The White House Abandons Bank-Reporting Plan . . . for Now

I n the latest round of spending negotiations, it appears as if the White House has abandoned the wildly invasive plan to require banks, credit unions, and other financial institutions to report account data to the Internal Revenue Service on an annual basis. Recall that tucked into the House’s reconciliation bill was this provision, which would have required all financial institutions to file an annual report to the IRS on all accounts with “gross flows” of $600 or more per year. That is, if the total of your account’s in-and-out transactions equaled at least $600, the activity would be reported to the IRS.

The White House claimed that this measure was necessary to track down rich people who avoid paying taxes. In a feature published on the Treasury Department’s website last month, deputy assistant secretary Natasha Sarin suggested that this reporting was necessary because the U.S. has a “two-tiered tax system.” One tier allegedly applies to wage-earners whose incomes are reported to the IRS annually; the other applies to rich people, who are often self-employed and whose incomes are therefore not necessarily reported to the IRS.

The Biden administration and House Democrats came under heavy fire for this plan, and for good reason. The idea that this financial-account-reporting scheme was necessary to catch rich tax cheaters in the highest 1 percent of the income strata was a farce. Don’t the financial accounts of rich people show gross flows of substantially more than $600?

In response to the pressure, the administration amended the threshold. The revised spying scheme would require banks to report to the IRS only if the gross flows in a given account reached $10,000. But that, too, was a farce.

Think about this for a minute. According to the Department of Health and Human Services, poverty-level income in the United States for an individual in 2021 is $12,880. That means those on the very bottom of the income strata would still very likely be subject to financial-account reporting — even at the $10,000-per-year level. How is that any concession of the $600 threshold?

Yet rather than continue to push for this reporting requirement, as of October 28 the administration had scrubbed the idea from its tax-and-spend proposal that is working its way through Congress. That, of course, does not mean it can’t be added back as negotiations continue, nor does it mean it won’t be brought up in future bills. The reality is that Big Government never gives up on the idea of gathering private data with as broad a dragnet as possible.

For example, a barely visible provision in the Affordable Care Act required information reporting on essentially all corporate business-to-business payments that exceeded $600 per year. Under the proposal, if your small-business corporation paid $600 or more in a year to, say, the phone company or a materials supplier, you would be required to report those payments to the IRS on a Form 1099. The rule — enacted as part of the ACA — would have led to an explosion in the number of information returns filed with the IRS every year, just as the gross-flows reports at either threshold would have done.

The difference is that the $600 business-to-business provision actually became law. And once it did, it was met by an avalanche of opposition, which resulted in its repeal in 2012.

My point here is simple. The prospect of IRS invasion into every area of your private life is not new — and it’s not going away. The taxman doesn’t give up, ever. And it doesn’t seem to matter whether Democrats or Republicans control the White House or Congress. The wish list of information-gathering tools comes from inside the IRS — from the career bureaucrats who spend their days thinking up more ways to gain access to your private personal and business financial details in the name of enforcing the tax laws.