By Scott W. Meier, Wyoming Bankers Association (WBA)
Few things are more private than your household finances. In his American Families Plan, President Biden unveiled a tax compliance initiative aimed at closing the gap between taxes that are owed and what are paid.
Most of the anticipated revenue, which the Administration estimated at $460 billion over 10 years, would come from requiring financial institutions to report account information that Treasury says would be similar to W-2 reporting for wages and other income reporting.
The proposal, if enacted, would require banks and other financial institutions to report to the IRS detailed information on the inflows and outflows of every customer account above $600.
Under the guise of closing the “tax gap,” the Biden administration and congressional allies are trying to push through a new, partisan reporting scheme in which financial institutions report customer transactions to the Internal Revenue Service.
This proposal would turn every American’s local bank, credit union and payment provider into an IRS agent, monitoring and reporting on deposits and withdrawals made in private accounts — at a threshold of as little as $600.
This surveillance dragnet will capture every single American — from all income levels — with a bank, credit union, brokerage or financial account.
This includes both individual and business accounts, including Main Street businesses of all types. This indiscriminate data collection would subject law-abiding Americans to further IRS scrutiny and exacerbate privacy concerns.
The IRS already holds troves of private data on Americans, including taxable income, charitable contributions, retirement savings, health care expenses, addresses, personal contact information and more.
Not only is this proposal a huge violation of privacy, but it is also an egregious abuse of Americans’ right to due process by inferring that all U.S. taxpayers are guilty of evading taxes until proven otherwise.
Suppose you transfer $15,000 from your savings to your checking account to make a large purchase you have spent years saving for, like a wedding, car or home down payment.
Your financial institution would be required to report the withdrawal and deposit to the IRS, possibly triggering an audit — despite the fact you have done nothing improper or illegal. Any ensuing IRS activity would presume you guilty until proven innocent.
Beyond privacy concerns or the dangerous practice of assuming all Americans are rich tax cheats until proven otherwise, the IRS has a history of violating constitutional due process rights.
According to a report by the U.S. Treasury Inspector General for Tax Administration, the IRS Criminal Investigation Division for years regularly violated, skirted or ignored taxpayers’ legal and due process rights when investigating taxpayers’ currency transaction reporting compliance.
Fewer than 10% of investigations uncovered legal violations. Every American should be wary of giving the IRS more power and more tentacles into private financial transactions.