WASHINGTON – Sen. Charles E. Schumer is working to put private debt collectors back on the trail of long-delinquent taxpayers, all in the name of jobs for Western New York.
Schumer, D-N.Y., has inserted language in a tax bill that would require the Internal Revenue Service to turn over most delinquent tax collections to private debt collectors after a year of failed government attempts to contact the tardy taxpayer.
The move would benefit the four private debt collectors that the IRS has authorized to do such work, including two that are located in Western New York: Pioneer Credit Recovery, an Arcade-based debt company that employs 900 people in Wyoming County; and ConServe, of Fairport, southeast of Rochester.
In an interview Monday, Schumer said the move would solidify employment at Pioneer and possibly increase the number of people the company employs locally.
But Schumer’s move has drawn sharp criticism from IRS officials who say that previous attempts to privatize tax collections ended up as a costly failure. Moreover, the agency’s taxpayer advocate said Schumer’s proposal “appears to place a bulls-eye on the backs of low-income taxpayers.”
Still, Schumer defended the move – which is winning bipartisan support – as a job preservation measure for the Pioneer facilities in Arcade and Perry, as well as an improvement over previous efforts to let debt collectors try to collect tax debt.
“This is far and away the largest employer in Wyoming County,” Schumer said. “And if these jobs were to fade away, if these jobs were to go away, these people would have nowhere to go.”
The nonpartisan Joint Tax Committee has estimated that the move could increase government revenues by $4.8 billion over the next decade. Half that money would go to extending a research and development tax credit for new companies, while the IRS would get $1.2 billion to bolster its operations and the debt collectors would share $1.2 billion.
Schumer said his proposal has been structured in a way to avoid the problems that occurred the last two times the government tried turning over tax collections to the private sector, in the late 1990s and again between 2005 and 2009.
Private tax collectors would be supervised to make sure they don’t harass taxpayers, and sufficient resources would be set aside to ensure the program would be better managed than it has been in the past.
“We wanted to be careful to make sure the program we put together would both preserve jobs in Western New York and be substantively the right thing to do, and I think we’ve come up with that,” Schumer said. But the IRS taxpayer advocate and the IRS commissioner disagree, as do some of Schumer’s colleagues.
The taxpayer advocate, Nina E. Olson, noted in a letter to lawmakers last week that four-fifths of the taxpayers to be targeted by private agents would be low-income.
“As the National Taxpayer Advocate, I believe it would be unconscionable for Congress to create a government-sponsored debt collection program that, even if inadvertently, targets such a high percentage of low income taxpayers,” Olson wrote.
Meanwhile, IRS Commissioner John Koskinen told the House Ways and Means Committee recently that he opposes the measure. The last time the IRS tried to privatize tax collection, “we ended up losing money,” he said.
Nevertheless, the measure has bipartisan support in both the Senate, which is expected to pass a bill extending a series of expired tax breaks that includes Schumer’s proposal, and the House. That tax bill faces murkier prospects in the House, but it’s already picked up support from Republican Reps. Chris Collins of Clarence and Tom Reed of Corning.
“I believe taxpayers are better served when you have the private sector, which has expertise in an area, performing a function that was otherwise stuck in the bureaucracy of big government,” said Collins, whose district includes Pioneer Credit Recovery’s Wyoming County facilities.
Reed, who serves on the tax-writing Ways and Means Committee, said he’s supportive of Schumer’s initiative, although he wants to make sure the proposal has been refined to correct previous problems.
“I think it’s a step in the right direction,” said Reed. “Obviously, when anything is going to impact the district and Western New York, we’re going to take a look at it. We’re all part of one family here.”
For his part, Schumer said he’s been working for years to boost Pioneer Credit Recovery, which already collects student loan debt as well as delinquent revenue due to state and local governments.
“The second issue after dairy prices in Wyoming County is Pioneer Credit,” Schumer said. “I’ve worked very hard to preserve those jobs and I’m going to keep doing it.”