Tuesday, August 22, 2006

Would you let these jokers manage your money?

I know this isn't a tax column, but tax policy in the U.S has a lot to do with philanthropy, so bear with me. David Cay Johnston of the New York Times is the only person I know of who can make tax reporting interesting. His piece in Sunday's paper was not only interesting, I had one of those "Jump out of the chair shouting You've gotta be kidding" moments.

Johnston's report, "I.R.S. Enlists Outside Help in Collecting Delinquent Taxes, Despite the Higher Costs," (Sunday, August 20, 2006, p 12 National Edition) notes the following:

If Congress would allow the IRS to hire its own debt collectors, the cost would be about $296 million and the return about $87 billion, or 3 cents on the dollar. (Over ten years)

Congress won't allow the IRS to hire staff, so they are outsourcing this work. It will cost us $330 million and return $1.1 billion, over the same ten years. This is 24 cents on the dollar.

And that is not all.

Three private firms have won the contracts to collect these debts. (Drum roll, please, you know what's coming). One of the three, based in Austin, TX, is run by a guy who has served jail time for bribery. The bribes were paid to win a collection contract.

And that is not all.

All of the firms will be given access the private taxpayer information on those who owe money. No worries about identity theft here, right?

Wrong. Stay tuned. It probably won't be long until the papers report the loss of a laptop/flash drive/file cabinet containing the private tax information on the more than 10,000 Americans these 3 companies will soon start calling.

And yes, I did make note that the collectors will focus on taxpayers who owe less than $25,000 each. Something tells me the folks making this decision are looking up the wrong end of the pipe if they really cared about collecting due revenue.

1 comment:

Phil said...

I believe the IRS is laying off half of the staff devoted to collecting estate taxes, one of the most cost-effective uses of tax collector's time.