IRS to lose ground to private debt collectors in highway bill

Private debt collectors would get the chance to chase tax debt under a provision tucked into the 6-year, $325 billion transportation bill being debated by the House.

The measure has worried the National Treasury Employees Union, which represents much of the IRS’ workforce. In a call with reporters, NTEU President Tony Reardon said it would hurt the IRS, which has lost $1.2 billion in funding throughout the past five years.

“It would undoubtedly take money to set it up and that would take money away that could otherwise be used to bring in more frontline employees,” he said.

The provision is one of several that attempt to raise revenue from new sources to pay for transportation projects.

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As drafted, it would let private collectors go after older cases that the IRS has declared inactive because it cannot locate the taxpayer. Such a program has been tried twice before in the past two decades. Both times it ended up costing the government money rather than saving it. Aggressive and abusive tactics by private debt collectors in the mid-2000s led the IRS to pull employees from their regular duties to supervise the contractors, Reardon said.

Consumer and civil rights groups, including the National Consumer Law Center and the NAACP, oppose the provision. National Taxpayer Advocate Nina Olsen also has warned against reviving the program.

Eleven House democrats have sponsored an amendment that would strip the section from the highway bill. Reps. John Lewis (D-Ga.), Sander Levin (D-Mich.) and Chris Van Hollen (D-Md.) issued a statement calling the provision “misguided and harmful to taxpayers.”

“We agree that it is vitally important that we fully finance a robust investment in our nation’s infrastructure. However, we should not pay for that investment by subjecting our taxpayers to these abusive practices. This provision must be removed,” they stated.

It’s unclear whether Republican leaders will allow a vote in the full House on the amendment. That is generally not permitted for tax-related amendments. But Reardon described this as an “unusual situation” in which Republican leaders in the Senate, where the bill originated, quietly have tried to help the debt collection industry.

“These offsets haven’t been considered by any committee in the House or the Senate and no one wants their fingerprints on them,” he said.

A spokesperson for Senate Majority Leader Mitch McConnell (R-Ky.) said he did not know who had sponsored the provision.

Customs user fees in question

Another provision in the highway bill would siphon off Customs and Border Protection user fees, long used to pay for that agency’s expenses, to fund transportation projects. Democrats are trying to strip that measure from the bill, too.

“Frustratingly, this break in precedent comes at a time when there is a staffing shortage of 1,811 customs officers across the U.S. The funds generated by indexing customs user fees to inflation are desperately needed to ensure that our nation’s border is secure, mitigate long wait times at our border for both trade and travel, and ensure that the United States is in compliance with its international obligations,” said Reps. Levin, Bennie Thompson (D-Miss.), Lucille Roybal-Allard (D-Calif.), and Jim McDermott (D-Wash.) in a statement.

If the full House does not agree to strip the bill of the IRS and Customs provisions, Reardon said, NTEU would continue to lobby against them as the legislation moves to a House-Senate conference committee later this fall.

“I don’t think anyone thinks that they are the best choice to provide for long-term stable transportation funding,” he said.