Despite the new rhetoric we’re hearing from the Far-Left about how the changes being considered for Joe Biden’s financial surveillance plan will ensure that only “the rich” who aren’t paying their “fair share” in taxes will be targeted, the truth of the matter is that every taxpayer regardless of income level will be subject to the IRS’s power to spy on our bank accounts.
Originally introduced back in May as part of his proposal to spend trillions of dollars on a laundry list of pet projects near-and-dear to the hearts of the far-left, Biden suggested having the IRS serve as a financial Big Brother that would track nearly every financial transaction of account holders.
Specifically, Biden and his far-left brethren suggested “monitoring” the financial activity of account holders by having banks report transactions for accounts holding over $600. When asked recently if the IRS monitoring provision would remain in Biden’s proposed $3.5 trillion reconciliation legislation, Nancy Pelosi emphatically said “yes.”
“Yes. There are concerns that some people have, but if people are breaking the law and not paying their taxes, one way to track them is through the banking measure. I think 600…that’s a negotiation that will go on as to what the amount is, but yes.” (emphasis mine)
One reason Pelosi mentioned negotiations about the $600 number is because Democrats have been dealing with blowback for including low income people in their scheme to punish “the rich.” And in light of that blowback, progressives have been trying to come up with a number that will make it look like they aren’t trying to spy on everyone.
Following the recent round of negotiations, Democrats on Capitol Hill increased the proposed IRS reporting threshold on bank accounts from $600 in combined annual transactions to $10,000.
I’m not an economist nor did I sleep in a Holiday Inn Express last night, but I’m pretty sure that $10,000 in annual transactions will still include nearly bank account — including the accounts of low and middle income wage earners — which mean the IRS will be spying on every bank account (via Reason.com):
The people most likely to have their transactions newly calculated for the IRS each year are not millionaires who scatter their holdings across 100 different $10,000 accounts, but rather freelancers, small business owners, immigrants, and anyone paid/gifted banked cash exceeding four months’ worth of minimum wage work in New York. If I paid my 13-year-old $100 a week to babysit my 6-year-old, and she turned around and spent all that money at Brandy Melville, her bank may be obliged to report her deposit/withdrawal sums at the end of the year.
I say “may” because the details of this are being hashed out behind closed doors.
Joe Biden is none too pleased about this change. “[The IRS spying plan] is about making sure the top one percent can’t evade $160 billion per year in taxes,” Treasury Department spokeswoman Alexandra LaManna told the New York Times last week.
However, as Reason.com points out, the U.S. Treasury’s wish list on the matter makes it obvious that this measure is designed to boost compliance among the lower 99 percent:
Requiring comprehensive information reporting on the inflows and outflows of financial accounts will increase the visibility of gross receipts and deductible expenses to the IRS. Increased visibility of business income will enhance the effectiveness of IRS enforcement measures and encourage voluntary compliance.
This proposal would create a comprehensive financial account information reporting regime. Financial institutions would report data on financial accounts in an information return. The annual return will report gross inflows and outflows with a breakdown for physical cash, transactions with a foreign account, and transfers to and from another account with the same owner. This requirement would apply to all business and personal accounts from financial institutions, including bank, loan, and investment accounts, with the exception of accounts below a low de minimis gross flow threshold of $600 or fair market value of $600.
Other accounts with characteristics similar to financial institution accounts will be covered under this information reporting regime. In particular, payment settlement entities would collect Taxpayer Identification Numbers (TINs) and file a revised Form 1099-K expanded to all payee accounts (subject to the same de minimis threshold), reporting not only gross receipts but also gross purchases, physical cash, as well as payments to and from foreign accounts, and transfer inflows and outflows.
Similar reporting requirements would apply to crypto asset exchanges and custodians. Separately, reporting requirements would apply in cases in which taxpayers buy crypto assets from one broker and then transfer the crypto assets to another broker, and businesses that receive crypto assets in transactions with a fair market value of more than $10,000 would have to report such transactions.
Biden and the Democrats say their plan will only target the “rich,” but the IRS will be spying on the bank accounts of every law-abiding, tax-compliant American because every bank and financial institution will be required to participate. As Tax Policy Center Senior Fellow Steve Rosenthal pointed out in the Journal:
Although administration officials talk about going after wealthy tax dodgers with their expanded staffing, the bank reporting proposal wouldn’t do much to them, he said. That is because the highest-earning Americans are employing more sophisticated tax-dodging techniques than just declining to declare all their income.
The bank-reporting rules are designed to get a different group of people altogether—business owners who inflate their deductions and don’t report all their income.
“This is a political call by the Biden administration: Let’s not tell those guys, small-business guys, what we’re doing,” Mr. Rosenthal said.
The Biden administration calls this equal-opportunity spying equity. (emphasis mine)
Last month, I wrote a piece describing Biden’s financial surveillance plan as a PATRIOT Act for the IRS based on similarities I saw between his plan and the original PATRIOT Act that obtained banking information to fight terrorism. Amazingly, the $10,000 IRS reporting threshold currently being considered in the financial surveillance plan provides more commonalities.
A little known provision in the PATRIOT Act changed the 1970 Bank Secrecy Act. This change established new standards for banks to identify customers and maintain records, and it required them to report cash transactions over $10,000.
Allegedly, this change prevented the funding of terrorist activities. Instead, it resulted in the violation of the Fourth Amendment’s protection against unreasonable search and seizure and the Fifth Amendment’s guarantee of due process — just like Biden’s financial surveillance plan will do.
In addition to killing liberty, giving the IRS the power to spy on bank accounts will create a serious threat to our personal privacy.
Compliance and hacking risks for institutions required to store this data will increase, not to mention that the IRS’s track record of keeping taxpayer information safe and secure is terrible.
So, ignore the rhetoric. The IRS will soon have all the power it needs to spy on every bank account.
David Leach is the owner of the Strident Conservative. He holds people of every political stripe accountable for their failure to uphold conservative values, and he promotes those values instead of political parties.