The initial proposal (pdf)—which Biden says is aimed at curbing tax evasion—would require banks and other financial institutions to report to the IRS any deposits or withdrawals totaling more than $600 annually to or from all business and personal accounts.
The new reporting requirement would take effect in 2022 and would apply to both private individual and commercial business accounts owned by a taxpayer.
But House Ways and Means Committee Chairman Richard Neal (D-Mass.) said on Sept. 23 that he and other Democratic leaders are planning to scrap the $600 annual figure and set a higher threshold, of which the details are still being worked through.
“We’ve reached an agreement to not have the $600,” Neal told Bloomberg.
A Democratic aide noted that they’re focusing on increasing the current threshold to $10,000 but said that figure could well change.
Under the Bank Secrecy Act, U.S. financial institutions are currently mandated to report to the government all wire transfers over $10,000, as well as suspicious cash transactions, to prevent criminal activities such as money laundering.
However, Biden and Democratic allies in Congress claim the threshold needs to be lowered to close the “tax gap,” which is the difference between what current federal law requires to be collected by the government and how much actually goes into the Treasury.
The president has maintained that the new reporting rule will mean “the wealthy can no longer hide what they’re making and they can finally begin to pay their fair share of what they owe.”
“That isn’t about raising their taxes. It’s about the super-wealthy finally beginning to pay what they owe—what the existing tax code calls for—just like hardworking Americans do all over this country every Tax Day,” Biden said at a press conference on Sept. 16.
At that same conference, the president noted that 55 of the biggest and most profitable corporations in America paid no federal income taxes in 2020, on what amounted to $40 billion in profit.
Despite his reassurances, Biden’s new proposal has faced stiff opposition from banks as well as Republicans and some Democrats who are concerned that the move could see the IRS having access to too much of taxpayers’ personal data.
Earlier this month, the American Bankers Association (ABA), along with more than 40 business and financial groups, sent a letter to House Speaker Nancy Pelosi (D-Calif.) and House Minority Leader Kevin McCarthy (R-Calif.) objecting to the “ill-advised” proposal, citing concerns over financial privacy.
“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,” the group wrote.
“We urge members to oppose any efforts to advance this ill-advised new reporting regime.”
Sen. John Boozman (R-Ark.) told The Epoch Times on Sept. 23 that the move would effectively “weaponize the IRS” and said he believes the Biden administration’s unprecedented rise in federal spending is the motivation behind expanding the IRS’s powers.
“What they’ve done is, they are weaponizing the IRS, they’re pushing many, many billions of dollars into that and they will be hiring tens of thousands of new agents,” Boozman said.
“So this is all about looking at everybody’s transactions and then hoping that perhaps they find something that’s not getting reported so they can come after you and get that income.
“They want this new authority to look at transactions of $600 or more rather than $10,000 or more because they have a $3.5 trillion, or some say up to a $5 trillion bill, depending on how you score it, so they desperately need pay-fors. This shows how desperate they are.”
Boozman is co-sponsoring legislation with Sen. Mike Crapo (R-Idaho) known as the Tax Gap Reform and IRS Enforcement Act (pdf) that would establish “guardrails” to prevent abuse by IRS employees of tax records. Rep. Kevin Brady (R-Texas) has introduced the proposal in the House of Representatives.