By: Katie McAuliffe
A Biden proposal that will allow the Internal Revenue Service to build an NSA style financial reporting system is still included in budget reconciliation.
The IRS will be able to invade every account that has a total of $600 in flows or out flows in a year. That’s not just your personal bank account, that includes Venmo, PayPal, and crypto currency wallets too. Since the IRS is a law enforcement agency, it amounts to a warrantless search of every American.
The $3.5 trillion budget resolution intends to offset government spending through “IRS tax enforcement”. President Biden announced his “American Families Plan” in April where he wantedto “revitalize [tax] enforcement to make the wealthy pay what they owe.” To do this, President Biden said he wanted to add 87,000 new IRS agents and expand its budget by $80 billion (For Comparison, the entire Department of Justice, which includes the FBI, ATF, DEA, and the entire federal prison system has a budget of only $28 billion).
Expanding the size of the IRS to extract more taxes from the wealthy is the Big Lie of tax policy. Increasing the size of the IRS will not hurt the wealthy, but place a target on the heads of everyday Americans.
The Biden administration made this clear in early May when the Treasury Department outlined its plan to “create a comprehensive financial account information reporting regime.” This “regime” would require financial institutions to produce an annual information return that reports data on all personal and business accounts that had gross in-flows and out-flows over $600. This $600 threshold is a dramatic departure from current law where a similar requirement already exists for cash transactions over $10,000.
In less than a month we went from making the wealthy “pay what they owe” to encapsulating virtually every American in a financial dragnet akin the National Security Agency’s PRISM program.
Not only does this proposal apply to banks, it would apply to lenders, investment institutions, crypto asset exchanges, and peer-to-peer payment services such as Venmo, PayPal, and CashApp
We cannot ignore what this proposal would mean. We would be letting a law enforcement agency have the power to automatically gain access to information about the private bank accounts of essentially every American without a warrant.
As we have covered here before at Americans for Tax Reform, these IRS investigations return little results while harming taxpayers.
We can anticipate what this harm will look like. Using the current $10,000 reporting requirement as a model, taxpayers have routinely had their rights violated by the IRS. The Treasury Inspector General for Tax Administration (TIGTA) conducted a review of IRS investigations initiated from the $10,000 reporting requirement and found that the IRS seized the assets of suspected violators before even speaking to them 92% of the time. Furthermore, only 8% of these suspected individuals actually broke the law.
The seizure of a person’s assets is no small inconvenience. During the months that an investigation occurs, a business can be from missing payments to employees, its bills, and contracts. Families can end up in trouble for not being able to pay rent, make car payments, or pay their utility bills.
Biden’s proposal to expand the manpower and pockets of the IRS will give it the resources it needs to stalk every American’s bank account. With the IRS proving itself oppresive with the relatively uncommon $10,000 reporting requirement, it raises the question about how much harm will result from dramatically expanding the focus of its investigatory lens.
This is not a proposal most Americans would support if they were aware of it. Senator Crapo of Idaho attempted to block the proposal with an amendment but it narrowly failed by 49-50.
With the IRS having this much authority, it is another attack on Americans’ privacy and Fourth Amendment protections.