IRS would track all bank transactions over $600 under Biden’s proposed plan

The Biden administration has made clear its plan to beef up IRS auditing by expanding the agency’s funding and power. Biden’s latest proposal would require banks to turn over to the Internal Revenue Service bank account information for all accounts holding more than $600.

This major component of President Joe Biden’s plan to raise revenue to pay for his trillions of dollars in new federal spending is now under fire from trade associations across the country.

In a sharp rejection of the proposal, more than 40 trade associations, some of which represent entire industries or economic sectors, signed a letter to U.S. House Speaker Nancy Pelosi, D-Calif., and Minority Leader Kevin McCarthy, R-Calif., raising the alarm about the plan.

The letter, which includes the support of several banking coalitions, calls on Congress to reject that requirement, saying it violates customer privacy and would create an incredibly expensive and elaborate reporting requirement for the banks.

“While the stated goal of this vast data collection is to uncover tax dodging by the wealthy, this proposal is not remotely targeted to that purpose or that population,” the letter said. “In addition to the significant privacy concerns, it would create tremendous liability for all affected parties by requiring the collection of financial information for nearly every American without proper explanation of how the IRS will store, protect, and use this enormous trove of personal financial information. We believe that this program is costly for all parties, not fit for purpose, and loaded with potential for unintended and serious negative consequences.”

The groups argue it would target “almost every American” and question whether the IRS could keep that information secure from hackers and bad actors.

“The undersigned associations representing a cross-section of financial and business interests write to express our strong opposition to a proposal under consideration as part of the reconciliation package that would establish an expansive new tax information reporting regime that would directly impact almost every American and small business with an account at a financial institution,” the letter said. “This proposal would create significant operational and reputational challenges for financial institutions, increase tax preparation costs for individuals and small businesses, and create serious financial privacy concerns. We urge members to oppose any efforts to advance this ill-advised new reporting regime.”

Some reports indicate that Democrats hope to raise the $600 threshold, but that has not yet materialized.

Biden proposed giving an extra $80 billion to the IRS earlier this year for auditing, saying the agency would more than make back those funds. House Democrats’ have so far indicated they plan to fulfill that request.

“There’s a 99 percent compliance rate on wages – because wage earners get their earnings reported to the IRS,” a fact sheet says that was handed out by the White House to lawmakers to sell them on the plan. “But the super wealthy who get their income from unreported sources are able to hide their income and avoid paying the tax they owe. In fact, each year the top 1 percent chooses not to pay more than $160 billion in taxes.”

Republicans on the House Ways and Means Committee have scheduled a virtual roundtable Wednesday entitled, “Weaponization of the IRS: A Sordid History and the Need for Taxpayer Protections” to discuss these concerns.

“The meeting will highlight the efforts of congressional Democrats to nearly double the size of the IRS with a massive funding increase while doing nothing to address the weaponization of the IRS, including the massive, criminal leak of taxpayer information to ProPublica in June of this year,” Texas Republican Rep. Kevin Brady’s office said.

This isn’t the only business community criticism to be levied at the $3.5 trillion bill in recent days.

The U.S. Chamber of Commerce officially condemed the bill this week, calling it an “existential threat” to the economy.

“This reconciliation bill is effectively 100 bills in one representing every big government idea that’s never been able to pass in Congress,” U.S. Chamber of Commerce President and CEO Suzanne Clark said. “The bill is an existential threat to America’s fragile economic recovery and future prosperity. We will not find durable or practical solutions in one massive bill that is equivalent to more than twice the combined budgets of all 50 states. The success of the bipartisan infrastructure negotiations provides a much better model for how Congress should proceed in addressing America’s problems.”