The US Treasury Department slammed “misinformation” over a provision in President Joe Biden’s tax plan which would require banks to report aggregate inflows and outflows of at least over $600 to the IRS.
“Congressional consideration of this proposal has been marred by misinformation, as opponents have elevated the pernicious myth that banks will have to report all individual customers’ transactions to the IRS,” said Treasury deputy assistant secretary for economic policy, Natasha Sarin in a Thursday blog post. “This is unequivocally false, and an incorrect representation of the proposals under consideration.”
So it won’t be ‘all’ customers.
As Bloomberg suggests, “The plan would require financial institutions to report information about some bank accounts to the Internal Revenue Service in an effort to determine if Americans are underreporting their income on their tax forms.”
While the blog post offered no clarity on who exactly would be targeted by the $600 provision, we can probably assume they mean ‘people who pay taxes.’
According to the Tax Policy Center, 61% of Americans paid no federal income taxes in 2020, up from 47% .
“This proposal has been seriously mischaracterized,” said Treasury Secretary Janey Yellen in a Tuesday interview with CBS Evening News.
Of course, despite what the Treasury says, Democrats have been walking it back:
House Democrats excluded the idea from their version of the tax-and-spending bill they wrote last month, partly because of opposition from members in their own party. However, Democratic leaders continue to work on the plan, which could raise hundreds of billions of dollars to fund an expansion of social programs.
House Ways and Means Chairman Richard Neal and Senate Finance Committee Chairman Ron Wyden have said they are working on scaling back the administration’s plan so that only account flows totaling $10,000 or more would be reported and other carveouts so that only high-income taxpayers would be in the scope of the plan. Lawmakers are looking at ways to exclude some common transactions, such as payroll deposits or mortgage payment withdrawals. –Bloomberg
According to the Independent Community Bankers of America, a banking trade group, the Treasury’s proposal violates consumers’ privacy and would require banks to “perform a police function on behalf of the IRS.”
The Treasury, meanwhile, insists that this additional information will help them track down high-earning tax cheats. The IRS estimates that people pay 99% of taxes due on their earnings when there is third-party reporting, vs just 45% when there’s no verification.
“The proposal would direct banks to report basic, high-level information on aggregate account inflows and outflows,” reads the Treasury blog post. “Banks would add just a bit of additional data to information that they already supply to taxpayers and the IRS: how much money went into the account over the course of the year, and how much came out.”