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Washington, D.C.—The Internal Revenue Service (IRS) cannot be expected to fulfill its vital mission without a realistic budget that takes into account increasing complexities in tax administration, the leader of the union representing agency employees told the IRS Oversight Board today.

President Colleen M. Kelley of the National Treasury Employees Union (NTEU) called for a 10 percent increase in IRS funding for fiscal 2006, and urged the nine-member public-private Oversight Board to push for a similar increase.

The IRS funding level set by Congress in recent years “makes absolutely no business sense” when viewed in light of the IRS’s ability to bring in four dollars in tax revenue for every dollar spent.

Kelley offered her comments in testimony to the Board, which has broad oversight responsibilities in such critical matters as IRS long-term and strategic planning, and budgeting. The Board was established in the 1998 IRS Restructuring and Reform Act (RRA).

In line with her views on IRS funding needs, the NTEU leader sharply criticized both the IRS and Congress for moving ahead with plans to privatize tax collection. Under legislation approved last year, the agency is permitted to hire private sector debt collectors and pay them a bounty of up to 25 percent of the tax debts they collect.

She said the privatizing program will risk exposing up to 2.6 million taxpayers’ private information; would subject taxpayers to the abusive tactics of private debt collectors—that industry generated 34,543 complaints to the Federal Trade Commission in 2003, and that was more than any other industry; and would cost more money than if IRS employees did the job.

Kelley offered the Board a lengthy detailed review of the problems the IRS has in contractor oversight, and urged the agency to immediately halt its plans to privatize tax collection. Instead, she said, the IRS should increase compliance staffing levels so that the ‘tax-gap’ between amounts owed by taxpayers and amounts collected can be closed without compromising taxpayer rights.

The NTEU leader also reviewed for the Board agency plans to conduct reductions-in-force affecting thousands of employees. These include many serving local communities in important programs like case processing and insolvency, and up to 2,200 handling tax returns at the Memphis Service Center. The agency claims the submission processing employees are no longer needed because of an increase in electronic filing of tax returns.

On the contrary, Kelley told the Board, the IRS consistently has fallen short of its e-filing goals, in part because it is using “unrealistic, opportunistic assumptions” to project the increase in e-filings—in turn using those assumptions to justify a RIF.

The better course, Kelley said, would be to reorganize only where there is a genuine need for a shift to an e-filing workforce, and that “every effort should be made to avoid a RIF” by retraining and placement of current employees—something the IRS has not been doing nearly enough.

NTEU is the largest independent federal union, representing some 150,000 employees in 30 agencies and departments, including about 98,000 in the IRS.