger taxpayers, while unleashing private debt collectors on the little guys.

It is sometimes fashionable to draw parallels between perceived degeneracy in the U.S. and Rome, suggesting that we are walking a Roman path to the end of our American empire. Another key factor in the Roman collapse was the abuses heaped upon the people by private tax collectors.

Let’s take another path—and start by fully funding the IRS.

http://taxprof.typepad.com/taxprof_blog/2017/04/chodorowthe-third-time-is-not-the-charm-the-irss-use-of-private-debt-collectors-will-not-end-well-ag.html

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Comments

Professor Chodorow's source for the past effort costing the IRS money doesn't say that. It says, "Others are concerned that outside debt collectors could cost the government more money than they actually end up collecting from past due accounts."Others are concerned that outside debt collectors could cost the government more money than they actually end up collecting from past due accounts." He's citing other people speculating like he does, not to something that actually happened.

Posted by: Eric Rasmusen | Apr 18, 2017 4:12:20 AM

The third attempt will work because: 1) the third time is always the charm; 2) the private sector is always more efficient that goverment; 3) BHObama was a Kenyan usurper; and 4) DJTrump will inspire confidence in taxpayers who will gladly pay up because of DJTrump’s sterling example.

Posted by: Publius Novus | Apr 18, 2017 6:52:29 AM

"While these cuts have been touted as necessary in an era of tight budgets"
No the cuts were because the IRS stonewalled and ignored Congressional Oversight.

Posted by: Paul L. | Apr 18, 2017 8:42:18 AM