August 31, 2006
Thursday

The Bush administration's plan to turn over some back-tax collections to private companies is a bad idea from virtually every standpoint - except the private companies'. Not only would the strategy cost more than if regular IRS officers were employed. It would also expose the tax-collection system to the kinds of abuses that professionalized government was designed to end.

According to a recent New York Times report, the cases of some 12,500 taxpayers who owe $25,000 or less are about to be turned over to private collectors. Within a few years, private agencies will have tens of thousands of files in their hands. They will be paid from what they collect; they will also gain lots of very personal information about citizens.

A few years ago, the commissioner of the Internal Revenue Service told Congress that it would only have to spend three cents on the dollar if it simply hired more revenue officers to pull in back taxes. But private agencies will keep about 23 cents of every dollar collected. Yet Congress has refused to hire more revenue officers, apparently because doing so represents an increase in discretionary spending.

For a party dedicated to fiscal responsibility (at least rhetorically), the Republicans in this instance seem badly adrift. Deceptive bookkeeping will not alter the fact that, under the new system, collecting back taxes will cost all Americans more.

Meanwhile, the private tax-collection agencies will have every incentive to be less than straightforward with taxpayers about their rights, or what they truly owe. Their job is to earn as much as possible.

According to the Times, Linebarger Goggan Blair & Sampson, a Texas law firm chosen to help kick off the initiative, already has a besmirched record: A former partner admitted having paid bribes to win a collection contract in San Antonio. This is not the kind of start that inspires confidence.

Even if private collectors behave with absolute scrupulosity, the potential for abuse will rise. Scam artists will more easily be able to represent themselves as collectors, and fleece taxpayers.

The reasons this plan will work poorly are among the age-old reasons modern government was invented. By delegating certain activities centuries ago, rulers let favored vassals intimidate and exploit others. Nor could these kings' cronies be held accountable. A professionalized class of civil servants is less able to run roughshod over people's rights.

While we favor a robust free-market system, privatization is not the answer to everything. We hope that President Bush will abandon this initiative, and that Congress will see the wisdom of hiring more IRS officers.

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