The Treasury Department on Thursday defended an incendiary proposal from President Biden to crack down on wealthy tax evaders by requiring banks to report more customer information on most Americans' accounts to the Internal Revenue Service.
Under the plan, banks, credit unions and other financial institutions would be required to annually report customers' account deposits and withdrawals of $600 or more to the IRS. While individual transactions would not be listed, the policy would apply to almost every Americans' bank account.
The White House has estimated the policy, which would apply to bank, loan and investment accounts, could generate about $463 billion in additional revenue over the next decade.
But the proposal has elicited a fierce backlash from banks who say it would increase compliance costs and add to the already existing burden the industry faces in turning over information to the government and from Republicans who say it amounts to the worst type of government overreach.
"This unprecedented expansion of government surveillance should leave everyone alarmed and outraged," Senate Minority Leader Mitch McConnell wrote in a recent op-ed for the Courier-Journal. "President Biden’s new plan creates a massive new dragnet that would sweep up all kinds of ordinary transactions that normal, law-abiding Americans make routinely."
Despite the criticism, the White House has stood by the plan. In a public memo on Thursday, Natasha Sarin, Treasury's deputy assistant secretary of economic policy, said the proposal has been "marred by misinformation, as opponents have elevated the pernicious myth that banks will have to report all individual customers' transactions to the IRS."
The Treasury Department argued that collecting additional information would help the IRS sniff out individuals who may be skirting their taxes.
"Suppose a taxpayer has $1 million of deposits flowing into their checking account in a year, but reports only $100 of income to the IRS," Sarin wrote. "There may be a benign explanation for this, but it is suspect — and something the IRS can prioritize looking into when selecting returns for potential audit scrutiny."
Banks already report millions of transactions a day to the Financial Crimes Enforcement Network for any transaction that exceeds $10,000 – part of banks' anti-money laundering requirements.
Still, House Democrats are considering narrowing the scope of the measure: A Democratic aide told Bloomberg News the threshold could be raised to $10,000, but cautioned that discussions are still fluid and subject to change. The lawmakers initially excluded the policy from its draft version of the tax bill because they were unable to reach a deal on it.
"You want to make sure it doesn’t hit the unintended," House Ways and Means Chairman Richard Neal told reporters recently. "You don’t want to hit people at the lower end."