Undercurrent

Lee, 20 other House Dems oppose Biden’s bank tax reporting proposal

By: - October 28, 2021 3:57 pm

“When the IRS can verify taxpayer filings with third-party information reports, such as the W-2 forms submitted by employers to report wages, compliance rates exceed 95%,” according to a U.S. Treasury report. “Without third-party reporting, compliance rates fall below 50%.” (Getty Images)

Nevada Democratic Rep. Susie Lee Thursday made a foray into the ongoing and long-going back-and-forth among Democrats over what should and shouldn’t be in the social spending measure the Biden administration has proposed and Democrats hope to pass.

Lee and 20 other House Democrats signed a letter Thursday opposing a provision that would require banks to report gross annual inflow and outflow of accounts with more than $10,000.

“While the intent of this proposal is to ensure all taxpayers meet their obligations—a goal we strongly share—the data that would be turned over to the IRS is overly broad and raises significant privacy concerns,” the 21 Democrats said in the letter to House Speaker Nancy Pelosi and House Ways and Means Chairman Richard Neal.

Neal had already signaled misgivings about the provision, and it was scrapped from the slimmed down spending and climate framework Biden announced Thursday.

Lee and the other Democrats said “hundreds of thousands of constituents have reached out to our offices voicing concerns and opposition to allowing the IRS to collect this data. We have also heard from a wide range of constituent companies and small businesses about the significant burden and potential unintended consequences that could result from the new reporting regime.”

The bank tax reporting requirement is one of two IRS-related measures – the other is increasing the agency’s enforcement budget – designed to help pay for the social spending bill by collecting the estimated hundreds of billions of dollars in tax revenue that goes uncollected each year.

The Treasury Department estimates that “tax gap” between what is paid and what is owed will equal $7 trillion over the next decade.

A Treasury Department report explaining the proposals notes that the incomes of wage earners are already reported to the IRS through W-2s. 

“When the IRS can verify taxpayer filings with third-party information reports, such as the W-2 forms submitted by employers to report wages, compliance rates exceed 95%,” according to the Treasury report. “Without third-party reporting, compliance rates fall below 50% and thus lead to an inequitable asymmetry in tax collections depending on the form in which income is accrued.”

“Importantly, there are no added requirements for taxpayers” involved in the bank reporting proposal, the Treasury description continued. “The IRS will be able to deploy this new information to better target enforcement activities, increasing scrutiny of wealthy evaders and decreasing the likelihood that fully compliant taxpayers will be subject to costly audits.”

In claiming that “the data that would be turned over to the IRS is overly broad and raises significant privacy concerns,” Lee and the House Democrats are echoing claims leveled against the proposal by the banking industry, congressional Republicans, and other voices on the right — claims not infrequently coupled with assertions that the IRS would be monitoring all transactions in an individual’s account.

Those assertions have been widely debunked.

The White House initially proposed requiring banks to report accounts with inflows and outflows of as little as $600. Amid stiff headwinds, the amount was raised to $10,000. Supporters of the bank reporting requirement say if the trigger amount is too small, it will allow “cheaters to fly under the radar using multiple accounts.”

This story was updated to reflect the bank tax reporting provision was excluded from the reconciliation framework announced Thursday.

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Hugh Jackson
Hugh Jackson

Hugh Jackson was editor of the Las Vegas Business Press, senior editor at the Las Vegas CityLife weekly newspaper, daily political commentator on the Las Vegas NBC affiliate, and author of the Las Vegas Gleaner political blog. Prior to moving to Las Vegas, he was a reporter and editor at the Casper (Wyoming) Star-Tribune.

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