Ordinary Americans Will Be Swept Up In Democrats’ IRS Dragnet, Just As They Designed It

Reeling From Americans’ Outrage Over Their Intrusive IRS Dragnet, Democrats Are Scrambling To Revise Their Financial Spying Provision, But ‘Whether It’s $600 Or $10,000, The Effect Is Going To Be The Same’

SENATE REPUBLICAN LEADER MITCH McCONNELL (R-KY): “President Biden likes to claim his $3.5 trillion tax and spending spree will only hurt the wealthiest Americans, leaving everyone else unscathed. As his plan comes into sharper focus, though, it’s become increasingly clear that Democrats intend to radically transform the lives of every worker, small business owner and family in America. Their latest gambit is a plot to give the IRS sweeping new authority to snoop on Americans’ personal finances, providing federal agents with data on every transaction over $600. This unprecedented expansion of government surveillance should leave everyone alarmed and outraged…. In effect, Washington liberals want to let the IRS leaf through Americans’ checking accounts as if everyone were a potential criminal or terrorist until proven otherwise. The IRS already knows how much you earn. Now they want to know exactly how you spend it…. Unsurprisingly, this extreme infringement on personal privacy has made Kentuckians upset. In recent weeks, I have received more than 14,000 messages from constituents expressing their concern with this provision. They are uniformly dismayed that their private financial decisions could be subject to real-time IRS monitoring. Kentuckians are tired of being subjected to big government and overreaching bureaucrats…. I am proud to stand with the Kentuckians who object to President Biden’s radical transformation of American society. I’ve consistently fought against these kinds of liberal power grabs in the past, and I’ll make sure Republicans are united in doing so again. We cannot treat every American like a potential criminal. We cannot regulate community banks out of existence. We cannot make everyone’s sensitive financial information free game for hackers and partisan leakers.” (Sen. McConnell, Op-Ed, “Biden Wants To Give The IRS The OK To Snoop On Your Bank Account. Don’t Let Him,” [Louisville] Courier-Journal, 10/05/2021)

SEN. MIKE CRAPO (R-ID), Senate Finance Committee Ranking Member: “[I]n the past few weeks, I have been working with my colleagues in the Senate to draw attention to the privacy concerns of requiring all financial institutions to report to the IRS on the inflows or outflows on every checking, loan, and investment account above a certain threshold. Under the guise of closing the tax gap, Democrats have proposed to drastically expand the powers of the IRS and turn banks and credit unions into private investigators for law-abiding Americans. The proposal as it originally came out in the ``Green Book’’ from the White House required that every single financial account--not just bank accounts, not just credit union accounts, but all financial accounts that have more than $600 worth of inflow or $600 worth of outflow in a given year would have to have that reported to the IRS. We have been pointing this out to people across America now for several weeks, and the uproar is loud.” (Sen. Crapo, Congressional Record, S7054-7055, 10/19/2021)

  • SEN. CRAPO: “If enacted, this new proposal would still raise some of the same privacy concerns; increase tax preparation costs for individuals and small businesses; and create significant operational challenges, particularly for community banks. The list goes on. Americans must speak up loudly and say ‘no.’  When asked if she was going to put this in the next bill, Nancy Pelosi said: ‘Yes, yes, yes, yes.’ Americans should say ‘No, no, no, no.’” (Sen. Crapo, Congressional Record, S7054-7055, 10/19/2021)

SEN. PAT TOOMEY (R-PA), Senate Banking, Housing, and Urban Affairs Committee Ranking Member: “We’re going to give all kinds of personal, private information about American citizens to the same IRS that famously discriminated against conservative organizations seeking tax-exempt charters? … I just came from a hearing in the Banking Committee where some of our Democratic colleagues suggest that the opposition to this is exclusively well paid lobbyists and multi-gazillionaires. This proposal is going to affect almost every single American. Not just the average American. The vast majority of Americans have accounts that go through $600 dollars in a year and if they raise it to $10,000 it’ll still capture everybody. And every small business.” (Sen. Toomey, Press Conference, 10/19/2021)


As Democrats Scramble To Revise Their Unpopular IRS Dragnet, ‘The Core Idea Remains… They Would Create A Data Trove That Tax Authorities Could Use To Decide Who Gets Audited’

