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Washington, D.C.—A provision to allow contracting to the private sector the collection of federal tax debts, included in the Senate tax cut bill, would be costly to taxpayers in several important ways, the president of the National Treasury Employees Union (NTEU) said today.

NTEU President Colleen M. Kelley urged Congress to defeat an administration attempt to allow private collection agencies to collect overdue taxes and to be paid up to 25 percent of the amounts they collect. The Senate Finance Committee is scheduled to mark up the tax bill containing the contracting out provision later today.

“Turning the inherently governmental function of tax collection over to private companies not only would cost more than having Internal Revenue Service employees perform the work,” President Kelley said, “it would make available to contractors private taxpayer information and it would subject taxpayers to the most aggressive collection techniques.”

The NTEU leader repeated her assertion that privatizing tax collections flies in the face of congressional intent expressed in passage of the 1998 IRS Restructuring and Reform Act (RRA). One key provision of that law was to prevent the IRS from evaluating its employees, including its managers, by using collection statistics.

“The administration proposal to contract out the collection of overdue taxes for a fee subverts the intent and goals of RRA,” President Kelley said. “Contract employees know they will be evaluated on the amount of money they collect, and taxpayers will be subject to the worst practices of the collection industry.”

The NTEU leader noted that Congress authorized a test of private tax collections in 1996, finding not only that it produced far less revenue than anticipated, but that it actually cost money since IRS employees both had to train the contractors and were pulled away from their collection duties to do so. It was so unsuccessful that a similar test project in 1997 was cancelled.

An internal audit of that pilot project found that contractors had placed hundreds of calls to taxpayers that were not in compliance with the Fair Debt Collection Act, including calling at 4 a.m.

“As the tax bill moves through Congress, there will be opportunities to eliminate this provision,” President Kelley said, “and NTEU will work tirelessly to try to make that happen.”

As the largest independent federal union, NTEU represents some 150,000 employees in 29 agencies and departments.