U.S. Senators Elizabeth Warren (D-Mass.), Ben Cardin (D-Md.) and Sherrod Brown (D-Ohio) have introduced legislation that would repeal authority from the Internal Revenue Service to contract with private collection agencies to collect unpaid taxes.
Now in its third iteration, “each time the program has been allowed to function, it has been shown to cost the federal government more money than it takes in while targeting some of the most vulnerable taxpayers” and potentially violating their rights, a statement announcing the legislative proposal says.
"The IRS private debt collection program is nothing more than a waste of taxpayer money," Warren, a member of the Senate Banking Committee, said in a sttaement. "Not one penny of Americans' hard-earned pay should be going towards ineffective private collection agencies.”
"Putting a bulls-eye on the back of low-income taxpayers has lost taxpayer dollars every time it has been tried. It needs to stop for good," added Cardin, a senior member of the Senate Finance Taxation & IRS Oversight Subcommittee.
"Taxpayer dollars shouldn't be spent employing private collection agencies so they can shakedown low-income workers,” Brown, ranking member of the Senate Banking Committee, said. “This is a textbook example of government waste, and we should fix it before more taxpayer dollars are misused.”
In 2015, a provision requiring the Secretary of Treasury to contract with PCAs was included as an offset to the highway funding extension bill. At the time, many Senators, the Treasury, the National Taxpayer Advocate, and a coalition of civil and consumer rights groups objected to its inclusion, citing concerns that ranged from cost to taxpayer confusion.
These concerns were not without precedent, the Senators say. Every previous attempt to use PCAs to collect taxes have resulted in revenue loss, despite projections that their use would generate billions in unpaid taxes. The first attempt, a 1996 pilot program that was projected to raise $27.5 million, resulted in a $3 million loss to taxpayers. The second attempt, extending from 2006 to 2009, was projected to raise $2 billion in revenue, but resulted in a loss of $4.4 million.
The third attempt at the PCA program has resulted in many of the same problems. Preliminary data from the IRS and NTA show that the latest program is also losing revenue.