“Democrats scaled back a proposal to require banks to send to the IRS more information about customers’ accounts in hopes of salvaging the idea, raising to $10,000 from $600 the key reporting threshold and adding an exemption that would spare many workers and retirees. The core idea remains—banks would be required to provide information that could help the IRS more easily find tax cheating. … Democrats want banks, other financial institutions and peer-to-peer services such as Venmo to report annual totals of account inflows and outflows to the Internal Revenue Service. That would give the tax agency a window into income streams that are more opaque than wages and interest. The IRS already gets information on wages and interest from banks and employers and cross-checks that data against tax returns. The additional account details wouldn’t provide direct evidence of tax cheating, but they would create a data trove that tax authorities could use to decide who gets audited. It could also be a deterrent to people—particularly business owners—who are considering not reporting all of their income.” (“Democrats Try to Salvage IRS Bank-Account Reporting With Scaled-Back Plan,” The Wall Street Journal, 10/19/2021)

Treasury Secretary Janet Yellen Admits The Plan ‘Would Really Help The IRS Target Their Auditing Resources’

TREASURY SECRETARY JANET YELLEN: “It comes from places where the information on income is opaque and can be hidden. And a simple way for the IRS to get a sense of where that might be is just a few pieces of information about individuals’ bank accounts, nothing at the transaction level that would violate privacy, simply aggregate inflows into the account over the year and aggregate outflows and that would really help the IRS target their auditing resources which we’ve proposed to greatly expand to do their audits on those usually high-income wealthy individuals that may be concealing their, their transactions and their income and these would be helpful indicators of where it would make sense for auditing to occur.” (CNBC, 10/05/2021)

‘$10,000 Sounds Less Intrusive Than $600, But The Data Dive Would Still Apply To Nearly Every Active Checking Account’

THE WALL STREET JOURNAL EDITORIAL BOARD: “Despite their growing aversion to private business, House Democrats grasp the concept of ‘sticker shock.’ Many Americans reeled when they learned that the Internal Revenue Service plans to track bank accounts with yearly cash flow as small as $600. Legislators may now raise that number to $10,000, but don’t buy it—the effect of the policy would hardly change. … This is no cause for relief. Sure, $10,000 sounds less intrusive than $600, but the data dive would still apply to nearly every active checking account. A retiree collecting $1,200 a month in Social Security would clear the bar easily, as would a student splitting rent in a cheap city apartment. To catch the tax cheats, the IRS says it needs to check these folks’ spending figures, and yours too.” (Editorial, “The IRS Gets Window Dressed,” The Wall Street Journal, 10/09/2021)

  • “The banks have plenty to dread from the reporting rule. They would bear the cost of reporting each of more than 124 million U.S. accounts, which might require new software and additional staff. Customers could count on these costs showing up in higher user fees. Collecting bank account data is only one part of Democrats’ broader plan to bulk up the IRS, including $80 billion in new funding to hire an army of new auditors, like multiplying Agent Smiths in ‘The Matrix.’ The Democrats are desperate for revenue to offset trillions in planned spending. But using the tax agency to screen and target ordinary Americans might be the least popular, and least effective, way they could do it.” (Editorial, “The IRS Gets Window Dressed,” The Wall Street Journal, 10/09/2021)


Banking And Business Associations: ‘The Impact On Average Americans And The Safety And Privacy Of Their Financial Information Would Not Be Mitigated By Raising The Reporting Threshold To $10,000 Or Even $100,000 … In The End, Whether It Is Average Workers Or Self-Employed Citizens Virtually All Americans Will Be Subject To This New Reporting’

THE AMERICAN BANKERS ASSOCIATION AND 100 BUSINESS ASSOCIATIONS: “Lawmakers must fully understand the breadth of taxpayers who would be receiving a new form from their financial institution – almost every American who has a bank or credit union account and has gross inflow and outflow of at least $600. While recent proposals suggest that increasing the de minimis threshold to $10,000 is less objectionable, this is a flawed assumption and will not significantly reduce the scale of this new IRS program. As we mentioned in our previous letter, this proposal would create serious financial privacy concerns, increase tax preparation costs for individuals and small businesses, and create significant operational challenges for financial institutions. The recent reports highlight avenues that Congressional leaders are looking to ‘soften the edges’ of the new regime, by exempting some payment processors, providing support to institutions to aid processing, or carving out certain types of flows all together (i.e. mortgage payments, etc.). These new proposed exceptions only add significant operational complexity for financial institutions and will not materially reduce the tens of millions of American taxpayers who would be subjected to the new reporting regime. We continue to urge members to oppose any efforts to advance this ill-advised new reporting regime. … We believe that this program is costly for all parties, not fit for purpose, and loaded with the potential for unintended and serious negative consequences. As associations representing a broad cross-section of financial and business interests, we urge you to oppose any efforts to institute this new reporting regime.” (American Bankers Association and 100 Business Associations, Letter to Reps. Pelosi and McCarthy and Sens. Schumer and McConnell, 10/14/2021)

