The Internal Revenue Service (IRS) traded two quarters for three pennies according to a report released Wednesday.
In the report by the independent Taxpayer Advocate Service.The IRS spent $20 million on private debt collection services that returned outstanding debt of only $6.7 million. That’s less than one percent of the total private collectors were charged with recouping. Of the 4,141 taxpayers whose debt was assigned to independent contractors, a full quarter were low-income households, according to USA Today.
“No one is making the IRS make these bad decisions,” National Taxpayer Advocate Service spokesperson Nina Olsen wrote in her annual report to Congress. “The harm to these taxpayers is something IRS leadership consciously decided to do despite my personal efforts, and those of my organization, to stop it.”
In fact, the IRS has attempted this approach in the past, and met with similarly disappointing results. In 2009, the program was abandoned when it was determined government employees could better handle the job.
Tax repayment scams are also astoundingly common, and is even easier when private collections contractors are used by the IRS. The process of verifying a private collector is, in fact, working for the IRS relies on savvy taxpayers‘ due diligence and not on the good behavior of collectors.
So why does the IRS use these wildly ineffective approaches?
Because they can’t afford to do it themselves.
The IRS’s 2016 budget had planned for a $122 million overhaul of their collection processes which was intending to return nine times its cost in unpaid taxes. However, faced with dwindling resources and a crushing workload, Congress authorized the IRS to outsource collection efforts to the private sector.
Republicans have been consistent proponents of using private debt collectors, including Treasury Secretary Steven Mnuchin. That’s not to say Democrats haven’t contributed to the problem, as the IRS’s budget has been shrinking since 2010.
As GritPost discussed last month, there are serious consequences that arise from the fact that no politician wants to be seen as “pro-taxes,” which extends to properly funding the Internal Revenue Service. Funding tax collection was one area where George H. W. Bush blasted Michael Dukakis thirty years ago. But the lack of desire to appear to support taxation has taken a program that aimed to get nine dollars for every one it spent and replaced it with one that spent almost four dollars for every single one it got back.
Slate argued for a host of reasons why private collectors shouldn’t be responsible of tax debts, but perhaps the most important one is that it doesn’t work.
Katelyn Kivel is a journalist and political scientist in Kalamazoo, Michigan. Follow her on Twitter @KatelynKivel.