Treasury Secretary Janet Yellen on Tuesday reiterated her previous support for a proposal from the Biden administration that would mandate banks to report to the IRS any customer transaction of $600 or more while claiming the rule is really aimed at high-income earners and noting that “there’s a lot of tax fraud and cheating that’s going on.”
According to White House estimates, the new rule would raise in excess of $460 billion over the next 10 years as President Biden looks for ways to help pay for a massive $3.5 trillion social spending package he and his administration have dubbed a “human infrastructure” bill.
The money would be collected via increased IRS enforcement, officials have said. Yellen and others within the administration are attempting to convince lawmakers and the public that the rule is mostly aimed at wealthy individuals, but the rule would still apply to all banking customers regardless of income level.
Tuesday evening, CBS News aired a clip of anchor Norah O’Donnell asking Yellen about the plan.
“Does this mean that the government is trying to peek into our pocketbooks if you want to look at $600 transactions?” O’Donnell inquired.
“Absolutely not,” Yellen claimed. “I think this proposal has been seriously mischaracterized. The proposal involves no reporting of individual transactions of any individual.”
From there, Yellen explained that there are “individuals” the government’s tax collection agency does not know enough about, without elaborating.
“Look, the big picture is that we have a tax gap that over the next decade is estimated at $7 trillion,” the Treasury chief continued. “Namely, a shortfall in the amount that the IRS is collecting due to a failure of individuals to report the income that they have earned.”
In response, O’Donnell said: “But that’s among billionaires. Is that among people who are transferring $600?”
“No, it tends to be among high-income individuals whose income is opaque and the IRS doesn’t receive information about it,” Yellen replied.
“If you earn a paycheck, you get a W-2, the IRS knows about it. But high-income individuals with opaque sources of income that are not reported to the IRS, there’s a lot of tax fraud and cheating that’s going on, and all that’s involved in this proposal is a few aggregate numbers about bank accounts – the amount that was received in the course of the year, the amount that went out in the course of a year,” she continued, without explaining why the agency hasn’t moved to step up enforcement already if officials are aware of the tax cheats.
“If someone reports an income of $10,000, and they had $3 million go out of their checking account, that tells the IRS that’s an individual that you might audit,” she said.
The Treasury secretary, however, has not provided details as to whom the administration is considering “wealthy,” and she has not said the IRS won’t go after regular wage-earners, Fox Business reported Tuesday.
Also, the network reported, O’Donnell was not the first to ask Yellen about why the transfer reporting limit of $600 is so low if the government is really targeting “billionaires.”
During Senate testimony last month, Yellen was pressed by Sen. Cynthia Lummis (R-Wyoming) over the proposed rule, saying the “$600 threshold is not usually where you’re going to find the massive amount of tax revenue you think Americans are cheating you out of.”
“That’s correct, but it’s important to have comprehensive information so that individuals can’t game the system and have multiple accounts,” she said.
Meanwhile, despite Americans’ objections to the invasive rule that banks have already spoken out against as well, House Speaker Nancy Pelosi (D-Calif.) said she will include the proposal in the $3.5 trillion reconciliation bill.
“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,” she told a reporter. “I think $600 – that’s a negotiation that will go on as to what the amount is. But yes.”
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