Bush to propose allowing limited private tax collection

President Bush will include a proposal in his fiscal 2005 budget allowing the Internal Revenue Service to use private companies to help beef up tax collection efforts, the Treasury Department announced Tuesday.

The president will seek to increase the IRS budget by 4.8 percent next year, significantly more than the average in the budget for non-defense, non-homeland security discretionary spending. The budget allots $300 million for the IRS to enforce tax laws, and would permit the IRS to use private firms to support collection efforts in "specific, limited ways," according to a Treasury statement.

The use of collection agencies would help garner an added $1.5 billion over 10 years, Treasury officials estimated.

"Many taxpayers are aware of their outstanding tax liabilities but have failed to pay them, and the IRS cannot continuously pursue each taxpayer with an outstanding liability," the Treasury statement said. "The proposal would enable government to reach these taxpayers to obtain payment while allowing the IRS to focus its own enforcement resources on more complex cases and issues."

On Jan. 7, IRS officials announced a massive restructuring plan, with plans to lay off 2,400 tax-processing employees and add more than 2,000 workers in the agency's enforcement operations.

The National Treasury Employees Union has announced plans to fight the restructuring, and has strongly opposed efforts in the past to privatize tax collection efforts.

The Bush administration made a privatization proposal in its fiscal 2004 budget, and a provision on private tax collection was included in President Bush's tax cut bill last year. But a House-Senate conference committee rejected the provision.

In October, the House Ways and Means Committee killed a proposal included in a tax bill that would have permitted private debt collection agencies to collect taxes under certain circumstances. At the time, NTEU President Colleen Kelley called the committee's action "a major victory for taxpayers."

Keith Koffler contributed to this report.

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