Opponents of IRS Private Collection Hit Bureaucratic Brick Wall

When the Democrats gained control in both the House and Senate, many assumed it was the death knell of the IRS’s private debt collection program.  Democrats have long criticized the Republican-flavored business plan, and made noises that among its first acts as the new power figure would be one that squashed the program.

The Democrats’ plan hasn’t been so easy.

Thanks to pay-as-you-go budget rules, attempts to abolish the IRS program haven’t worked. Opponents of the program have long argued that the IRS could do the job for less money and that the government would be able to keep more that it collects.  But an accounting quirk in the budget process may prevent opponents from proving that. As the D.C. periodical The Hill puts it, “Non-partisan budget scorers like the JCT and the Congressional Budget Office (CBO) have not traditionally regarded funding increases to the IRS or plans to boost the agency’s efficiency as revenue raisers.”

To pass a bill ending the IRS program, the Democrats would have to make sure they don’t waive pay-go rules.  “We have to find a way to link the hiring of additional federal agents with the money saved to offset the losses,” said Rep. Chris Van Hollen. “It could go as a revenue raiser if they score it that way.”

The IRS’s program, which started with three debt collection agencies but is, for the moment, down to two – Pioneer Credit Recovery and CBE Group – has turned over more than $15 million to the Treasury since it started in September of 2006.  Next year, the program is projected to bring in $88 million.

Pioneer Credit also has a strong ally in Rep. Tom Reynolds, who is fighting to keep the program because of the jobs it provides to his district. Pioneer Credit Recovery, a subsidiary of student loan giant SLM Corp., employs about 1,000 people in rural New York and is one of two companies currently contracted to collect the taxes.

Abolishing the program would require Democrats to explain how they planned to offset that missing revenue.  And with the program’s successes, that’s going to be a difficult feat to manage.