Don’t let impractical, risky budget plan sneak back in
Under bipartisan pressure, Democrats in the U.S. House of Representatives removed a provision from their budget resolution that would have put the personal information of hundreds of millions of Americans at risk.
For now, that’s a welcome reprieve. However, bad legislation in Washington has more lives than a cat, so the public needs to be vigilant in ensuring this particularly bad policy proposal doesn’t come back.
The Biden administration has been lobbying Congress to include a new, colossal IRS reporting measure as part of the budget bill that would have required banks and other financial institutions to report customer financial data to the government for all accounts with transactions or holdings in excess of $600 annually. However, the White House walked back that original proposal, raising the threshold to $10,000 per year. For now, that, too, has been removed from the House budget resolution.
That may sound like an improvement, but it still would have captured virtually all bank accounts at every financial institution in America. If you have a job, receive a Social Security check or any other regular income, or pay monthly bills, your data would likely have been reported. What helped spur its removal was a letter to House leaders signed by 21 Democrats identifying “the significant burden and potential unintended consequences that could result from the new reporting regime.”
The administration touted the requirement as a way to “pay” for the budget bill. A memorandum from Mark Mazur, the Treasury Department’s acting assistant secretary for tax policy, estimated the original measure would increase tax revenue $200 billion to $250 billion over a 10-year period. But that is based on the rosy assumption that the IRS would be able to identify and tax underreported income if it can see how much people pay for groceries and utilities each month.
While there’s no reason to believe the proposal would close the so-called tax gap and pay for the budget bill, it would have some very real, quantifiable costs. A companion measure still in the budget bill adds $80 billion for the IRS to hire staff to pore over data and identify potential tax cheats. Presumably, much of that data would have come from the new reporting requirement. But if the $10,000 reporting requirement is gone for good, why is there still a need for the full $80 billion for the IRS?
There would also be a cost to banks, which would be forced to gather and report data to the IRS on virtually all their customers. For big national banks with large compliance departments, the additional reporting requirements might not overwhelm them. But for community banks already under pressure from regulatory mandates, it could mean the difference between continuing to serve their customers and closing their doors.
Researchers at Mossavar-rahmani Center for Business and Government at the Harvard Kennedy School found that in the four years following the last major increase in banking regulations, in 2010, community banks’ share of U.S. banking assets shrank by more than 12 percent, while the top five bank-holding companies continued to control nearly the same share of U.S. banking assets.
Finally, gathering, storing and sharing this immense amount of financial data would pose a risk to the American people and would be extraordinarily expensive.
We can’t let Congress sneak this intrusive law back into the financial lives of ordinary Americans.