Some Republicans are challenging Treasury Secretary Janet Yellen’s claim that a tax enforcement provision in the $3.5 trillion reconciliation bill will only target high income tax evasion.
Republican Senator Cynthia Lummis of Wyoming argued to Fox Business that the proposal, which would allow the IRS to monitor all transactions in bank accounts with more than $600, normalizes a level of data extraction from average Americans that is a major encroachment into the private sector and personal liberties.
“No amount of explaining will change the fact that this $600 reporting threshold is completely unacceptable, a massive government overreach, and gives the IRS data they can’t manage properly,” Lummis told the network.
“Secretary Yellen is essentially implying the American people are regularly committing tax fraud,” she added. “Throwing out ‘innocent until proven guilty,’ this rule would facilitate unwarranted snooping by the IRS.”
In response to Republican outrage over the rule, Yellen clarified in an interview with CBS that banks would report full-year inflow and outflow information from bank accounts rather than monitoring individual transactions in real time.
“I think this proposal has been seriously mischaracterized. The proposal involves no reporting of individual transactions of any individual,” Yellen said. “We have a tax gap that over the next decade is estimated at $7 trillion, namely a shortfall in the amount that IRS is collecting due to a failure of individuals to report the income that they have earned.”
“It tends to be among high-income individuals whose income is opaque,” Yellen elaborated. “All that’s involved in this proposal is a few aggregate numbers about bank accounts.”
Millions of small accounts used for things like cashing paychecks, paying rent, or buying groceries would meet the $600 threshold and would therefore come under scrutiny.
Similarly, last week Republican Senator Tommy Tuberville called for the Senate to pass his legislation, the Protecting Financial Privacy Act (S.2953), to block President Biden’s proposal for financial institutions to submit all transactions of $600 or greater made by their customers to the IRS.
Amid the partisan gridlock and ongoing negotiations over the reconciliation package pending in Congress, for which Democrats are struggling to garner sufficient support even in their own party, a higher threshold of $10,000 for the reporting requirement is under consideration, Bloomberg News reported.