Sen. Joe Manchin said Tuesday that a deeply controversial proposal that would force banks to turn over most customers' account information to the Internal Revenue Service will likely be dropped from Democrats' final tax and spending bill, even after the White House agreed to narrow the scope of the plan.
Manchin, a West Virginia Democrat who is a crucial deciding vote in the 50-50 Senate, said he told President Biden during an Oval Office meeting that a plan to require banks to tell the IRS how much money flows in and out of individual accounts each year is "screwed up." Biden reportedly agreed with that assessment, saying, "Joe is right on that," Manchin said.
"So, I think that one is going to be gone," Manchin said during an appearance at the Economic Club of Washington on Tuesday morning.
Under the new plan that Senate Democrats unveiled last week, banks, credit unions and other financial institutions would be required to report annually on accounts with deposits and withdrawals worth more than $10,000, rather than the $600 threshold that President Biden initially proposed.
Even with the slimmer scope, however, banks and other industry groups have argued the policy presents potential financial privacy risks for customers while increasing compliance costs for banks and adds to the already existing burden the industry faces in turning over information to the government.
In a letter addressed to Biden on Monday, nearly 100 banks and other industry groups slammed the higher reporting threshold as "cosmetic changes" that did little to truly change the essence of the bill; though the minimum amount that would trigger a report to the IRS on individual accounts is substantially higher, it will likely still encompass "Americans from all income levels," the group argued.
"The privacy concerns for Americans who pay their taxes and would be swept into this account reporting program are real and should not be taken lightly," the letter said.
The tightening of the plan follows a steady lobbying campaign from banking groups and other industry organizations, in addition to fierce pushback from Republican lawmakers who see it as the worst type of government overreach.
The White House has repeatedly defended the plan, writing in a memo to congressional Democrats that requiring banks and financial institutions to provide a "little bit of high-level information" to the IRS on account flows gives the agency more information about wealthy Americans' earnings from investments and business activity. Recipients of federal benefits like unemployment and Social Security would be exempt from the policy, which would also exclude any income received through a paycheck in which federal taxes are automatically deducted.
"This is a well-reasoned modification: for American workers and retirees, the IRS already has information on wage and salary income and the federal benefits they receive," a Treasury Department fact sheet on the changes said.
Banks are already required to report any individual transaction that exceeds $10,000 to the Financial Crimes Enforcement Network – part of anti-money laundering requirements.
The Biden team has stressed that banks will not have to report individual transactions to the IRS, but rather "basic, high-level information on account inflows and outflows" and that audit rates for Americans earning less than $400,000 annually would not go up.