On your next trip to the ATM, imagine that Uncle Sam is looking over your shoulder. As if your annual tax filing wasn’t invasive enough, the Biden Administration would like a look at your checking account.
commissioner of the Internal Revenue Service, wants banks to report annual cash flows for ordinary account holders. Treasury Secretary
is promoting the plan, and the House Ways and Means Committee is debating whether to include this mandate in the Democrats’ $3.5 trillion spending bill.
Ms. Yellen says the reporting will help to catch wealthy tax dodgers. In a recent letter to the committee she said the plan would reveal “opaque income streams that disproportionately accrue to the top.” Treasury and congressional Democrats hope taxpayers will report income more accurately if they know the feds have their account information.
Yet the IRS plans to review every account above a $600 balance, or with more than $600 of transactions in a year. So every American with a job could get looked over. A group of 41 industry groups recently warned congressional leaders that the plan “is not remotely targeted” to detect major tax avoidance.
It’s also a privacy breach waiting to happen. Not long ago the confidential tax records of
and other wealthy Americans were exposed by ProPublica. Whoever leaked or hacked those records committed a crime, but the IRS has revealed nothing from its promised investigation. Adding bank account info to the IRS trove would risk the disclosure of savings and spending information of political adversaries in the same way.
Twenty-three state treasurers and auditors signed a letter last month opposing the plan, calling it “one of the largest infringements of data privacy in our nation’s history.” Nebraska Treasurer John Murante says his state won’t comply if the reporting rule takes effect.
Casting a wide net over personal finances is a longstanding aim for Democrats and the political left. President Obama in 2009 formed a panel to discuss closing the “tax gap,” arguing that widespread underreporting of income costs the government hundreds of billions a year.
The House continues to debate the bank account proposal, but the spending bill already includes $80 billion for the IRS to hire thousands of new staffers. Treasury estimates that these changes would collect $700 billion in revenue over the coming decade. But
Rep. Kevin Brady,
the top Republican on Ways and Means, points out that the tax gap is murkier than Democrats admit.
“The IRS will admit their data is seven years old,” Mr. Brady told CNBC in July, noting that the agency’s estimates don’t account for the 2017 federal tax reform that limited many loopholes. “What they’re saying is give us a ton of money, let’s hire a bunch of auditors and we think this will create revenue.”
Overestimating the results of greater enforcement lets the Biden Administration attach a higher revenue number to its multi-trillion-dollar spending proposal. That’s bad enough. But the bigger threat of giving the IRS access to the details of your bank account is that politicians will eventually find a way to control how you save and spend your own money. This is a bad idea that deserves to die.
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Appeared in the October 5, 2021, print edition as ‘The IRS and Your Bank Account.’