THE AMERICAN BANKERS ASSOCIATION AND 51 STATE BANKERS ASSOCIATIONS: “[T]he impact on average Americans and the safety and privacy of their financial information would not be mitigated by raising the reporting threshold to $10,000 or even $100,000. The proposal contemplates reporting on gross annual inflows and outflows of customer accounts. Consider a taxpayer who earns $18 an hour, has no other income, and pays rent and other living expenses – the sum of gross inflows and outflows after taxes would be around $60,000. Self-employed contractors who buy materials and install them for customers, will commonly have gross inflows and outflows that far exceed the income they earn. These are simple examples of what likely would be significant amounts of information generated by this new regime and reported to the IRS regarding the accounts of average Americans. In the end, whether it is average workers or self-employed citizens virtually all Americans will be subject to this new reporting. The taxable portions of this activity are already generally captured by existing reporting, and it is unclear how these additional details will help the IRS target tax cheats in the top 1% of reporters.” (American Bankers Association And 51 State Bankers Associations, Letter to Reps. Pelosi and McCarthy, 9/24/2021)

ROB NICHOLS, CEO and President of the American Bankers Association: “Even with the modifications announced today, 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. 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. How about self-employed hair stylists, convenience store owners and farmers just to name a few? 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.” (“ABA, Lawmakers Criticize Revised IRS Tax Reporting Proposal,” ABA Banking Journal, 10/19/2021)

Richard Hunt, CEO of the Consumer Bankers Association: “[The IRS] can’t deduce who is avoiding paying their taxes without peering through every financial transaction… Bankers cannot become agents of the IRS.” (“Democrats Try to Salvage IRS Bank-Account Reporting With Scaled-Back Plan,” The Wall Street Journal, 10/19/2021)

REBECA ROMERO RAINEY, President of the Independent Community Bankers of America: “The threshold doesn’t really solve for anything because you still have to aggregate it to know whether or not you hit that threshold.” (“Yellen, IRS Push Democrats to Require Banks to Report Taxpayers’ Annual Account Flows,” The Wall Street Journal, 9/15/2021)


Senate Republicans: ‘The IRS Will Have Data On Every American’s Account’, ‘This Is A Large-Scale Fishing Expedition That Has No Motive Other Than To Make The Private Lives Of Individuals’ Public To The IRS’, ‘Whether It’s $600 Or $10,000, The Effect Is Going To Be The Same’

SENATE REPUBLICAN WHIP JOHN THUNE (R-SD): “Senator Crapo, who chairs the Senate Finance Committee, his folks have done the research on this from the Bureau of Labor Statistics, and it shows that the average American has $61,000 a year that runs through their bank account. So, whether it’s -- and that’s a cumulative number, by the way, in their proposal. So, whether it’s $600 or $10,000, the effect is going to be the same. The IRS is going to have double the budget they have today, so they can spend more time snooping, more time creating a dragnet of people’s bank accounts in this country. And contrary to what the Democrats are saying, it doesn’t hit billionaires the hardest. It hits lower-income Americans. The analysis makes it very clear that it’s going to be those making less than $100,000 a year that are going to pay 75 percent of the cost for this crazy proposal which needs to end up, as I said earlier today, on the ash heap of history.” (Sen. Thune, Press Conference, 10/19/2021)

SEN. CRAPO: “So does raising the total to $10,000 really stop the IRS from accessing very many people’s accounts? No… Think of a family that doesn’t spend more than $10,000—yeah, that spends less than $10,000 in a year in their financial accounts. Think of a small business in America that doesn’t run more than $10,000 a year of income and expense through their accounts. It will pick up every small business in America; it will pick up, I think, every family in America; and nothing will be changed. The IRS will have data on every American’s account.” (Sen. Crapo, Congressional Record, S7054-7055, 10/19/2021)

  • SEN. CRAPO: “Then they say: Well, OK, but it is only two numbers. It is just the total of your income and the total of your outflow. Well, everybody can kind of intuitively tell that that doesn’t make sense. What would they do with those two numbers? What they will do with those two numbers is use their algorithms to figure out which taxpayers to audit--or which taxpayers that they don’t even need to audit; they will just send them a notice of deficiency and say: Well, we think you should owe more taxes, and this is what we think you should owe us. And if the taxpayers don’t comply, then the IRS can go ahead and audit them. And guess what happens when they audit them? They get access to every single transaction in their account. … Americans should be outraged that the IRS is seeking to make banks, credit unions… Venmo, PayPal, credit card companies, everybody who handles financial transactions, report to them, if you hit some level, whether it be $600 or $10,000 of either income or expenditure. And then the door is open. Then the IRS can use its algorithms and decide whether to do a deeper dive on you.” (Sen. Crapo, Congressional Record, S7054-7055, 10/19/2021)

