Life’s two certainties are supposed to be death and taxes. Cheating death is still impossible. But millions of Americans are currently dodging taxes.
According to a new report from the Government Accountability Office, the Internal Revenue Service has failed to collect some $380 billion in outstanding tax debt. In the last six years, that figure has grown to approximately $470 million, a 23 percent increase.
Fortunately, Congress appears set to make tax cheats chip in their fair share with a measure that would order the IRS to employ private contractors to help collect some of this tax debt.
That’s the right call. Doing so would restore some fairness to the tax system — and furnish the funds needed to repair our roads, run our parks and build new schools, among other things.
The agency’s own commissioner called its customer service this tax-filing season “abysmal.” Sixteen million fewer taxpayers received assistance from the IRS. This past spring, agents routinely hung up on taxpayers seeking help by phone, according to Sen. Chuck Grassley, R-Iowa.
Congress has cut the agency’s funding by $1.2 billion since 2010. But many of the IRS’s wounds have been self-inflicted. The House Ways and Means Committee estimates that the agency has diverted $134 million from customer service to other activities.
The IRS has also stated publicly that it will audit fewer taxpayers. Agents in Dallas said that they wouldn’t go after anyone who owed less than $1 million. The Ways and Means Committee reported that decisions like these would cause the government to forego $2 billion in tax revenue that otherwise would’ve been taken in. This also sends the message to tax cheats that as long as they don’t cheat too much, they can get away with not paying taxes.
It’s no surprise, then, that uncollected tax revenue is skyrocketing. Why pay taxes if the authorities won’t bother to check?
According to a 2014 IRS Oversight Board survey, 94 percent of Americans agree that it’s everyone’s civic duty to pay his or her fair share of taxes. Seventy-one percent say that not reporting all income on your taxes is morally wrong, according to a 2013 Pew study.
Instead of raising taxes on hardworking Americans, federal officials should look to collect taxes that are already owed by leveraging the expertise of the private sector.
The agency has the power to hire private debt-collection agencies. It’s just refused to use it.
Those refusals have never made sense. In September 2006, the IRS implemented a pilot program to test private debt collectors. The contractors focused on “low-priority debt” — small amounts, old debts and the like. Over two-plus years, the private firms recouped more than $98 million.
The IRS shut the program down in 2009, asserting that it could collect those debts more cost-effectively.
There was only one problem — it had never tried to do so previously. And it hasn’t done so since.
The Highway Trust Fund bill wouldn’t allow the IRS to refuse private contractors anymore. Under this system, the IRS could help itself — 25 cents of every dollar collected would go to shore up its enforcement budget.
The Joint Committee on Taxation projects the net revenue increase from private collection agencies to be nearly $2.5 billion over the next decade. That’s after providing the IRS resources from the collections to hire 1,000 employees.
Critics of private collection agencies — among them the IRS’s unionized workers, who fear the competition — claim that contractors will have incentives to inappropriately harass folks into paying up.
But contractors must follow more stringent rules than the IRS. Private firms have to adhere to both the Fair Debt Collection Practices Act and the taxpayer rights protections within the Internal Revenue Code.
Evidence shows that private debt collectors treat taxpayers fairly. During the 2006 pilot program, private firms earned a 96 percent taxpayer satisfaction rate, compared with 92 percent for the IRS.
And private collection agencies scored a 99.9 percent rating for professionalism — no small feat considering that they were trying to extract back taxes from delinquent taxpayers.
The government has two choices. It can leave billions of dollars on the table and allow tax cheats to continue breaking the law. Or it can lower the deficit by using private collection agencies with a record of boosting tax revenue while delivering a more pleasant experience than the IRS.
Seems like a no-brainer.
By David Williams
David Williams is president of the Taxpayers Protection Alliance, a nonprofit organization that researches, analyzes and disseminates information on the government’s effects on the economy.