Democrats will revise President Joe Biden's proposal that bank transactions exceeding $600 must be reported to IRS. Banks and privacy advocates are opposed to this plan.
In an effort to combat tax fraud and increase revenue for Democrats' multitrillion-dollar infrastructure, and social spending package, the initial proposal was that banks report all account inflows or outflows exceeding $600 to IRA. House Ways and Means Chairman Richard Neal has announced that Democrats have now agreed to raise this threshold.
According to Bloomberg, Neal stated Thursday that they have reached an agreement not to pay the $600.
Although the details are still being worked out by Democrats, it is reported that they have set a $10,000 threshold. This is comparable to the amount that the Treasury Department monitors for the federal government.
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Banks are required to report currency transactions on deposits exceeding $10,000 to the Financial Crimes Enforcement Network (a division of Treasury Department). While the FinCEN is responsible for preventing money laundering and other crimes, it does not monitor reports for tax purposes.
Banks and credit unions worry that the Biden proposal to report transactions exceeding $600 to IRS would be too burdensome and take up valuable time.
According to Scott Talbott (senior vice president of government relations, Electronic Transactions Association), the bank's administrative difficulties and complexity of setting a $600 threshold per year may hinder the goal of tax avoidance reduction. The squeeze at $600 may not be worth it.
Privacy concerns are also raised, especially considering that the proposed threshold of $600 would be applicable to almost everyone. More than 140 Republican legislators wrote to Neal and Nancy Pelosi (House Speaker), Treasury Secretary Janet Yellen and Charles Rettig, the IRS Commissioner, in opposition to this idea.
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They stated in the letter that such a comprehensive IRS database would require substantial resources to create, maintain, and secure. It would also make personal financial data of millions of Americans vulnerable for attack.
The Democrats plan to finance their spending package by infusing the IRS with billions to increase tax enforcement and close the huge tax gap in the nation, which is the total amount of taxes owed compared to what is actually collected.
Republicans are refusing to give the IRS more power or funding. This is especially in light of ProPublica's tax leaks earlier in the year, when thousands of pages of tax documents relating to the richest Americans were leaked to the media. The massive leak has not been investigated and no one has been arrested.
Although the $600 threshold proposal by Biden was expected to generate nearly $500 billion in revenue over ten years, it is not clear what the future revenue prospects of the revised proposal are.
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Democrats are working together to get the spending package passed. It will be done through budgetary reconciliation, which avoids Republican filibuster. Democrats cannot afford to lose one vote in Senate, and they can't do without a few House votes. This means that centrists have more power in the negotiations.
Other proposals Biden made have been reduced from their original levels. Biden's 28% corporate tax pitch is now at 26.5%. A plan to almost double the capital gains rate of the highest earners was also lower than originally proposed.
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Tags: News, IRS, Congress, Taxes, Finance and Banking, Biden Administration
Original Author: Zachary Halaschak
Original Location: Democrats propose to increase the cap on Biden's IRS transaction data
