Republicans in the House and Senate have continued their efforts to oppose a proposal that would change what information on financial transactions banks submit to the Internal Revenue Service.
Members of the GOP have come out against the proposal mainly over a provision that would require financial institutions like banks and credit unions to include the aggregate inflows and outflows of accounts in which the flows amount to over $600 on annual IRS forms.
Senate Minority Leader Mitch McConnell, R-Ky., described the proposal as an “absurd new IRS spying provision” during a speech on the floor of the Senate on Tuesday, and on the same day wrote in an opinion piece for the Courier-Journal that it would make “a massive new dragnet that would sweep up all kinds of ordinary transactions that normal, law-abiding Americans make routinely.”
Treasury Secretary Janet Yellen defended this proposal as a way to reduce the “tax gap” after Sen. Cynthia Lummis, R-Wyo., spoke out against it during a Senate Banking Committee hearing at the end of September, saying that “there are obvious privacy concerns for all Americans here, and this represents a dramatic new regulatory burden for community banks and credit unions.”
Yellen responded: “I think it’s important to recognize that we have a tax gap that’s estimated at $7 trillion. Over the next decade, that is taxes that are due and are not being paid to the government that deprive us of the resources we need to do critical investments to make America more productive and competitive, and the reason that the tax gap in part exists, partly, it’s because the IRS has been deprived of revenue to hire auditors, but the IRS has a wealth of information about individuals if you work at a job where you get labor income … but there are a class of partnerships, businesses, high-income individuals who have opaque sources of income that the IRS doesn’t have direct information about, and that’s where the tax gap is, not low-income people.”
Senate Finance Committee Chairman Ron Wyden, D-Ore., told The Hill in a statement that “Under this proposal, a bank would report just two numbers to the IRS — not individual transactions. The IRS will not know what taxpayers are purchasing. This proposal is about going after tax cheats who are putting more and more of the tax burden on wage earners who follow the rules.”
