Surprise, surprise, surprise! Another attempt at privatization of a government function fails. This time it’s collection of back taxes
By Marc Jampole
Once again, privatization of a basic government function has failed. As the New York Times reports, the Internal Revenue Service paid $20 million last year to private collection companies to collect unpaid back taxes. The companies were able to dun people for a mere $6.7 million in back taxes. Sometimes they were paid a 25% commission on back taxes collected solely through the efforts of the IRS. But there’s much worse, 45% of the take was from taxpayers they weren’t supposed to go after: hardship cases for whom paying back taxes would prevent paying basic living expenses.
As Gomer Pyle, the rube played by Jim Nabors for years on two situation comedies, would put it, “Surprise, surprise, surprise!”
If Congress had studied history, it would have known that privatization of tax collecting—which used to be called tax farming—doesn’t work as efficiently as the government doing its own collection. (To be accurate, private companies are trying to collect back taxes for the IRS; historical tax farming collected all taxes.) Ancient Egypt, Rome and Greece all had third-party for-profit enterprises collecting taxes, as did the early kings of Europe. Historians now consider having the government bureaucracy collect its own taxes as one of the earliest signs of a modern government. The advantage of the government doing its own collections is twofold: It gets more of the revenues and the taxpayers are happier, since tax farming generally led to abusive practices by the tax farmers, who sought to maximize profits by squeezing taxpayers. Of course, even if Congress had known what a failure privatized tax collection is, it might have still passed the 2015 bill requiring the IRS to use private contractors.
When will politicians, both Republican and Democratic, learn that the private sector doesn’t always work as well as government does in providing services, especially when those services involve most if not all of the population?
Let’s tally the performance of the private sector when it takes over functions previously performed successfully by government.
We’ll start with private schools. Advanced research now demonstrates without a doubt that when you correct for poverty and disabilities public school students do better on standardized tests and improve their performance more over time than do private schools. And no wonder. Compared to private schools, public schools are more innovative, have more experienced teachers and provide those teachers with more continuing education.
Private prisons have proven to be a complete disaster virtually everywhere they have been tried in the United States. A few years back, the Wall Street Journal detailed the woes that the state of Idaho had after it privatized its state prisons in 2000; its private prison contractor walked away from a new contract, leaving Idaho with several lawsuits alleging that understaffing led to gangs rampaging violently through Idaho’s private prisons. The Journalreported that Michigan recently dropped plans to house 968 cons in a privately run prison after the bids by private companies exceeded by millions how much it would cost the state to do it. A few years back, a study showed that private prisons cost the state of Arizona more than a public system would have. When the State of Ohio gave its first inspection to one prison, it found that since a private company had taken over the facility compliance with regulations fell from 97.3% to 66.7%, a stunning decline in quality. As long ago as 2010, The Lexington Herald-Ledger called the privatized prison system in Kentucky a failure and cited the many abuses at one notorious private-run correctional facility.
How about private armies? People seem to forget that since Bush II, we have farmed out a large part of our military functions to private companies like Blackwater (formerly run by the brother of our current pro-privatization Secretary of Education) and Haliburton (the former company of Bush II’s VP, Dick Cheney). At a certain point, we had well over 100,000 military contractors in Iraq and Afghanistan, hired mercenaries loyal to their company not to the United States and not indoctrinated with the values and ethics of the American military. Using contractors drove up the cost of the Iraq and Afghanistan wars and led to a number of scandals of abuse of local civilians. And perhaps most significantly, we have failed to win either of these wars. And why would anyone think we’d have a better chance to win with hired guns, not well-trained U.S. soldiers? The United States has recognized the inferiority of privatized armies since we beat one in the Revolutionary War.
Then there’s our privatized health insurance system, which costs much more than other nations and yet delivers inferior health care, if judged by outcomes. In 2015, the United States spent almost three times on healthcare as the average of other countries with comparable incomes. Despite these outsized U.S. expenditures, people live longer in 29 of the 34 other countries surveyed. When compared to nationalized health insurance systems, we have fewer hospital beds per capita, higher rates of infant mortality and fewer people covered by health insurance. If you don’t think government does a better job of providing healthcare, ask anyone who has just switched from a commercial plan to Medicare what they think. I immediately noticed the improvement in benefits and access to care that Medicare provides.
For one more example, let’s go back in time to the early days of data processing. Many states and the federal government would outsource data processing to private companies such as Ross Perot’s Electronic Data Systems (EDS). Back in the 1980’s, it would cost Perot’s company about 6-8 cents a transaction, including labor costs. EDS charged governments 72 cents a transaction, a pretty fat profit margin. It doesn’t take much of a business head to figure out that the governments would have saved their constituents a lot of money if they had bought the computers and done the work themselves.
Of course, evidence means nothing to Trumpty-Dumpty and Republicans. Just this week, we learned that the Trump administration has abruptly halted work on the National Registry of Evidence-Based Programs and Practices, which analyzes substance abuse and behavioral health problems and recommends which work and which don’t, based on actual evidence. The program has been around about 20 years and features a website listing 453 programs in behavioral health that have been shown, by rigorous outcomes measures, to be effective. Like all Republicans, Trump and his advisors would prefer that the public be free to select from any number of treatments, even those that evidence has shown are little better than quackery. The freedom to select something that doesn’t work because you don’t have enough information and/or have been fooled by an unethical charlatan is more important than cutting the cost of health care and getting people the best treatment.
The contemporary Republican Party seems to run from science, which disproves virtually all of its fundamental ideas regarding the economy, free markets, the environment and public health. Their religious faith in the power of privatization is greater than the evidence that shows it doesn’t work.