House Votes to Kill IRS Collection Program; Veto Threatened

The U.S. House of Representatives late Wednesday passed a bill that kills the IRS’s use of private debt collectors after a lively, and at some times acrimonious, debate on the floor of the Capitol. Supporters of the program say that the bill faces much tougher opposition in the Senate and even the President’s office has weighed in and threatened the use of a veto.

Introduced by Democrat Charles Rangel of New York, Chairman of the House Weighs and Means Committee, H.R. 3056 passed by a vote of 232-173. The vote count was mostly along party lines, with 22 Republicans crossing over to vote in favor of passage and 9 Democrats voting against. The bill expressly nullifies the authority Congress granted the IRS in 2004 to enter into contracts with private collection agencies to collect old, uncontested, and low-dollar amount debt.

Although the ban on private collection agencies would take effect immediately under the bill, the two companies that are currently collecting on the contract — Waterloo, Iowa-based CBE Group and Arcade, N.Y.-based Pioneer Credit Recovery –- would be allowed to work until their contracts expire in March. The program is currently slated to expand in March of next year to around 10 collection agencies.

The vote capped more than an hour of vigorous debate which saw both sides hurling wild accusations and comically divergent numbers in support of their side. Both sides were given equal time with Rangel controlling the “For” time and Republican Jim McCrery (La.), ranking member of the Weighs and Means Committee, controlling the “Against” time.

After pedestrian opening remarks from both Rangel and McCrery, Rep. Earl Pomeroy (D-N.D.) began the battle of words with an opening salvo for the ages. “If you are happy with Blackwater in Iraq, then I expect you are perfectly fine with contracting the debt collection of IRS debt to private bill collectors,” said Pomeroy, referring to the embattled security contractor currently under investigation by both the U.S. and Iraqi governments.

Pomeroy’s statement underscored the framing of the issue for the Democrats. On Tuesday, Dam Drummond, spokesman for a group representing the collection agencies currently working the contract, told insideARM.com that opposition to the program is being buttressed by a larger debate on the government’s use of private contractors. “This program has been lumped in with other programs in the government outsourcing debate, and we feel that is unfortunate,” said Drummond.

Once the bill was passed, the White House Office of Management and Budget issued a surprisingly strong statement of opposition to H.R. 3056. “The bill is not consistent with the administration’s commitment to a balanced approach toward improving taxpayer compliance and collecting outstanding tax liabilities,” the statement said. The office said they would recommend that the President veto the bill if it passes the Senate.

Everyone close to the bill agrees that it faces a much tougher challenge in the Senate. In fact, Senator Chuck Grassley (R-Iowa) declared the bill “dead on arrival in the Senate” in a statement yesterday. Grassley, the ranking Republican on the Senate Finance Committee, also intimated that a few key Democratic Senators may not be in favor of killing the program.