The Treasury Department says the proposal that’s drawing objections and others that would require that more information be sent to the IRS will reduce tax evasion and improve collection of taxes that are already due, generating an estimated $460 billion in tax revenue over ten years. It’s being suggested as a revenue offset for the $3.5 trillion reconciliation bill that the Biden administration and Democrats who control Congress are drafting to spend more money on programs that they say would improve health care, education, infrastructure and counter climate change, among other things.
The Treasury Department says the extra data is being sought to target high earners who underreport their tax liabilities.
“It is not about using new financial account information reports to increase enforcement scrutiny on lower-income taxpayers,” said a statement from Natasha Sarin, deputy assistant secretary for economic policy at the Treasury Department. “The Administration has been clear that audit rates will not rise relative to recent years for those with under $400,000 in actual income. Instead, these proposals are about targeting enforcement actions where they belong: on higher earners who do not fully report their tax liabilities.”
Community Bankers Association of Ohio CEO Bob Palmer argues the proposal constitutes a “strong invasion of privacy,” and expressed doubt the data will help IRS catch wealthy tax evaders. He argues that people who have $600 in the bank typically are not wealthy individuals, and says his organization and its counterparts on the federal level are “pushing back at the administration and saying this makes no sense to us.”
Palmer said the proposal would create “tremendous cost and inconvenience” for banks, which are already required to report suspicious transactions to the IRS. His organization is asking its members and its customers to raise objections to the plan.
“What the IRS will do with this information is of concern to us,” said Palmer. “The volume of information they are seeking is of concern to us. The safety of the information is of concern to us.”
Ohio Chamber of Commerce President and CEO Steve Stivers said the proposal might help the IRS catch some tax cheats who operate in the cash economy, but it could create liability for banks, undermine confidence customers have in financial institutions and increase the number of people who don’t use banks.
“If you are a consumer and they have the banks mine your personal financial transaction data and send it to the government, that is certainly something a lot of Americans should be concerned about,” said Stivers, a former Republican congressman from Columbus.
An advocate of the plan, Urban-Brookings Tax Policy Center co-director William G. Gale disputed that the proposal would risk taxpayer privacy. He says banks already have the information the IRS would seek and providing it would reduce the likelihood of the IRS auditing honest taxpayers.
“Right now, the IRS is trying to fight tax evasion with one hand tied behind its back,” said a statement from Gale. “President Biden has proposed transformational policies that could substantially reduce tax cheating and thus make the tax system fairer for the large majority of taxpayers who are honest. Republicans and some Democrats have recently expressed concerns about higher budget deficits. Cracking down on evasion would be an ideal way to raise revenue without boosting official marginal tax rates.”
U.S. Sen, Sherrod Brown, an Ohio Democrat who chairs the Senate Committee on Banking, Housing and Urban Affairs, supports increasing IRS reporting requirements, his office said. Brown believes it will better equip the IRS to distinguish between honest taxpayers and wealthy tax cheats it needs to audit.
Ohioans – including Bob Gibbs of Holmes County, Jim Jordan of Champaign County, Anthony Gonzalez of Rocky River, Warren Davidson of Miami County, Brad Wenstrup of Cincinnati, Bob Latta of Bowling Green and Troy Balderson of Zanesville – signed onto a letter from more than 100 Republican House of Representatives members objecting to the plan. It argued the privacy concerns raised by the proposal would “further exacerbate the banked/unbanked/underbanked divides” by discouraging people to use banks.
“Financial institutions currently report a tremendous amount of data to the IRS, and no evidence has shown that the proposed requirements would substantially aid the IRS’s efforts to close the tax gap beyond the information already at the IRS’s disposal,” said the letter, addressed to House Speaker Nancy Pelosi, House Ways and Means Committee Chairman Richard Neal, Treasury Secretary Janet Yellen and IRS Commissioner Charles Retting.
“Not only would such an overly comprehensive IRS database require significant resources to build, maintain, and protect, but it would make the personal, financial data of millions of Americans vulnerable to attack. Considering the IRS experiences 1.4 billion cyberattacks annually and has experienced multiple data breaches, we should not give this agency additional sensitive data to manage.”
A statement from Gibbs called the proposal “the type of big-brother style intrusion into private information we should all be worried about.
“Americans should not have to worry about the IRS looking over their shoulder whenever they loan money to family members or purchase Christmas presents for their children,” said Gibbs. “There is simply no need for the IRS to be collecting this information, and I urge the IRS to abandon their mass surveillance plans.”
Congressional Rebuttal – https://s3.documentcloud.org/documents/21061611/efd0d4ae2726a1765b43a4b910366695fi-reporting-letter-91321.pdf