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Washington, D.C.—The leader of the National Treasury Employees Union (NTEU) today denounced the Senate Finance Committee for its “complete disregard of the rights and privacy of taxpayers” by including a provision that would turn over individual tax returns to private debt collection agencies in an unrelated international tax bill.

NTEU President Colleen M. Kelley vowed the union would continue its strenuous efforts to keep the tax collection by bounty hunters provision from becoming law.

“Turning private tax returns over to debt collection agencies is a proven bad idea,” she said. “It costs more than allowing the IRS to do the same work,” the union leader said, “and it permits confidential tax returns to be released to private sector debt collectors where their privacy cannot be guaranteed.”

Her anger was directed at action during a markup session today on an international tax bill, S 1637. The committee approved language included by Sen. Charles O. Grassley (R-IA) that would allow the Internal Revenue Service to contract tax debt collections to private companies. The private sector debt collectors would be entitled to a bounty of up to 25 percent of the amounts they collect. NTEU and a broad coalition of consumer groups have vocally opposed the proposal.

President Kelley was sharply critical of the Finance Committee “for ignoring the painful lessons of the past” on this issue.

In 1996, a pilot program of tax debt collection authorized by Congress resulted in multiple contractor violations of the Fair Debt Collection Practices Act, as well as their failure to protect the security and privacy of taxpayer information. The 1996 pilot was so bad—including resulting in a net loss of $17 million—that a planned follow-up program in 1997 was canceled.

The NTEU leader took the Finance Committee to task for its apparent unwillingness to consider the financial aspects of the current proposal. “It is far from cost-effective,” she said, noting that using private sector debt collectors would cost about $250 million to collect $1 billion in taxes over ten years. That’s a net return of only $3 for every dollar invested.

A wiser step would be to use IRS employees for that work, she said. That would result in the collection of $1 billion in taxes for an investment of only $30 million in additional agency resources in one year. The net return from that approach is $30 for every dollar invested—ten times the return from using private contractors.

“You would like to think the Senate Finance Committee would be much more sensitive to these cost and net return figures,” President Kelley said, adding that “the idea of turning tax collections over to private debt collection agencies has absolutely nothing to recommend it. Everything about it should make reasonable, thoughtful people reject it.”

She noted, for example, that debt collection companies make up the most complained-about industry in the country, generating more than 25,000 consumer complaints about their tactics to the Federal Trade Commission in 2002 alone.

“Paying debt collection agencies a bounty to go after tax debts is a certain way to generate abusive tactics by these companies,” President Kelley said, “and that is even without considering the potential harm that may come from compromising the privacy of taxpayer information.”

NTEU is the largest independent federal union, representing some 150,000 employees in 29 agencies and departments, including more than 97,000 in the IRS.