WASHINGTON — Bowing to an aggressive banking lobbying campaign and yielding to Republican backlash, the Biden administration has agreed to support a much more limited scheme for the Internal Revenue Service to try to curb tax fraud.
Senate Democrats are expected to present a new proposal Tuesday that will narrow the scope of information banks must provide to the Internal Revenue Service about customer accounts. Under the new plan, banks will only be required to provide data on accounts with a total annual deposit or withdrawal value of more than $10,000, rather than the originally suggested threshold of $600. The reporting requirement does not apply to payroll deposits for wage and salaried employees or beneficiaries of federal programs such as Social Security.
Narrowing the plan comes after a while. sustained lobbying campaign by banks and RepublicansHe argued that the Biden administration’s desire to support the IRS to shrink the so-called “tax gap” of $7 trillion amounts to an invasion of privacy and government overreach.
Critics of the proposal incorrectly suggested that the IRS would track information about individual transactions. Management said the IRS will not track certain customer transactions, but will instead use bank account information to detect discrepancies between what individuals report on their tax returns and what their bank accounts show.
The Biden administration insists that audit rates will not increase for those earning less than $400,000 and that the program focuses on collecting unpaid taxes from the rich.
The Treasury Department said the Biden administration would support the narrower proposal, as the IRS already knows about American workers and retirees. While it will give the agency visibility into a much smaller number of bank accounts, a memo to be released by the Treasury on Tuesday and obtained by The New York Times said, “It is only part of what accrues other forms of income through obscure means. reporting regime.”
“We are pleased that most members of Congress are committed to ensuring that the top 1 percent pay the taxes they owe, as are teachers, firefighters and other wage workers,” said Treasury spokeswoman Alexandra LaManna. “We look forward to continuing to work with them to bring this critical proposal to life.”
Oregon Senator Ron Wyden, the Democratic chair of the Senate Finance Committee, and Massachusetts Democratic Senator Elizabeth Warren will unveil the new plan Tuesday afternoon.
According to prepared statements, Mr Wyden will say, “The main reason Republicans are locked into this issue as the liar every day is because they know their tax agenda is a political loser.” “The American public overwhelmingly wants to get megacorporations and billionaires to pay their fair share, so Republicans have largely abandoned their tired, dripping arguments.”
Banks already submit tax forms to the IRS on accrued interest on client accounts. But the new proposal will require them to share information about their account balances so the IRS can see if there are major differences between what income earners and businesses report and what they have at the bank. The IRS can investigate loopholes to see if these taxpayers are meeting their obligations.
The Treasury Department estimates that its original proposal to require banks to report account balances, along with plans to strengthen enforcement staff at the IRS, could raise $700 billion in ten years.
In a letter to House Democrats last month, Treasury Secretary Janet L. Yellen urged lawmakers not to dilute the information reporting proposal. Initially, this part of the plan was expected to raise $460 billion over ten years. The Treasury Department estimated that the narrower plan Congress was considering could raise between $200 billion and $250 billion over that time.
The Treasury Department believes these are conservative estimates and that the “deterrent effects” of the policies could still generate additional $700 billion in tax collections over the next decade.
Although the scope of the proposal is narrower, Republicans are not about to give up on the offensive line.
Representative Marjorie Taylor Greene, Republican of Georgia, took it to twitter “Democrats need to keep their dirty little hands off people’s bank accounts,” he said on Tuesday morning. The IRS does not need to monitor how you spend your money. It’s not their damn business.”