Financial information

Democrats face growing storm over IRS reporting provision

Democrats face a storm of criticism over a proposal to increase the amount of information about bank accounts reported to the IRS, posing a challenge as they craft their sweeping social spending bill.

The proposal is a top priority for the Biden administration, which says it will help the IRS tackle tax evaders of the wealthy.

But it has been the subject of a barrage of attacks from banks and Republicans, who say it raises significant privacy concerns. Financial institutions have mobilized their clients to speak out against the proposal with lawmakers.

Congressional Democrats are expected to make changes to the administration’s initial proposal, but are generally supportive of the idea. Growing attacks on the proposal have prompted lawmakers and administration officials to get on the defensive.

“Ultimately, the president’s proposal aims to curb tax evasion by shedding light on the opaque revenue streams that disproportionately flow to the top 1%,” deputy deputy secretary Natasha Sarin wrote on Thursday. economic policy at the Treasury Department. an article on the ministry’s website.

“As such, it is not surprising that substantial resources are being deployed to defeat these efforts, as many tax evaders risk losing a fairer tax system,” added Sarin.

The Biden administration released a proposal earlier this year that would require banks and other financial institutions to report on existing annual IRS forms the total amount of money entered into an account in a year and the total amount of money that came out of it.

The president’s budget request proposed to impose the reporting requirement for accounts with flows of at least $ 600. Democrats in Congress have discussed increasing that threshold to $ 10,000 and exempting payroll processor payments.

The proposal could be a way to increase revenue that could be used to offset the cost of spending Democrats’ social safety net in areas such as child care, education and the climate. The Treasury estimated the administration’s proposal would raise about $ 460 billion over 10 years, and said a narrower proposal could raise $ 200 billion to $ 250 billion over a decade.

The administration said the proposed reporting requirement would help the IRS better target audits and close the “tax gap” between the amount of taxes paid and the amount owed, which the Treasury has estimated at around 7,000. billion dollars over the next decade.

“If someone reports income of $ 10,000 and $ 3 million is taken out of their checking account, that tells the IRS that this is someone you can verify,” said the Secretary of the Treasury. Janet YellenJanet Louise YellenBiden’s IRS Proposal Could Mark End to Banking Privacy Climate Crisis: House is on Fire, Will Bank Regulators Break the Glass? Overnight Energy & Environment – Brought to you by ExxonMobil – Climate divides conservative Democrats in reconciliation campaign MORE said in an interview with CBS News this week.

The administration said it plans to focus enforcement efforts on high-income taxpayers and that verification rates will not increase for taxpayers with actual income below $ 400,000.

But banking groups and Republicans argue the proposal would lead the IRS to receive additional financial information about a wide range of taxpayers. They expressed concerns about the IRS’s ability to protect information, citing past instances where the agency has been hacked and there have been unauthorized disclosures of tax information.

“The implications of this reporting and data collection system are serious and far-reaching,” said Sam Whitfield, senior vice president of congressional affairs at the Consumer Bankers Association.

Financial groups said many non-wealthy Americans would still see their accounts subject to the proposed reporting requirement if the threshold was raised from $ 600 to $ 10,000. And they said it would be complicated for them to implement exemptions for the payment of wages.

“We believe this is a flawed proposition at any threshold,” said Ryan Donovan, advocacy manager and executive vice president of the Credit Union National Association (CUNA).

Banks and credit unions have alerted their customers to the IRS’s proposal and urged their members to contact their members of Congress. Donovan said his group was aware of more than 500,000 emails and other communications from members of credit unions on Capitol Hill.

“We’re going to continue like this,” he said.

Republican lawmakers, who have long disliked the IRS, have also frequently criticized the IRS banks’ proposed disclosure in Congressional hearings, speeches, and editorials.

GOP lawmakers in the House Ways and Means Committee responsible for drafting the tax introduced a bill this week prohibiting the Treasury from implementing a proposal along the lines of the administration’s plan.

“We should not allow the IRS to invade the privacy of Americans by rummaging through their bank accounts,” the representative said. Drew fergusonAnderson (Drew) Drew Ferguson Dental coverage for Medicare beneficiaries divides parties (R-Ga.), The bill’s main sponsor, said in a statement. “The Biden administration and the Congressional Democrats have made it clear that they intend to institute a broad regime of financial supervision using Americans’ private financial information.”

Democrats in Congress are still working on the details of any IRS banking reporting arrangement for their spending bill. A provision on the subject was not included in the bill that the Ways and Means Committee approved in September, along with the panel chair Richard nealRichard Edmund NealBiden’s IRS Proposal Could Mark End to Privacy in Banking Overnight Health Care – Presented by National Council for Mental Wellness – NIH Study Finds Mix-and-Match Boosters are effective Ireland joins international agreement on global minimum tax PLUS (D-Mass.) Saying at the time that he was still discussing the matter with the administration.

Still, Democrats fended off criticism of the proposal. Provisions to get taxpayers to pay the taxes they already owe could be appealing to Democrats if they face a step back in their caucus on tax hike proposals.

Speaker Nancy PelosiNancy PelosiSanders and Manchin escalate battle for 0.5T spending bill Sanders accuses the media of ignoring details of Biden’s spending plan. Photos of the week: climate protests, Blue Origin and a koala PLUS (D-Calif.) Said at a press conference Tuesday that a version of the IRS proposal would be included in the spending program.

“Yes, some people have concerns, but if people are breaking the law and not paying their taxes, one way to follow them is the banking measure,” she said.

Democratic lawmakers and administration officials have stressed that the proposal would not order banks to provide the IRS with details of specific transactions, after some Republicans mistakenly suggested that the IRS would receive such information. ‘information.

“I think this proposition has been seriously misinterpreted,” Yellen told CBS News.

Chairman of the Senate Finance Committee Ron WydenRonald (Ron) Lee Wyden Best move to close endangered racial property gap, Progressives say Democrats’ reconciliation bill breaks Biden’s middle-class tax pledge Missouri Department of Education says “hacker” reporter for reporting security breaches on state website PLUS (D-Ore.) Said in a statement that “the reason Republicans have clung to this issue as the one they lie about every day is because they know their tax program is a loser Politics”.

Supporters of the proposal are optimistic that a version of it is included in a final social spending package that will be enacted into law.

Seth Hanlon, a senior researcher at the left-wing Center for American Progress, said that “there is strong support and a solid understanding of its importance” among the main Democrats in Congress.

Hanlon added that lawmakers and the administration “have more work to do to counter false claims” about the proposal.

But those who have criticized the proposed bank reporting requirement predict that a proposal resembling the administration’s plan will not be included in the spending bill.

Steve Rosenthal, a senior researcher at the Urban-Brookings Tax Policy Center, whose former director now works in the Biden administration, said the proposal is too broad and believes bank lobbyists “have hit a sore spot” with their clients concerned about confidentiality. .

“I think that ultimately this banking proposal will fail,” he said.


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