House backs bill to end private tax collections

WASHINGTON Wed Oct 10, 2007 6:35pm EDT

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WASHINGTON (Reuters) - The House of Representatives voted on Wednesday to end a Republican-backed program allowing private debt collectors to pursue tax debts owed to the federal government.

The House voted 232-173 for a bill ending the program enacted in 2004 by the then Republican-led Congress.

Democrats, who now control Congress, and unions opposed the program, saying it was a costly way to collect tax debts that could more efficiently be collected by Internal Revenue Service employees.

"There is nothing magic about privatization," said House Ways and Means Committee Chairman Charles Rangel, a New York Democrat. "Just saying that it is privatized doesn't mean that it is more effective or you are doing the right thing."

Republicans said the program had collected millions of dollars in taxes that otherwise would not have been paid. Rep. Jim McCrery of Louisiana, the top Republican on the Ways and Means Committee, said the private collection agencies were better equipped to collect unpaid taxes than the IRS.

"In the program's first year, more than 90,000 cases have been placed with the (private collection agencies)," McCrery said. "Close to 7,300 have resulted in full payment and more than 2,600 taxpayers have entered into installment agreements."

The bill now goes to the Senate where it faces stiff opposition from Sen. Charles Grassley of Iowa, the top Republican on the tax-writing Senate Finance Committee.

"This bill is dead on arrival in the Senate as far as I'm concerned," Grassley said in a statement. "Using private companies to contact delinquent taxpayers and urge them to pay frees up IRS employees for complex investigative cases that require the specialized knowledge of people who know the tax code inside and out."

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