(bizpacreview) – Opposition is rising to a measure that is included in a massive $3.5 trillion spending bill authorizing the federal government through the IRS to monitor every single bank account, ostensibly to reduce tax fraud.
Supporters of the proposal, which includes most congressional Democrats and the Biden administration, say it is necessary to help finance the spending package and would help raise hundreds of billions of dollars over the next decade.
Nevertheless, privacy rights advocates are concerned the provision encroaches on the Fourth Amendment, while banks are largely opposed to the measure because it imposes significant new reporting requirements, the Daily Mail noted. Also, opponents say such a measure would hurt poor Americans most while causing others who have the means to move their assets to offshore accounts.0:10 / 46:046 seconds…
The outlet reported that the measure requires banks and financial institutions to report to the IRS every single withdrawal and deposit to accounts, to include transactions from PayPal, Venmo, and cryptocurrency as well as other payment platforms in a push to combat tax evasion.
“The IRS would know how much money is in an individual’s bank account in a given year, whether the individual earned income on that account and exactly how much was going in and out,” the Daily Mail reported.
In addition to President Joe Biden, the measure is supported by IRS Administrator Charles Rettig, Treasury Secretary Janet Yellen, and several Senate Democrats, in particular, Elizabeth Warren of Massachusetts, who view it as a vital element of an $80 billion tax compliance push. A May report from the Treasury Department claimed that the government missed out on collecting $600 billion in owed taxes in 2019, a figure that would rise to $700 billion in a decade — or about 15 percent of all income taxes.
The report claimed that the proposal would not have much effect on compliant Americans but “for non-compliant taxpayers, this regime would encourage voluntary compliance as evaders realize that the risk of evasion being detected has risen noticeably.”
But opponents like Patrick Hedger, vice president of policy at the Taxpayers’ Protection Alliance, say the proposal slams up against the Fourth Amendment’s privacy guarantees and would most likely hurt vulnerable Americans the most.
“The IRS is first and foremost, a law enforcement agency, and the Fourth Amendment protects against unreasonable searches and seizures in pursuit of, of looking for wrongdoing and criminal actions, so I think this is going to run into severe Fourth Amendment headwinds,” he told the Daily Mail.
He also said that the proposal will hurt poor Americans disproportionately.
“You’re going to push more folks into small cash transactions, you’re going to push more banking offshore … the big fish out there that do have sizable assets that are that are eligible for taxation offshore,” he said.
“This is the ultimate regressive tax. You’re going to end up punishing the worst off among us … the lower-income folks in this country have historically been the targets of aggressive IRS audits because they don’t have the CPAs and the lawyers to be able to fight back,” he continued, adding: “I don’t see why they need to be going after people, you know, just the average, the average Joe and start stooping on, you know, a $600 payment.”
Banks, too, are pushing back.
In a letter to the Senate Finance Committee’s Subcommittee on Taxation and IRS Oversight, the American Bankers Association countered that the “new reporting requirements for financial institutions would impose cost and complexity that are not justified by the potential, and highly uncertain, benefits.”
“We believe additional reporting requirements guided by subjective criteria have privacy and fairness implications and the potential to put financial institutions in an untenable position with their account holders,” the letter noted further.