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Readers should be aware of a recent proposal – currently withdrawn – by the Biden administration to give the Internal Revenue (IRS) access to taxpayer bank accounts. Unfortunately, many people do not understand its ramifications.
The plan would provide the IRS with vast amounts of data on personal and business bank accounts. Specifically, it would require financial institutions to report all activity, including all deposits and withdrawals, from accounts of $ 600 or more.
The proposal is part of an initiative to generate additional tax revenue. The administration maintains that not all individuals and businesses report their income. Supporters estimate it would generate $ 460 billion over 10 years. The proceeds would be used to cover part of the expenses of the gargantuan $ 3.5 trillion package of health care, education, climate and other expenses.
From this author’s point of view, the proposed action is fraught with negative impacts. First, it intrudes on the privacy of individual taxpayers; financial confidentiality would become non-existent. Access to every transaction associated with personal accounts provides unprecedented insight into the finances of most Americans. In contrast, the Patriot Act of 2002, passed following the terrorist attacks on the World Trade Center and the Pentagon, requires financial institutions to report suspicious transactions of $ 5,000 or more.
In addition, it would make financial institutions IRS agents. This would place undue hardship on them, especially community banks that focus on providing quality services to the local areas they serve.
Crucially, the proposal would negatively affect the large group of unbanked people and disrupt the goal of bringing them into the banking system. Many in this group are suspicious of banks and other financial institutions and fear depositing their money there. In fact, the initiative would drive them further away, perhaps to predatory lenders.
Finally, this approach would overwhelm the IRS with untold volumes of cases. As we have seen in the past, this could lead to massive data breaches. In addition, the data could be misused as has happened before. A good example is the ongoing investigation into leaked tax returns.
In short, the proposal is a misguided and ill-conceived plan that would be detrimental to taxpayers. Obviously, this was designed by people who had no knowledge of how the financial system works.
This item is currently not included in the $ 3.5 trillion bill. But Treasury Secretary Janet Yellen, in recent testimony to Congress, continued to push for its inclusion. Hopefully he won’t be resurrected!
Email Wayne Curtis at wccurtis39 @ gmail.com.