84.27 F
August 19, 2022

Is this Biden proposal a way to spy on your bank account — or catch tax cheats?

Twenty-dollar bills are counted in North Andover,
Mass., on June 15, 2018. State auditors and treasurers in 20
states, including Utah, have come out against what they say is an
“invasive” Biden administration proposal to require banks to report
more information on the accounts of everyday Americans to the IRS. (Elise Amendola, Associated Press)

State auditors and treasurers in 20 states, including Utah, have come out against what they say is an “invasive” Biden administration proposal to require banks to report more information on the accounts of everyday Americans to the IRS.

The goal, according to the Treasury Department, is to collect taxes from wealthy people and businesses on income that is earned but not reported. The agency estimates that more than $160 billion is lost each year from taxes the top 1 percent choose not to pay.

Utah State Auditor John Dougall and State Treasurer Marlo Oaks say the private banking activity of more than 100 million Americans could be subject to “invasive” IRS examination if the plan is enacted.

“The proposed rules would be an egregious data mining and surveillance exercise against everyday American citizens who have committed no crimes and are not suspected of any wrongdoing,” Dougall said. “In addition, there is no indication that this level of surveillance would help accomplish the stated goal of catching tax evaders.”

Under the measure, financial institutions would be required to annually report to the IRS gross inflows and outflows from all business and personal accounts if the amounts total at least $600 in a year.

Banks and credit unions would only report total amounts of money going into and out of an account during the prior year. They would not have to report details of individual transactions.

The Treasury Department unveiled the proposal in May. The Senate Finance and House Ways and Means committees could adopt it as part of budget reconciliation legislation currently under consideration.

Oaks called the proposed reporting requirements an “unprecedented infringement” on the rights and privacy of Americans.

“Creating mountains of private data for IRS agents to sift through does little to help them focus on more sophisticated tax evaders and subjects honest citizens and small businesses to invasive and unwarranted IRS scrutiny,” he said.

In addition, the increased reporting would likely overburden banks and credit unions, Oaks said.

The State Financial Officers Foundation sent a letter to President Joe Biden and Treasury Secretary Janet Yellen this week calling the plan a “direct assault” on Americans, regardless of economic status, and businesses.

The group, in which Dougall serves as auditor at-large, argues there is no evidence that the measure would help in collecting taxes from tax evaders. It also contends the plan lacks guardrails to prevent the IRS or other government agencies from abusing the information.

The Center for American Progress says the reporting measure is a critical part of Biden’s Build Back Better agenda.

“Despite fearmongering from bank lobbies, the proposal protects taxpayers’ privacy while simply requiring banks to provide basic, aggregated information about flows,” Seth Hanlon, a senior fellow on the economic policy team at American Progress. Galen Hendricks, a former research associate at the center, wrote last week.

The measure allows the IRS to select audits in a more efficient and equitable way so that the vast majority of taxpayers would be less likely to be audited, they wrote. Better targeted audits will result in more revenue collected from tax cheats as well as deter cheating in the first place.

“Cheats will think twice if they know that streams of income will not be entirely invisible to the IRS,” according to Hanlon and Hendricks.

The “tax gap” — the difference between taxes that are owed and collected — totals around $600 billion annually and will mean about $7 trillion of lost tax revenue over the next 10 years, according to the Treasury Department.

The proposal also would increase the IRS enforcement budget $80 billion over the next decade. It also calls for using information that financial institutions already possess —without imposing any burden on taxpayers — so the IRS could use the additional resources to audit more sophisticated tax evaders.

The proposed changes to the third-party information reports are estimated to generate $460 billion over a decade, according to the Treasury Department.

Related Stories

Dennis Romboy

More stories you may be interested in

Related posts

Traffic deaths in US reached a 16-year high in 2021


Power restored to 5K people in Taylorsville following outage


FDA advisory committee recommends approval of Moderna's COVID-19 vaccine for emergency use


Biden promises candor, Xi greets ‘old friend’ as U.S.-China talks open


From 'Gabriel jinx' to Badger alum, BYU-UCF more acquainted than you'd think


Driver crashes into semi in Virgin River Gorge, walks a mile before motorist stops to help