Private Debt Collection Amendment

Floor Speech

Mr. GRASSLEY. Mr. President, I rise for the purpose of discussing an amendment that was filed yesterday that I hope I get an opportunity to offer. I am going to touch on these points, but I thought I would highlight a couple points about this amendment.

First of all, there is bipartisan agreement in this body there is a $290 billion tax gap--``tax gap'' meaning taxes that are owed but not collected. There is also an understanding that is not written that the IRS is not going to go after taxes unpaid, through their own employees, of under $25,000 a year. There is a feeling by some people in the IRS there ought to be more employees hired to go after the tax gap, but even if those additional employees are hired, they still will not go after those under $25,000.

Now, we have a program in place I wish to defend in my remarks. That program in place is the IRS contracting with private collection agencies to go after the money that is owed for those under $25,000; and to make the point, that program is working. But the bill before us, the Omnibus appropriations bill, contains a provision that would essentially kill the IRS private debt collection program, which the Senate, working through the Senate Finance Committee I serve on, only authorized a short period of 4 years ago. The IRS implemented that program only 2 years ago.

This program, which has never been fully operational in its brief 2-year period, allows the Internal Revenue Service to use private collection agencies to collect money owed to the Government. The program has many critics, and once again they are seeking to destroy the program before we have a chance to gauge how effective the program is.

Before I discuss the merits of the program, I wish to note that an appropriations bill is not the proper vehicle to nullify tax policy. The private debt collection program was created in a tax bill within the jurisdiction of our Finance Committee, and further legislation affecting the program should be done through the committee where the expertise is, the Finance Committee. Whether you would agree with the program, I think everyone could agree on the importance of the committee structure that we use in the Senate. In other words, a committee of jurisdiction where the expertise is ought to work to change a program if it needs to be changed or if it needs to be done away with, as basically the appropriations bill would do. I would assume members of the Appropriations Committee would not want--would not want--those of us on the Finance Committee making decisions against the expertise of the Appropriations Committee.

The IRS private debt collection program facilitates the collection of tax debts the IRS would not otherwise pursue. These liabilities amount to billions of dollars a year.

A Government Accountability Office report issued in June of 2008 reported the unpaid tax debt as of fiscal year 2007 to be about $290 billion, of which almost $185 billion was classified as nonpotentially collectible inventory and $25.5 billion was deemed potentially collectible but not in active collection status. The private debt collection agencies are only permitted to pursue debts taxpayers have conceded they owe.

Opposition to this program is surprising, since the Internal Revenue Service program is intended to run like similar programs at other agencies. In other words, the Department of Education uses private collection agencies to pursue delinquent student loans. The Treasury Department, which houses the Internal Revenue Service, also houses the Financial Management Service, and, ironically, the Treasury Department uses private debt collection agencies to collect small business loans.

So if it is OK for one branch of the Treasury Department to do that, why isn't it OK for the Internal Revenue Service to go after taxes owed but not paid? The only reason I can think of that private debt collection is so controversial at the Internal Revenue Service is simply the opposition to the program from the National Treasury Employees Union. The National Treasury Employees Union is comprised primarily of Internal Revenue Service employees, and according to that union's Web site, is the largest Federal sector union in the entire country.

The other Government agencies that use private debt collectors do not have as powerful a union fighting for more Government jobs. Yet this program does not threaten the jobs of revenue agents already working at the IRS. The tax debts the private collection agencies are targeting are debts the Internal Revenue Service is not even pursuing, and likely would not pursue even if additional revenue agents were hired.

In May 2007, Acting Commissioner Kevin Brown--now this is a Commissioner of the Internal Revenue Service--when testifying before a subcommittee of the House Ways and Means Committee, confirmed that the Internal Revenue Service would not otherwise pursue these debts, even if the IRS were given additional resources. So the bottom line is this: There are no IRS jobs on the line. Rather, the National Treasury Employees Union believes the IRS should be hiring more union employees to do collections work.

In contrast, I believe if the IRS is going to hire more workers, it should be agents to do more exams--work that private contractors cannot do. Former IRS Commissioner Mark Everson stated in a letter to me on April 11, 2007, that a full-time revenue agent auditing individual tax returns historically brings in nearly $700,000 annually.

Mr. President, I ask unanimous consent that Commissioner Everson's letter be printed in the Record, as well as a followup letter I wrote to Treasury Secretary Paulson on this issue.

There being no objection, the material was ordered to be printed in the RECORD

BREAK IN TRANSCRIPT

Mr. GRASSLEY. For me, this proves the IRS would be better off hiring more examination agencies than debt collectors. In addition to the National Treasury Employees Union's failure to discuss the success of private debt collection programs at other Federal agencies--I mentioned them, Education and one other branch of the Treasury Department--the National Treasury Employees Union also conveniently fails to mention that the private collection agencies hired by the IRS have consistently scored customer satisfaction ratings above 95 percent, while the IRS collection employees appear to be scoring at less than 65 percent.

The National Treasury Employees Union also fails to mention the amount of employee time devoted to union activities is proportionately higher at the Internal Revenue Service than it is in comparison to other Federal Departments and agencies. Commissioner Everson testified to this at the Senate Finance Committee tax gap hearing held on April 18, 2007. Just think, then, of the additional revenue IRS could be collecting if union employees were actually doing the job they were paid to do instead of spending taxpayers' dollars to lobby Congress to do away with a program that is collecting money owed under $25,000 a year that would not otherwise be collected. Of course, they do not like that program.

Since the omnibus provision prohibiting the IRS from using 2009 appropriations to fund the program office may actually kill the program, I have this amendment before the Senate. I mean, at least it is filed. It is not before us yet. I would not support a government program that is unsuccessful, and this private debt collection program is no different. However, we do not have enough information to know whether this program is effective, and, given the success of such programs at other agencies, I believe it can be successful at the Internal Revenue Service. It surely is successful at the Education Department.

Last week, I, along with Senator Harkin, my colleague from Iowa, and Mr. Schumer, the senior Senator from New York--the three of us--sent a letter to Treasury Secretary Geithner and IRS Commissioner Shulman asking for more information so we can actually make an informed decision on the effectiveness of the private debt collection program.

The letter asks for, among other things, additional information to measure the cost-effectiveness of the program, information to gauge the results of the collection agencies, and more information on the use of collection
agencies by other Government agencies. So all my colleagues are able to read the letter, I ask unanimous consent that letter be printed in the Record.

There being no objection, the material was ordered to be printed in the RECORD

BREAK IN TRANSCRIPT

Mr. GRASSLEY. It boils down to the fact that we should have a chance to obtain and review this information before killing a program that is going after money owed--$25,000 or less--from people who have said they acknowledge they owe it, that IRS employees would not go after. This affects jobs in a couple States, and I wish to say that when we are having a program--as the stimulus bill did--to keep people from being laid off and to have people being hired, you would at least think we would not think about eliminating jobs in a couple States. I was a supporter of this program before any contracts were awarded. As I said, I will not support the program if it does not prove effective.

Given the propensity to spend the Government seems to be afflicted with, there is going to be a hunger for new sources of revenue which is going to be controversial. What should not be controversial is that we need to collect taxes currently owed in the most effective and most efficient way possible and particularly not ignore a policy of not going after money under $25,000. Since the private debt collection program will accomplish that, I urge support for this amendment when it comes up.

I yield the floor.

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