A little-known yet wide-reaching proposal from the Biden administration to report transactions from your bank account to the Internal Revenue Service (IRS) could be one of the most egregious affronts to liberty and privacy the federal government has ever concocted. The plan, considered part of the way Democrats intend to pay for their massive $3.5 trillion spending bill and slush fund, would give the federal government annual reports from banks about transactions and spending which could indicate you’re not paying enough on your taxes or you’re trying to conceal income.
It may sound over the top to call it “spying on your bank account,” but that’s what the proposal amounts to once you read the details. Up until this point, the federal government has never had direct access to your personal checking account without a court order or subpoena as part of a criminal investigation.
This proposal from the Biden administration would change all that and make your personal finances an open book for the IRS to audit and comb as it sees fit:
The goal, according to the Treasury Department, is to collect taxes from wealthy people and businesses on income that is earned but not reported. The agency estimates that more than $160 billion is lost each year from taxes the top 1 percent choose not to pay.
Under the measure, financial institutions would be required to annually report to the IRS gross inflows and outflows from all business and personal accounts if the amounts total at least $600 in a year.
Banks and credit unions would only report total amounts of money going into and out of an account during the prior year. They would not have to report details of individual transactions.
The Treasury Department unveiled the proposal in May. The Senate Finance and House Ways and Means committees could adopt it as part of budget reconciliation legislation currently under consideration.
Some might be asking why they care if they have nothing to hide? The details, in this case, are sparse, and it’s not entirely known how this plan could change or morph over time and exactly what kind of power would be granted to federal agencies looking to replenish the coffers after spending trillions of dollars that American doesn’t have to spend.
The term “wealthy” can mean many different things to different people. The Biden administration has changed the definition of “wealthy” many times. Back during the Obama years, making $250,000 annually seemed to be what “wealthy” meant, but it ebbs and flows depending on what kind of class warfare the Democratic Party is engaged in this week. Make no mistake, if the government thinks you owe it money, they will surely label you as “wealthy” no matter what your income bracket is.
Many state banking authorities are speaking out against the proposal:
State auditors and treasurers in 20 states, including Utah, have come out against what they say is an “invasive” Biden administration proposal to require banks to report more information on the accounts of everyday Americans to the IRS.
Utah State Auditor John Dougall and State Treasurer Marlo Oaks say the private banking activity of more than 100 million Americans could be subject to “invasive” IRS examination if the plan is enacted.
“The proposed rules would be an egregious data mining and surveillance exercise against everyday American citizens who have committed no crimes and are not suspected of any wrongdoing,” Dougall said. “In addition, there is no indication that this level of surveillance would help accomplish the stated goal of catching tax evaders.”
Giving the federal government access to your personal finances would remove the need for randomized IRS audits. No longer would the IRS be forced to take limited manpower and investigate a handful of taxpayers each year. Instead, banking data would be fed into computer algorithms built to search for potential tax evasion or activity the government deems questionable for some reason.
The banking industry is opposed to such a plan since they know it would drive millions of people away from them as potential customers. If citizens fear that their checking account down at their local bank is being served up annually to the federal government for inspection, some people will decide to simply stop using their bank as much, especially for larger purchases.
Obviously, this kind of plan is wrought with a boatload of unintended consequences. What happens if you simply withdrawal a large amount of cash to make your purchase? How does the IRS interpret that? Is it your right to do that or does that look suspicious for some reason because you did something off the books?
The plan may be more insidious in the opposite direction. Perhaps it’s less about spying on your banking activities, and more about using your banking activity to spy on someone else, like the small business that cleans your house or the preschool where your kids attend. If the payments you’re making to a particular business don’t line up with the income that specific business is reporting, can the IRS use that information to penalize a business because it appears they took in more money than they’re reporting? It seems that would be part of the intended use.
Make no mistake, however, the goal of opening up banking information to federal auditors is all about extracting more money from you which is straight from the mouth of Treasury Secretary Janet Yellen:
“As you consider specific policy choices in designing an information reporting regime, it is important to ensure that the reporting regime is sufficiently comprehensive, so that tax evaders are not able to structure financial accounts to avoid it,” she [Yellen] wrote.
In reality, it’s all about the federal government trying to squeeze Americans for additional tax dollars in an effort to fund Democrats’ $3.5 trillion budget wish list. Or as Yellen phrased it in a letter to Congress, the government has “a shortage of necessary funds for key national priorities.” Biden officials estimate this could bring in upward of $400 billion over a decade.
As many have pointed out also, the IRS already has the means to go after individuals or corporations which it suspects are shortchanging their share in taxes. A proposal like this is like taking a sledgehammer to a job better suited for a scalpal, unless you want to start sledgehammering millions of Americans every year:
Rann Paynter, president and CEO of the Michigan Bankers Association, says the plan would hamper both financial institutions and consumers.
“It’s certainly a burden to the holders of those accounts, and an invasion of privacy to Americans for that type of information to be shared with the IRS,” he says. “It’s a lot of information to provide to the government that is not necessary.”
Paynter notes that if the IRS is concerned about some individuals or businesses avoiding their share of taxes, the agency already has the tools it needs to investigate.
The Biden administration is actively pushing for one of the largest infringements imaginable into your personal life and finances. There is little more sacred that tells someone about your priorities than your bank account. Your personal cell phone probably contains more information, but your bank account is the blueprint for your entire financial life from your paycheck to your spending.
Unless you are specifically suspected of committing a crime, the government and President Biden have no business looking at your checking account but don’t expect Democrats to give up on such power grabs very easily.
