A group of nearly 100 banks and financial industry organizations are writing to President Biden urging him to ditch a proposal in his spending plan that would compel banks to report data on accounts to the Internal Revenue Service — citing a “reasonable right to privacy.”
Democrats set the threshold for accounts valued at $10,000 — raising it up from $600 following initial backlash — and included exemptions for certain income from W2 wages or Social Security amid a chorus of criticism from Republicans and financial institutions.
The letter from 99 banking and financial groups called on the White House to find another means to close the tax gap — the difference between what people owe and what they pay.
“Our member companies understand that this proposal is a good-faith attempt by your administration to ensure all taxpayers meet their tax obligations, and we strongly support that goal,” they wrote in the letter dated Monday.
“However, our members, and the American people, believe that they have a reasonable right to privacy and this overly broad proposal to report gross annual inflows and outflows from nearly every account is disconnected from its purported narrow purpose of focusing government scrutiny on Americans with actual income above $400,000,” it continued.
“We respectfully request that this proposal be withdrawn from further consideration, and the administration consider more targeted measures to reduce the tax gap,” the groups wrote.
The collection of financial institutions — including the American Bankers Association, Mortgage Bankers Association, National Grocers Association, and US Chamber of Commerce — credited the Biden administration for acknowledging that the proposal “was far too expansive” and raising the threshold to $10,000, but said it was only a “cosmetic change.”
“As we have stated in several previous letters, these changes fail to address the reality that any program based on gross annual inflows and outflows will impact Americans from all income levels. Even with the proposed exclusions of certain types of income, a large number of common and totally innocent transactions by individuals and small businesses will be captured by this new regime,” the letter said.
The Biden White House has reiterated that the proposal would not identify individual transactions and would only focus on gross annual inflows and outflows of the accounts.
The administration has said the reporting function would make it more difficult for wealthy Americans to hide their taxable income and could raise hundreds of billions of dollars by catching tax cheats.
But the banking groups worry that their customers’ privacy could be violated.
“The privacy concerns for Americans who pay their taxes and would be swept into this account reporting program are real and should not be taken lightly. Financial institutions are already facing difficult customer questions about this proposal,” the letter said.
“According to the Department of Treasury, it only plans to use the data to increase audits for those who make over $400,000 a year. The likely question of any American taxpayer making less than that is: Why does the IRS need my account information if they aren’t going to use it?,” the groups said.