The Internal Revenue Service (IRS) building stands in Washington on April 15, 2019. (Zach Gibson/Getty Images)
Paul Merski, executive vice president for the Independent Community Bankers of America, told NTD’s “The Nation Speaks” program that President Joe Biden’s proposed bank account reporting law being drawn up is a violation of Americans’ financial privacy and is a costly regulatory burden on financial institutions.
“This is going to be a massive invasion of financial privacy,” Merski said. “The last thing we need is everyone’s financial account information being turned over to the IRS in a massive dragnet.”
Merski is referring to the Treasury Department’s proposed plan (pdf) to require financial services companies to track and submit inflows and outflows from every bank account above a minimum threshold of $600 during a year to the Internal Revenue Service (IRS), including breakdowns for cash. That would be down from the current threshold of $10,000.
Treasury Secretary Janet Yellen has said that the reporting requirements would reveal “opaque income streams that disproportionately accrue to the top” and that the measure would help catch wealthy tax dodgers, according to a letter she wrote in September to House Ways and Means Chairman Richard Neal (D-Mass.).
“These information reporting provisions will make use of information financial institutions already know to help shed light on taxpayers who evade their tax obligations,” Yellen wrote.
Her letter came attached with a memo from Mark Mazur, the Treasury Department’s acting assistant secretary for tax policy, in which he estimated that a narrower reporting regime—even if it ends up above the $600 threshold—would yield additional tax revenues of between $200-250 billion over the ten-year budget window.
Besides the proposal opening up privacy concerns, Merski said compliance costs for banks would run into “billions of dollars” for new technology, computer equipment, software programming, and new staff.
“It’s our job as a national banking trade association to sound the alarm bells not only for the banking sector, but really alerting people of what’s happening with their financial data and their financial privacy,” Merski said.
Yellen, in an interview on CNBC’s “Squawk Box” earlier this week, dismissed privacy concerns, calling the collection of such information “routine.”
“It’s just a few pieces of information about individual bank accounts, nothing at the transaction level that would violate privacy,” Yellen said.
According to the Center on Budget and Policy Priorities, under the proposal “the IRS will only see two pieces of information: annual gross account inflows and outflows, with no detail on individual transactions.”
Merski’s objections build on earlier opposition to the proposed measure by a coalition of dozens of industry groups, who warned congressional leaders in a Sept. 17 letter (pdf) that the plan “is not remotely targeted” to detect major tax avoidance.
In the letter addressed to House Speaker Nancy Pelosi (D-Calif.) and House Minority Leader Kevin McCarthy (R-Calif.), the groups said the proposal would create “reputational challenges” for large financial services firms, increase the cost of tax preparations for Americans and small businesses, and create serious “financial privacy concerns.”
“We urge members to oppose any efforts to advance this ill-advised new reporting regime,” the groups said in the letter.
“While the stated goal of this vast data collection is to uncover tax dodging by the wealthy, this proposal is not remotely targeted to that purpose or that population,” they argued.
Also expressing opposition were 23 state treasurers and auditors, who in a September letter called it “one of the largest infringements of data privacy in our nation’s history.”
The proposed new reporting requirement is part of the $3.5 trillion package that Democrats are advancing via reconciliation and is currently in committee on Capitol Hill.
