Democrats bowed to pressure from the banking industry and the GOP over their proposal for banks to report all transactions of over $600 to the IRS. They have now increased the cap to $10,000.
Senators Wyden and Warren announced the change on Tuesday, October 19. They did this after the proposal was endorsed by Treasury Secretary Janet Yellen. Yellen said in a statement the proposal shows the Biden administration’s belief of going after those at the top of the income scale who don’t pay the taxes they owe.
She further noted the new $10,000 threshold would help protect American workers. Yellen also added there’s an exemption for wage earners, like firefighters and teachers.
Justification for the Proposal
The Biden administration justified the proposal to have the IRS looking into the bank accounts of Americans. They have continuously said it’s a justification to make the rich pay their fair share of taxes.
Joe Biden once said the new proposal is a way to know what’s going on in super-wealthy bank accounts. He said without the proposal, the super-wealthy would get away with not paying taxes.
Senator Ron Wyden spoke with reporters on Tuesday, October 19, after the cap was increased to $10,000. He said IRS commissioner Charles Rettig attested the tax gap could be $1 trillion annually.
The senator noted the proposal is specially designed to catch the wealthiest people involved in tax fraud. The Biden administration aims to reduce the gap between tax owed and tax paid.
The IRS has changed their proposal after backlash. Instead of monitoring all accounts over $600, the new proposal will instead require the provision of additional information for accounts with more than $10,000 in annual deposits OR withdrawals… 🤦♂️
— Jared Schumaier (@strummaster42) October 19, 2021
Wyden also explained working people voluntarily pay their taxes. He said their employers always send their numbers to the IRS. On the other hand, rich business owners only pay taxes if they want to. Wyden also opined the arguments against the information reporting proposal have always been wrong.
GOP Senators: the New Cap is Still Intrusive
Even after changing the cap for information reporting from $600 to $10,000 transactions, Republican senators still think it’s too much.
They objected and noted the proposal still won’t target the wealthy as Democrats suggested. They said the proposal is too intrusive on most Americans and logistically burdensome for everybody.
Whether it’s $600 or $10,000, the IRS has NO business monitoring your bank account.
— Senator Michael Rulli (@michaelrulli) October 14, 2021
Republican Senator Pat Toomey of Pennsylvania said the new $10,000 cap would still capture all small businesses and everybody. He said implementing this will make Americans lose their privacy.
He added the IRS would also be flooded with the personal information of many individuals and small businesses, with the IRS having no clue what to do with the information overflow.
Senator John Kennedy of Louisiana also commented on the development. He said the president of China, Xi Jinping, would be proud of the Democrats’ plan.
Aside from the GOP senators opposing the proposal, the American Bankers Association also railed against it. The president and CEO of the association, Rob Nichols, said the proposal is still too extreme, forcing financial institutions to report transactions of millions of customers to the IRS.