Are you ready for the IRS to track your bank-account information?
By Sarah Chamberlain and Rep. Jeff Van Drew
There are many reasons to dislike President Biden’s proposal to identify every bank account with a $600 balance or with more than $600 in transactions in a year – in other words, pretty much everyone who doesn’t hide their money under a mattress.
First and foremost, it’s an invasion of the privacy of honest, hard-working Americans who pay their fair share and should not be included in the Democrats’ $3.5 trillion social spending reconciliation package, where it can further their agenda of controlling Americans’ lives.
President Biden is so focused on his “legacy” that he has aligned himself with the free-spending progressives in his party rather than where he promised he’d be -- someone who would seek bipartisan collaboration to move the needle.
He wants to put even more of your personal (and in the case of self-employed taxpayers, business) information into the hands of the Internal Revenue Service, which experiences 1.4 billion cyberattacks annually.
Biden’s message is clear: Taxpayers are not to be trusted. Rather than taking a scalpel to his concern that higher-income taxpayers are not paying their fair share, he is putting everyone at risk with a plan that would need implementation skills that government has not proven it has.
Imagine if you will, your 12-year-old works summers cutting lawns and deposits her money into a savings account. She’s a target. Or your 19-year-old banks his college work-study check to pay for textbooks. He’s a target too. And for users of platforms such as PayPal, Venmo, and Square, simple transactions involving the family’s monthly cell phone bills or reimbursement for one person paying a restaurant bill may suddenly be a target for scrutiny.
Nearly everyone except Biden and his progressive friends thinks this is a bad idea. A group of 41 industry groups recently warned congressional leaders that the plan “is not remotely targeted” to detect major tax avoidance. Twenty-three state treasurers and auditors jointly said the plan is “one of the largest infringements of data privacy in our nation’s history. And the U.S. Chamber of Commerce calling the proposal an “existential threat” to the economy.
We agree with Rebecca Romero Rainey, CEO of the Independent Community Bankers of America, who described this proposal as an “invasion of consumers’ privacy, a violation of Americans’ due process, a data security risk amid the agency’s ongoing tax-return leak investigation, and a threat to bipartisan efforts to reduce the unbanked population by driving more Americans out of the banking system and toward predatory lenders.”
Financial institutions already report reams of data to the IRS, including suspicious activity reports, currency transactions reports, and foreign bank account information. Under the terms of the Bank Secrecy Act, financial institutions are currently required to report any deposits or withdrawals of $10,000 or more. They also provide their customers and the IRS with Form 1099-INTs relating to any accounts that earn interest of more than $10 annually.
The unintended consequences from this proposal are staggering if Democrats slide it into their massive reconciliation bill, which will not require a single Republican vote in support if Biden, Nancy Pelosi, and Chuck Schumer keep everyone in line.
Efforts to reach vulnerable populations and unbanked households will be undermined. The FDIC says the second most common reason unbanked households lack a bank account is that they don’t trust banks. Surveys also indicate that 25% of all taxpayers do not trust the IRS to protect their tax account records or to fairly enforce the tax laws.
Implementing the rule would be a tremendous undertaking, especially for community banks that often depend on third-party service providers. This will be a particular concern if the rule applies to all banking products, including those that do not currently require any IRS reporting. The increased compliance costs will be passed along to customers.
If this proposal gains traction as Democrats try to fund their unbridled spending spree, it will be a major talking point during the 2022 mid-terms. Voters from both sides of the aisle will hold the Democratic Party accountable for putting their personal data at risk, knowing that they pay their fair share. Perhaps the Democrats should focus on simplifying our overly complex tax code instead.
Let your voice be heard. Encourage your congressional representatives to publicly oppose this proposal. If they won’t, at least demand they raise the threshold to $10,000 to align with the Bank Secrecy Act; exempt payments from payroll processors from the reporting requirements to reduce the number of accounts covered by the reporting rules; and exempt mortgage payments from the threshold.
As our economic recovery continues, creating an additional expensive and burdensome infrastructure prevents financial institutions from providing access to credit to communities and small businesses in need, and does nothing to even the playing field.
Congressman Jeff Van Drew represents the 2nd District of New Jersey and recently introduced the Banking Privacy Act of 2021. Sarah Chamberlain is president and CEO of the Republican Main Street Partnership, which promotes bipartisan consensus-building on public policy issues. This column was originally published in the USA Today Network's mid-Atlantic publications, including the Bergen (NJ) Record.