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Washington, D.C.—It is a taxing question to understand why the Internal Revenue Service (IRS) would willingly pay private contractors far more money to collect a modest amount of taxes than it would spend on its own employees to collect a great deal more in taxes, the head of the union representing IRS employees said today. The private companies could earn as much as $350 million over the next 10 years, if the IRS plan moves forward.

“At a time of record federal deficits, this makes no sense,” said President Colleen M. Kelley of the National Treasury Employees Union (NTEU), talking about the IRS plan to hire private sector debt collectors to pursue tax debts in exchange for a bounty of up to 25 percent of the money they collect.

IRS Commissioner Mark Everson has openly admitted twice, most recently in an appearance before the House Ways and Means Committee last week, that it would cost more to hire the private collection agencies to pursue the tax debts than to have IRS employees do the work.

The bounty of $25 to collect $100 in tax debts by the private companies is in sharp contrast to figures provided by the previous IRS commissioner who said that IRS employees could return 10 times as much money to the Treasury as debt collectors. Overall, the estimate by the IRS is that its tax collection privatization program, if it runs over the next decade, would generate about $1.4 billion in collections—but, with a bounty of up to 25 percent, would cost the government some $350 million.

Meanwhile, in a September 2002 report to the public-private IRS Oversight Board, the IRS itself said that with only a modest investment of $296 million in additional enforcement employees, IRS employees could collect $9 billion in a single year.

“The math, supporting having the work done by IRS employees, is strikingly in favor of America’s taxpayers, to say the very least,” President Kelley said.

But the adverse financial aspects of the IRS plan are only one problem, the union leader said. The other principal concern is for the safety and security of taxpayer information. An increasing number of members of Congress have expressed their concerns about both the costs of the program and the risk to taxpayer data, including their Social Security numbers, by providing tax returns to private sector debt collectors.

In a letter to Commissioner Everson, Rep. Rob Simmons (R-CT) raised the privacy issue, noting his concern that since some 26 million Americans have been the victim of identity theft over the past 15 years, “furnishing more taxpayer data to dubious third-parties will only increase the risk of wrongful disclosure.”

Rep. Simmons—who along with Rep. Chris Van Hollen (D-MD)—has introduced legislation, H.R. 1621, that would revoke the IRS’s authority for the tax debt privatization program—strongly urged Everson “to reconsider this action before our taxpayers’ privacy is compromised.”

NTEU is the largest independent federal union, representing some 150,000 federal workers in 30 agencies and departments, including 90,000 in the IRS.