Democrats’ plan to have banks report all transactions over a certain amount to the Internal Revenue Service is mired in practical and privacy concerns, Republicans and some tax groups contend.
President Joe Biden initially planned for banks to report all account inflows and outflows of over $600 to the IRS to help raise revenue for Democrats’ multitrillion-dollar infrastructure and social spending package. Since then, Democratic leadership has worked to narrow the scope of the provision and revise the threshold, perhaps up to $10,000.
The concept would be a new one for both banks and the IRS. Currently, banks are only required to file currency transaction reports on all deposits of over $10,000 to the Treasury Department’s Financial Crimes Enforcement Network. The FinCen works to curtail money laundering and crime but doesn’t monitor the reports for tax purposes.
Two major issues with the idea, which at the $600 threshold proposal was projected to raise nearly $500 billion in revenue, are privacy and logistics.
Garrett Watson, senior policy analyst at the Tax Foundation, told the Washington Examiner that the collection of such an enormous amount of data about people and their finances raises legitimate privacy concerns.
Those trepidations are amplified by the fact that the prevalence of cyberattacks has been growing and the IRS is still facing enormous scrutiny over a massive leak of hundreds of pages of tax data from the wealthiest Americans.
More than 140 GOP lawmakers sent letters to Ways and Means Committee Chairman Richard Neal, House Speaker Nancy Pelosi, Treasury Secretary Janet Yellen, and IRS Commissioner Charles Rettig highlighting their concern that the compilation would put millions of people’s financial data at risk.
During a recent appearance on Capitol Hill, Sen. Cynthia Lummis grilled Yellen about the proposal’s impact on privacy and the “dramatic new regulatory burden” for banks.