April 15,2008

Grassley Urges Private Debt Collection Detractors to Consider Facts, Including Disciplinary Actions Against IRS Employees

WASHINGTON – Sen. Chuck Grassley, ranking member of the Committee on Finance, with jurisdiction over tax policy, today urged detractors of the private debt collection program to consider facts, including disciplinary action against IRS employees and the IRS’ own poor track record ofcollecting the $345 billion of owed taxes known as the tax gap. Disciplinary action against IRSemployees included staff in the office of the national taxpayer advocate, a frequent critic of theprivate debt collection program.

Grassley wrote to Sen. Byron Dorgan, the lead sponsor of legislation to cut the program, andcopied the Senate co-sponsors of the Dorgan bill. The text of his letter follows here. The IRS commissioner’s two disciplinary reports for 2007 are available at finance.senate.gov.

April 15, 2008

The Honorable Byron Dorgan
322 Hart Senate Office Building
Washington, D.C. 20510-2405

Dear Senator Dorgan:

As the sponsor of legislation to prohibit the Internal Revenue Service from using private debtcollection companies, you should be aware of several important points.

First, the discussion over whether to gut this relatively new program has focused on its effectiveness.Detractors claim the IRS would be more effective than private companies in collecting tax dollarsthat are due and owed. However, the IRS has no interest and no will to pursue these debts and saidso in today’s Washington Post:

But IRS officials also say that if private collection ended, it is unlikely that the IRSwould redirect resources to the kinds of cases the private firms handle.

"Our own collection resources wouldn't get down to this level, not that we wouldn'thave made an attempt," said David Alito, director of collection at the IRS.

The tax gap of $345 billion grew in part because the IRS either lacks the will, direction, innovation,or sound management to stay on top of the problem. Congress may have contributed to thesefailures. If the private debt collection program is the “hood ornament for incompetence,” as youcalled it, then the IRS’ failure to collect $345 billion of taxes due and owed is the Edsel ofgovernment functions.

Second, the private debt collection program is being derided for costing more money than it raisesfor the federal Treasury. However, IRS employees are a big expense for the federal Treasury.Salaries and benefits are costly, and IRS employees are almost always permanent. Also, theprogram is still relatively new. It should have a fair chance to succeed or fail on its merits beforeCongress rushes to kill it in the cradle.

Third, much has been made about complaints involving the private debt collection program. Ofcourse no taxpayer should be subject to any kind of abuse or surly customer service from either agovernment agency or its proxy. Those of us who helped to create the private debt collectionprogram purposely built in a series of taxpayer protections. Ironically, staff members in the NationalTaxpayer Advocate’s Office were disciplined dozens of times for problems last year, including somethat directly involved taxpayers: “computer security and taxpayer privacy violations.” Other causesfor disciplinary action included “taxes, failure to properly and timely file or pay” and “governmentcredit card problems.”

Overall, the IRS took 2,366 disciplinary actions out of 99,022 employees from Jan. 1, 2007, to Jan.30, 2007. The IRS took 2,185 disciplinary actions out of 94,696 employees from July 1, 2007, toDec. 31, 2007. Please note these are formal disciplinary actions, not pending cases. In other words,the IRS took disciplinary action against 2.3 percent of its workforce last year. As with the taxpayeradvocate’s office, some of the disciplinary actions did not involve taxpayer privacy or service.

Clearly, the vast majority of IRS employees work diligently and ethically. But IRS employees haveoccasional lapses in judgment, just like members of the population at large. I hope you and otherskeptics will keep that in mind and take the time to evaluate any complaints involving the privatedebt collection companies in substance, in context, and in comparison to the IRS’ workforce beforerendering judgment that it’s time to kill a program to do a job that the IRS couldn’t or wouldn’t.Thank you for your consideration.

Sincerely,

Chuck Grassley

Attachments via e-mail

Cc: 23 cosponsors of S. 335, Sen. Dorgan’s bill to prohibit the IRS from using private debtcollection companies

Sen. Daniel Akaka
Sen. Sherrod Brown
Sen. Benjamin Cardin
Sen. Hillary Rodham Clinton
Sen. Daniel Inouye
Sen. John Kerry
Sen. Frank Lautenberg
Sen. Carl Levin
Sen. Robert Menendez
Sen. Patty Murray
Sen. John Rockefeller
Sen. Barbara Boxer
Sen. Maria Cantwell
Sen. Robert Casey
Sen. Dianne Feinstein
Sen. Edward Kennedy
Sen. Amy Klobuchar
Sen. Patrick Leahy
Sen. Joseph Lieberman
Sen. Barbara Mikulski
Sen. Jack Reed
Sen. Jim Webb
Sen. Sheldon Whitehouse

-30-