Controversial plan in Congress to outsource collection of unpaid taxes

Author: Anchor Dan Brown, Reporter Hilary Wical

Published: October 5, 2004

DAVID BROWN, anchor: You know, it must be an election year. What started out as a bill to roll back export tax breaks that violate world trade rules has morphed into--well, let's just call this the `Omnibus Everything Act of 2004.' The 633 pages include tax breaks for shipping industries, bow and arrow manufacturers, native Alaskan whalers and importers of Chinese ceiling fans. But wait. There's more. If you keep on digging, you'll come across a plan for the government to outsource some of its tax work. MARKETPLACE Hillary Wicai has our story.

HILLARY WICAI reporting: Outsourcing the collection of unpaid taxes is a controversial idea that's been around for a few years. In fact, President Bush included it in both his 2004 and 2005 budget proposals. And--Presto--it's popped up again. Tara Bradshaw is a spokesperson for the Treasury Department. She says an estimated $16 billion in taxes are waiting to be collected.

Ms. TARA BRADSHAW (Spokesperson, Treasury Department): We believe there are many outstanding tax debts that could be addressed effectively and efficiently by private contractors. And this would free up valuable IRS resources for more complex cases.

WICAI: Sheldon Cohen disagrees. He was IRS commissioner during the Johnson administration. He advocates giving the $1.5 billion the outsourcing program would cost to the IRS, so it can better collect. Cohen believes private tax collection goes against one of the two fundamentals of sovereign nations.

Mr. SHELDON COHEN (Former IRS Commissioner): One is the ability to defend yourself, and the other is the ability to finance yourself. So the collection of taxes and the defense establishment are the most inherently governmental functions that we have.

WICAI: Len Burman is co-director of the Tax Policy Center in Washington. He warns the legislation now being considered eliminates government responsibility. If the private collectors make a mistake, you can't sue the government; you've got to sue the bill collectors.

Mr. LEN BURMAN (Co-director, Tax Policy Center): And it could be that citizens who are not treated well by these tax-collection agencies could end up with no recourse. This is really a disaster.

WICAI: He compares private tax collectors to bounty hunters because they're both paid a percentage of their collections. In Washington, I'm Hillary Wicai for MARKETPLACE.