Cart (0)
VIDEOBounty Hunters Coming for Your Back Taxes
By
Scott Reeves Jul 08, 2009 2:40 pm
IRS gets very, very serious.
 |
|
There’s a financial incentive at work: The defendant puts up a small portion of the bail -- typically 10% -- and the bondsman is on the hook for the balance if the alleged bad guy fails to appear in court. The bounty hunter often helps the cops by rounding up fugitives -- or “absconds,” as they’re often called at the courthouse.
Can the same technique be used for delinquent taxpayers?
The US Treasury estimates that about $150 billion in tax revenue is lost each year. Because the Internal Revenue Service doesn’t have the staff to collect the money, it launched the Private Debt Collection Program (or PDC) in 2006 and expanded it in 2008.
Under the program, private collectors received as much as $0.25 on each dollar collected, plus $100 for each account closed.
This has the the Center for American Progress -- a liberal think-tank headed by John Podesta, author of The Power of Progress: How America's Progressives Can (Once Again) Save Our Economy and President Clinton's former chief of staff -- in a lather.
“There is no difference between these collections and bounty hunters who hunt for fugitives,” the Center says in a press release. “The very nature of the program provides incentives for collectors to push the limits of legality to extract a little more revenue from their targets.”
Maybe, but what program or institution isn’t susceptible to abuse by the unscrupulous? Derivatives, anyone? Rent control? Defense contracts? Farm subsidies?
So what’s the Center for American Progress griping about? It calls for an end to the Private Debt Collection program based on current complaints and the likelihood of future abuses. If that’s the standard, why not extend the logic and call for the abolition of Congress? Some of its members have used their position to reward their friends, punish their enemies, and enrich themselves.
Maybe the think-tank just doesn’t like to see any government action handled by the private sector.
There’s no question that the PDC program could impinge on the rights and privacy of private citizens. Come to think of it, so could the Environmental Protection Agency. The tax-collection program needs safeguards and rigorous oversight. Aggrieved taxpayers are free to push back via the courts and their representatives.
Of course, that may be cold comfort for a taxpayer facing a gung-ho private debt collector who smells a fat commission.
The solution is simple -- and unthinkable -- at least for Washington. Compliance with the tax code is largely voluntary. To increase compliance, simplify the process. That would boost tax collections and increase revenue flowing to the US Treasury.
Congress could start by shortening the tax code and publishing it in English. Its 67,024 pages are a goldmine for special interests, accountants, and tax lawyers fluent in gobbledygook.
A flat tax that preserves exemptions for mortgages and charitable giving would be a good first step toward simplifying the tax code -- boosting compliance and increasing tax receipts. Cutting marginal tax rates would do more to goose the economy than the $787 billion stimulus package: It would keep the money in private hands, where it could be put to efficient use, without an overlay of political calculation.
Don’t bet on a simplified tax code, though. Congress is in the business of carving out exemptions for campaign contributors and industries with major lobbying efforts in Washington.
And it’s no secret that Americans spend billions each year to prepare their tax returns. If the tax code were simplified and if compliance increased, there would be less need for the IRS’s Private Debt Collection program, for the army of tax preparers, including H&R Block (HRB), Jackson Hewitt (JTX), and perhaps even for software developed companies by such as Intuit (INTU).
A simplified tax code would increase tax receipts and free liberals to fuss and fulminate about real problems.
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
