Community bankers are continuing to deride President Joe Biden’s IRS reporting proposal, even after the threshold was recently raised from $600 to $10,000.
If implemented, financial institutions would be required to report information on gross inflows and outflows for all accounts above that threshold. Biden has also signaled his willingness to include carve-outs for “wage and salary earners and federal program beneficiaries,” though details of how flow calculations would work remains unclear. As reported by Politico, Biden’s original proposal was designed to raise money for his $3.5 trillion spending package and promoted as a way to end tax dodging from wealthy Americans.
American Bankers Association President and CEO Rob Nichols called the revised plan a “blunt instrument.”
“Even with the modifications … this proposal still goes too far by forcing financial institutions to share with the IRS private financial data from millions of customers not suspected of cheating on their taxes,” he said. “The exclusion of payroll and federal program beneficiaries does not address millions of other taxpayers who would be impacted by the proposal. Not every non-wage worker is a millionaire … if enacted, this new proposal would still raise the same privacy concerns, increase tax preparation costs for individuals and small businesses, and create significant operational challenges, particularly for community banks.”
The Independent Community Bankers of America also expressed disapproval. President/CEO Rebeca Romero Rainey added that “no amount of updating will salvage this misguided plan or quell the widespread public backlash it has generated.” She cited an ICBA poll that found 67 percent of voters opposed the proposal, with 64 percent indicating they don’t trust the IRS to monitor their financial information.
“The IRS reporting proposal is 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,” Romero Rainey said.
The proposal is also being blasted by Congressional Republicans.
“The average American will be picked up by this plan,” said Senate Finance Committee Ranking Member Mike Crapo (R-Idaho) including “virtually every small business. … The scope of the IRS’ ability to dive into these accounts will be the biggest violation of individual privacy that I think this country has ever seen.”
Independent Community Bankers of Minnesota President/CEO Jim Amundson said the revised proposal “misses the mark,” and would include relatively low-income account holders. He also questioned how the government would prove the validity of an account holder claiming to be a firefighter or educator — two groups exempt from the proposal. He said the IRS already can subpoena information and has data to track tax dodging.
Though Amundson said government “bureaucrats” make it seem that community banks have the required technology to implement the proposal, he claimed that is not the case. Instead, he said implementing the plan “would require significant upgrades.”