Earlier today, Treasury Secretary Janet Yellin defended the Biden administration’s proposal to require banks to report inflow and outflow information on all accounts with more than $600 or more than $600 in transactions–in other words, virtually all bank accounts:
During an interview on CNBC’s “Squawk Box” on Tuesday, Yellen was pressed on whether the IRS has the “wherewithal” to collect more information about taxpayers and bank accounts including cash flows, something many Republicans have called invasive.
“Well, of course they do,” Yellen said. “Right now, on every bank account that earns more than $10 a year in interest, the banks report the interest earned to the IRS. That’s part of the information base that includes W2’s and reports on dividends in other income that taxpayers earned. So collection of information is routine.”
That is rather disingenuous. Interest paid by banks is income. Employers and many others report income that they pay out to the IRS. This proposal is different: the idea is that the IRS can compare the amounts of money going into and out of bank accounts with the income reported by a given taxpayer. If the reported income doesn’t seem to match the bank records, the IRS can perform an audit.
“It’s just a few pieces of information about individual bank accounts, nothing at the transaction level that would violate privacy,” the secretary said.
So the IRS won’t see what you spent your money on, it will just know how much went into and out of your accounts.
This is from an exchange between Yellin and Sen. Cynthia Lummis during a recent hearing:
[Lummis]: “Bank customers are not subjects to the federal government. Banks do not work for the IRS.”
Yellen defended the plan, telling the senator, “Banks already report directly to the IRS the interest that they pay on accounts when it exceeds $10, and this is not a proposal to provide detailed transaction-level data by banks to the IRS.”
“Well, $600 threshold is not usually where you’re going to find the massive amount of tax revenue you think Americans are cheating you out of,” Lummis fired back.
“That’s correct,” Yellen admitted, “but it’s important to have comprehensive information so that individuals can’t game the system and have multiple accounts.”
Those $600 accounts can add up.
The administration claims this measure would yield something like $46 billion a year in revenue by catching tax cheats. As an honest taxpayer, I am sympathetic to the argument that it is in my interest for cheaters to be caught. The problem is that I don’t trust the Biden administration, and I don’t trust the IRS.
The Democrats have politicized one federal agency after another, and they have weaponized the IRS, in particular, to weaken their political opponents. I have zero confidence that the IRS wouldn’t selectively use this new data source to target Republicans in general, and vocal opponents of the Biden administration in particular. On the contrary, experience suggests that this is exactly what they would do. That being the case, and given the broader concerns about privacy that most Americans share, the last thing I want to do is give the Biden administration private information about essentially every bank account in the U.S.