October 26,2010

Grassley: IRS Makes No Progress on Debt Collection, Despite Rush to End Private Contracts

M E M O R A N D U M

To:    Reporters and Editors
Re:    GAO report on private contractors tax collection
Da:    Tuesday, October 26, 2010    

Sen. Chuck Grassley, ranking member of the Committee on Finance, today made the following comment on a report released from the Government Accountability Office, “Tax Debt Collection: IRS Could Improve Future Studies by Establishing Appropriate Guidance.”  The report is available here.

“According to this report, the IRS used a flawed study to justify ending its contracts with private agencies to collect owed taxes that the IRS wasn’t collecting on its own.  The IRS knew the study was flawed because the GAO told the IRS how to do the study.  But the IRS didn’t implement the GAO’s recommendations to fix the study, even though it agreed with them.  The IRS used the results from the defective cost-effectiveness study to defend its decision to terminate the use of private collection agencies, even though that wasn’t the primary purpose of the study.

“Union advocates, including members of Congress, Obama administration officials and the taxpayer advocate, tried to tell the public that IRS employees could collect the tax debts cheaper and better than private employees.  Yet, the IRS’ own information shows that the fledgling pilot program was returning money to the Treasury and that private employees’ quality ratings were consistently higher than that of IRS employees.  Union supporters’ successful disinformation campaign ultimately hurts other taxpayers, as private agencies were collecting dollars that the IRS wasn’t and isn’t going to collect anyway.”

“The IRS used a poor study to secure a task it said it could perform but hasn’t.   As of the most recent fiscal year, unpaid tax debts equal $328.1 billion. Only $120.4 billion of that amount is deemed potentially collectible and IRS is not actively pursuing $27.4 billion that it says is collectible. These are significant increases from when GAO first started tracking these numbers.  So, not only has the IRS made no progress in reducing unpaid tax debt, but also we’re worse off every year.

“Private collection agencies were supposed to help the IRS collect debts that it couldn’t or wouldn’t collect on its own. And, despite the IRS’ announcement last year that it would be dedicating IRS resources to working cases that the private agencies would have worked, GAO tells us today that that isn’t the case. At the same time, the number of hours IRS employees dedicate to union activity at the office, on the taxpayer’s dime, is significant.  Those IRS employees should spend more time doing the government’s work and less time protecting their jobs.”