Reconciliation bill includes provision to beef up IRS scrutiny of bank transactions
October 6th, 2021
Update from NASL Member Rob Jolly:
Giving the IRS sweeping new authority to monitor Americans’ bank transactions, a provision in the $3.5 trillion reconciliation bill is intended to catch tax evaders. But it’s also triggering a strong response from states.
In an effort to raise revenue and ensure compliance with the bill’s tax hikes on corporations and top earners, the bill provides a $79 billion IRS budget infusion. The Biden Administration cites the need to ramp up tax code enforcement, expand auditing capacity, and modernize outdated technology.
But a provision that will require banks to report all transactions over $600 has been controversial, with states and privacy advocates vowing to fight the measure.
Calling it the largest data mining exercise in US history, a coalition of twenty-two state treasurers, auditors, and financial officers warn the measure threatens privacy, jeopardizes data security, and invites political abuse. In publicly opposing the measure, state officials say they worry “there are no guardrails in place to prevent any abuse of this information by the IRS or other government actors.”
State legislatures are also pushing back. In Maine, lawmakers introduced a resolution urging the state’s federal delegation to oppose Biden’s proposal. The resolution cites the IRS leak of tax return data to Pro Publica earlier this year. It further cites a 2017 report by the Treasury Inspector General for Tax Administration (TIGTA), which concluded the IRS “routinely skirted or ignored due process requirements when investigating taxpayers for violating the $10,000 currency transaction requirements that exist under the Bank Secrecy Act.”
But the White House sees the new authority as the best way to detect unreported income that should rightfully be taxed. The top 1 percent of earners fails to pay more than $160 billion in taxes each year, according to a White House fact sheet. The provision is intended to target the “super wealthy who get their income from unreported sources and are able to hide their income and avoid paying taxes on what they owe.”