Private tax collectors 1, taxpayers 0

Before Capitol Hill cleared out for the July 4th holiday, the House approved an $11 billion IRS budget.

That’s a 4.7 percent increase over last fiscal year’s IRS budget. The money for FY 2008, which begins Oct. 1, includes $3.6 billion for taxpayer service; $7.2 billion for enforcement efforts; $282 million for business systems modernization; and $116 million for tax compliance research.

But the bill is noteworthy for what isn’t in it.

The House removed a provision that would have eliminated funding for the private collection of tax debts.

The outsourcing of tax collection has been a contentious issue for the last several years. Even before the current program began last fall, some lawmakers began working to kill it. The House did in fact approve outright repeal of the program last year, but since the Senate failed to act, the program continued. (You can read the pro-con saga in this collection of blog postings.)

This year, opponents took another approach. They inserted language in the 2008 budget limiting the IRS to no more than $1 million to "renew, extend, administer, implement, enforce, provide
oversight of" private tax-debt collection. That would have effectively killed
the program.

But when it came to a vote on June 28, defenders of the debt collection program used
a procedural move to strip the funding limitation from the bill. Dismantling the collection effort now, they argued, could cost the IRS $69 million in 2008.

Privately raking in the tax dough: Enough Representatives also were apparently swayed by the dollars that the IRS says the program will bring in — an estimated $22 million in 2007 and $63 million in 2008. So far, according to the IRS, private collectors have recovered almost $20 million, and the agency’s goal over the next 10 years is more than $2 billion.

Opponents of private tax collection vowed to keep fighting. "There is clearly a consensus in the Congress to end the ongoing abuses in the IRS’ private tax collection program, and that consensus
won’t be thwarted by procedural gimmicks," said Rep. Chris Van Hollen, D-Md. "We are determined to end this kind of bounty-hunting activity once for all."

The appropriations measure also must clear the Senate, which has a private tax-debt collection ally in Senate Finance Committee ranking member Charles Grassley, R-Iowa, who earlier this year wrote his colleagues urging their support of the program.

Ultimately, any funding measure must go to the president for signature. And while the White House supports private tax collection, a spokesman for the president said Dubya might veto the entire bill if it
exceeded his recommended budget amounts, which the House bill does by $52 million.