This was in links a day or two ago, but it's worth highlighting:
Collecting Taxes Is Government Work, Editorial, NY Times: Buried in the Senate-passed version of the big highway bill is a provision that would require the Treasury secretary to use private debt collectors to collect unpaid back taxes.
The provision, added to the bill by Republican leaders, is ostensibly intended to help pay for highways. But it’s a bad idea that should be kept out of the House version of the bill and out of any final compromise version.
Private tax collection was tried in the 1990s and in the 2000s. Both times it lost money. It increases the cost of handling complaints and appeals at the Internal Revenue Service, and it is far less efficient than simply increasing the collection budget of the I.R.S.
Worse, it fosters taxpayer abuse. The debts involved are ones that the I.R.S. has not been able to collect, in part because the taxpayers are too hard-pressed to pay up. A private company is probably not going to have better luck unless it uses abusive tactics.
And yet, private tax collection is an idea that keeps resurfacing. Why? One reason is that it would be a cash cow for the four companies likely to win tax-collection contracts...
Senator Chuck Schumer, Democrat of New York, has argued in the past that using federal money to pay private companies for tax collection would create jobs at those companies. But it would be better to increase the I.R.S. budget to create middle-class public-sector jobs in professional tax collection than to throw money at low-paying private-sector contractors who cannot do the job as well. ...
I've posted this before (in 2006) (I left out his two other examples of the Bush administration trying to take us "back to the 16th century"):
Back to a bad old future:
Tax Farmers, Mercenaries and Viceroys, by Paul Krugman, A Monarchy Commentary, NY Times: Yesterday The New York Times reported that the Internal Revenue Service would outsource collection of unpaid back taxes to private debt collectors, who would receive a share of the proceeds.
It’s an awful idea. Privatizing tax collection will cost far more than hiring additional I.R.S. agents, raise less revenue and pose obvious risks of abuse. But what’s really amazing is the extent to which this plan is a retreat from modern principles of government. I used to say that conservatives want to take us back to the 1920’s, but the Bush administration seemingly wants to go back to the 16th century....
In the bad old days, ...[t]here was no bureaucracy to collect taxes, so the king subcontracted the job to private “tax farmers,” who often engaged in extortion. There was no regular army, so the king hired mercenaries, who tended to wander off and pillage the nearest village. There was no regular system of administration, so the king assigned the task to favored courtiers, who tended to be corrupt, incompetent or both.
Modern governments solved these problems by creating a professional revenue department to collect taxes, a professional officer corps to enforce military discipline, and a professional civil service. But President Bush apparently doesn’t like these innovations, preferring to govern as if he were King Louis XII.
So the tax farmers are coming back...
Tax farmers, mercenaries and viceroys: why does the Bush administration want to run a modern superpower as if it were a 16th-century monarchy? Maybe people who’ve spent their political careers denouncing government as the root of all evil can’t grasp the idea of governing well. Or maybe it’s cynical politics: privatization provides both an opportunity to evade accountability and a vast source of patronage.
But the price is enormous. This administration has thrown away centuries of lessons about how to make government work. No wonder it has failed at everything except fearmongering.