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US House, Senate Democrats Target Private Tax Collector Project January 25, 2007

Posted by notapundit in Congress, Politics, US News.
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WASHINGTON (Dow Jones)–House and Senate Democrats are poised to push legislation this year to halt the Internal Revenue Service’s use of private debt collection firms.

Reps. Chris Van Hollen, D-Md., and Steven Rothman, D-N.J., said Thursday they’ve introduced a bill to revoke IRS authority to hire collection agencies to pursue tax debts. The announcement comes after Sens. Byron Dorgan, D-N.D., and Patty Murray, D-Wash., introduced similar legislation last week.

“This is a very important step to protect the taxpayer,” Van Hollen told reporters in a conference call.

The development comes after the IRS National Taxpayer Advocate on Jan. 9 criticized the private debt collection project as “fatally flawed” and urged its termination.

The IRS last year hired three private collection agencies to collect a portion of overdue tax bills. The congressional Joint Committee on Taxation estimates that private collectors will bring in $1.4 billion over the next 10 years.

The project, authorized by Congress in 2004, is a Bush administration initiative to free up IRS resources and reduce the nearly $300 billion tax gap, a measure of uncollected taxes.

The U.S. House of Representatives last year voted to strip funding for the project amid revelations IRS workers could do the job at far less expense. IRS Taxpayer Advocate Nina Olson said the private collectors would return $4 for every dollar invested versus IRS staff who would return $32 per dollar invested.

IRS Commissioner Mark Everson has defended the program, saying the private firms would supplement the IRS workforce. His request for a significant expansion of the workforce has stalled in Congress amid federal budget constraints. The private collectors were to handle simple cases and be subject to close monitoring and taxpayer protections.

The private tax collection ban will receive significant support in the House and Senate tax writing committees, which oversee the IRS. House Ways and Means Chairman Charles Rangel, D-N.Y., backs the repeal of the private debt collection project.

By Rob Wells, Dow Jones Newswires

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