Washington politicians love handing out public money to big corporate contractors, especially the ones giving fat donations to their reelection committees. Replacing civil service employees with private employees working for those campaign contributors is an easy way to reward donor friends. And it promotes the fiction that private firms do the job better than government workers—even though studies repeatedly have shown that privatization consistently leads to higher costs for taxpayers.
Unfortunately, this mania for privatization has reached the Internal Revenue Service and taxpayers should be worried that tax investigations might become a political prize handed out to campaign donors. The occasional fraud and shoddy work we see with many government contractors is one thing; but the abuses that profit-oriented companies engage in controlling tax investigations instills a whole different level of fear.
Privatization Proposals Highlight Dangers of Crony Contracting
Two proposals this year highlight this danger of the IRS becoming a focus for campaign donor spoils.
First, tucked into the proposed Senate highway bill this year was a provision to allow private firms to collect tax debts owed to the IRS, a program that failed miserably in pilot projects in the past. The Republican Senate majority pushed this privatization program, but they were joined by Sen. Chuck Schumer of New York, who frankly admitted his support for the provision was strengthened by the fact that two of the four companies likely to get a chance to bid on the debt collection contracts were based in New York. This would generate jobs for his constituents and no doubt donations to his reelection campaign.
In a more unprecedented and potentially illegal move, the Obama administration in May of this year gave a $2.2 million contract to the legal firm Quinn Emanuel to assist directly in investigations of a corporate target of the IRS. Unlike the debt collection program, which involves the more mundane – if often unsavory – task of collecting debts where the IRS has already determined taxpayer liability, Quinn Emanuel will be involved in what many argue is the more core governmental function of determining whether a firm being audited followed the law, including taking testimony from witnesses. When the administration was criticized for this move, they hastily issued new regulations to allow the IRS to make such contracts, but the new regulations are being challenged in court.
Critics have noted not just the expense of substituting high-paid private lawyers for IRS staff attorneys, but that Quinn Emanuel is not even known in legal circles for tax expertise. What they are notable for, however, are being heavy donors to the Obama reelection campaign. As data from the Center for Responsive Politics details, Quinn Emanuel employees donated over $300,000 to the Obama campaign and the Democratic national Committee in the 2012 campaign, over half of the total political contributions by the firm employees in that cycle.