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Washington, D.C.— For the second time, under oath, before Congress—this time in the Senate—the Internal Revenue Service (IRS) Commissioner again “freely acknowledged” that it is more costly for the private debt collectors to perform the tax collection work of the IRS than to have IRS employees perform it. Despite that fact, the IRS is plowing ahead with its outsourcing plan.

The claim of the IRS that the private companies it hired to pursue tax debts have recovered half-a-million dollars from taxpayers in the first two weeks of its privatization effort is further proof of the financial folly of the program, the leader of the union representing IRS employees said today.

IRS Commissioner Mark Everson earlier this week also told a Senate Homeland Security and Governmental Affairs subcommittee that the three private companies hired by the IRS already have received over $500,000 in cash from some 250 taxpayers.

Given the payment to the collectors of a bounty of up to 24 percent of the money they collect, that would mean the three companies have so far generated nearly $120,000 in commissions. And, she noted, that calculation does not take into account the $57 million the IRS anticipates spending on program-related start-up costs in fiscal 2007.

“Not only could IRS employees have performed this work for pennies on the dollar—had they been allowed to do so,” said President Colleen M. Kelley of the National Treasury Employees Union (NTEU), “the notion that all it takes is a letter and a phone call to collect tax debts is yet more proof that there is no need to privatize this work.”

National Taxpayer Advocate Nina Olson, who also testified at the hearing, was quoted in a major tax journal yesterday stating that the half-a-million dollars collected proves paying debt collectors up to 24 percent does not make economic sense, when taxpayers responded to the first letter sent for 39 cents.

NTEU has been leading the fight not only against the IRS program to hire private debt collectors, but against this administration’s drive to contract to the private sector as much federal work as possible.

The union has been joined in its opposition to the tax debt collection program by a growing number of members of Congress. Critics in both the House and Senate have expressed concern about the cost of the tax debt program and the risks it generates to the security of private and personal taxpayer information. Last week, eight major consumer groups joined with NTEU to send a letter to the Senate objecting to the program including: Consumer Federation of America; NAACP; National Active and Retired Federal Employees Association; National Consumer Law Center; National Consumers League; Citizens for Tax Justice; National Council of La Raza; and the U.S. Public Interest Research Group.

House-passed legislation in the fiscal 2007 Transportation-Treasury Appropriations bill would prevent the IRS from moving forward with the program; other pending legislation would revoke the agency’s authority to hire private debt collectors. The Senate has yet to take up its version of the 2007 Treasury spending bill.

NTEU is the largest independent federal union, representing some 150,000 federal workers in 30 agencies and departments, including 94,000 in the IRS.