Treasury Secretary Janet Yellen expressed her support for the Internal Revenue Services’ plan to track the gross inflow and outflow of Americans’ bank accounts.
In a proposal that many lawmakers are calling a violation of the Fourth Amendment, the Democrats’ pending $3.5 trillion social spending bill would compel banks to report gross inflows and outflows to the IRS for transactions of $600 or more.
Yellen lauded the plan during a recent interview with CNBC’s “Squawk Box.”
“Right now, on every bank account that earns more than $10 a year in interest, the banks report the interest or into the IRS,” she explained. “That’s part of the information base that includes W2s and reports on dividends and other income that taxpayers have earned so collection of information is routine.”
Yellen, however, noted that there is a projected tax gap of $7 trillion over the next decade — a reality that keeps the IRS from collecting “what we believe are owed.”
“It comes from places where the information on income is opaque and can be hidden,” she said. “And a simple way for the IRS to get a sense of where that might be is just a few pieces of information about individuals’ bank accounts, nothing at the transaction level that would violate privacy, simply aggregate inflows into the account over the year and aggregate outflows. That would really help the IRS target their auditing resources.”
“So, it is not reporting of individual transactions or anything of the like, and it would be a simple thing for banks and other payment providers to provide along with the other information they’re already providing.”
Several Republican governors and state treasurers have announced that they will resist the Democrats’ plan.
“I will stand up to this government overreach and protect the privacy of those account holders,” said Missouri state treasurer Scott Fitzpatrick. “Turning over their transaction data to the federal government is illegal under Missouri law and a gross violation of Missourians’ expectation of privacy when it comes to their personal financial records. I will not turn this information over to the IRS voluntarily and will fight in court to block any attempt by the federal government to compel my office to comply with this mandate.”
“It would be absolutely absurd for me to turn over their private account data regarding money they’re saving for their loved ones’ future to the IRS, and I do not intend to do so,” added Arkansas state treasurer Dennis Milligan. “I would do all I could in my role to not comply with this proposal.”
This article has been revised for clarity.