House panel votes to block IRS collection plan

A House panel voted Tuesday to throw a roadblock in front of an Internal Revenue Service plan that would use private collection agencies to chase unpaid tax debts.

The House Appropriations Committee voted 29-27 to prevent the IRS from using money appropriated to the agency for fiscal 2007 to set up the program. President Bush had asked lawmakers to give the tax collectors $54 million to get the operation running.

Rep. Steve Rothman, D-N.J., who wrote the amendment, said the program should be stopped to protect taxpayers from exposure to privacy breeches.

“With personal identity theft on the rise, it makes no sense to hand over 2.65 million taxpayer files to private debt collection companies,” he said.

Rep. Joseph Knollenberg, R-Mich., said the provision will probably be overturned when the House debates the bill, which would fund the Treasury Department at $10.5 billion.

The concept enjoyed enough support from lawmakers to win approval in 2004 after the IRS argued it did not have enough money to chase every tax debtor on its own.

The private agencies stand to earn 22 percent to 24 percent of the tax money they collect for the federal government.

The IRS awarded contracts to three companies to start the first phase of the program. Private collectors would track down people who agree they owe taxes but haven’t paid.

The first phase of the program was to start this summer, but protests by two companies that lost their bids to do collection work caused a brief delay.