SEN. JOHN BARRASSO (R-WY), Senate Finance Committee Member: “Joe Biden wants to give the IRS more power to spy on Americans. That’s what he’s asking for. Just listen to the testimony of the Secretary of Treasury who comes to Congress and says she wants to look into the checking accounts, banking accounts, anybody with deposits or withdrawals of $600 dollars. Republicans are committed to stopping this! Just stopping it.” (Sen. Barrasso, Press Conference, 10/19/2021)

SEN. CHUCK GRASSLEY (R-IA), Senate Finance Committee Member: “It’s a stupid idea. That I hear from Iowans all the time that they don’t want the peering eyes of the IRS snooping on them. The middle-class is going to be hurt as a result of this, it isn’t going to be the billionaires. This is a large-scale fishing expedition that has no motive other than to make the private lives of individuals’ public to the IRS.” (Sen. Grassley, Press Conference, 10/19/2021)

SEN. JONI ERNST (R-IA): “Several weeks ago, I got a text from one of my good friends in Southwest Iowa and it basically said, ‘Joni, is this true?’ with a bunch of exclamation points. And then she went on in her text to ask, ‘Is the federal government really going to be able to look into our bank accounts?’ Yes, it is true. And I went on to explain to her what the Democrats and the Biden administration are proposing that the IRS have access to everyday Americans’ bank accounts. They will be tracking your expenditures and your revenues. And it’s not just the wealthy elite, folks. It is every American, virtually every American out there that has direct deposit.” (Sen. Ernst, Press Conference, 10/19/2021)

‘If You Believe You Can Trust The IRS To Keep Your Personal Information Safe, Think Again… This Is The Same IRS That Made Targeting Conservative Organizations A Matter Of Internal Policy… Americans Simply Can’t Trust The Federal Government To Hold Their Financial Information In Confidence’

LEADER McCONNELL: “If you believe you can trust the IRS to keep your personal information safe, think again. Just this year, an IRS leak exposed sensitive financial data from several Americans – information that was quickly weaponized by the political left. This is the same IRS that made targeting conservative organizations a matter of internal policy under the last Democratic administration. Americans simply can’t trust the federal government to hold their financial information in confidence.” (Sen. McConnell, Op-Ed, “Biden Wants To Give The IRS The OK To Snoop On Your Bank Account. Don’t Let Him,” [Louisville] Courier-Journal, 10/05/2021)

SEN. CRAPO: So if you have got a Treasury Department which has already proven it can’t keep the data it has safe and that its data will be hacked; if you have a Treasury Department that has already proven that it will not avoid utilizing the data it has for political purposes, that it will not weaponize the data it collects to punish or try to diminish the effect and influence of people with different political points of view; if you already have an IRS that has proven that it will take those kinds of actions, and that it is available to be accessed for its private data to be hacked, what can Americans expect from that? (Sen. Crapo, Congressional Record, S7054-7055, 10/19/2021)

SEN. BARRASSO: “I hear from people all around Wyoming that the IRS is already the least accountable and most powerful agency of the government. They point out that the IRS is incapable of keeping their records that they turn over to the IRS, keeping those private as they should be. The IRS does have a track record of targeting specific groups that they don’t like politically, and Republicans are committed to this very scary proposal dead in its tracks.” (Sen. Barrasso, Press Conference, 10/19/2021)


Asked If The IRS Reporting Provision Would Stay In Democrats’ Reckless Taxing And Spending Bill, Speaker Pelosi Emphatically Repeated, ‘Yes’

REPORTER: “Speaker Pelosi, one of the pay?fors in the Build Back Better bill that’s been proposed is IRS cracking down on some unpaid taxes. Banks are starting to get calls from customers, and they’re reporting these calls. They’re concerned about this tracking of transactions that is greater than $600. So, Americans are starting to be worried about this. Do you think that this pay?for of giving the IRS more money to crack down on unpaid taxes is going to stay in the reconciliation bill?”
REPORTER: “And what do you say –”
REPORTER: “–to Americans –”
REPORTER: “– who are concerned –”
REPORTER: “– about that?”
SPEAKER PELOSI: “Yes. Well, I mean, with all due respect, the plural of ‘anecdote’ is not ‘data.’  I’ve said that before here. Yes, there are concerns that some people have. But if people are breaking the law and not paying their taxes, one way to track them is through the banking measure. I think $600 – but that’s a negotiation that will go on as to what the amount is. But, yes.” (Speaker Pelosi, Press Conference, 10/12/2021)



Related Issues: IRS, Taxes