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Applying Models of Tax Collection to Contracting Out Federal Delinquent Income Tax
|Title:||Applying Models of Tax Collection to Contracting Out Federal Delinquent Income Tax|
|Date Issued:||30 Jul 2020|
|Abstract:||The use of external tax collectors has been a highly politicized compromise between administrative effectiveness and procedural fairness. Addressing the issue of private tax collectors, we develop three basic analytical models of tax collection based on tax farming and agency theory. Our analytical results provide both clarity and ambiguity associated with contract types for external tax collectors. We then apply our analytical results to the current issue of contracting out federal delinquent income tax collection. The effectiveness benefits under incentive-based contracts are diluted not only by potentially increasing compensation but by a potentially more destructive result, the social costs associated with taxpayer harassment. Our results offer explanatory power for the resulting backlash to external federal tax collectors in prior iterations and potential hope for the current use of private tax collectors.|
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