To help pay for Democratic spending priorities and cut down on unpaid taxes, the Biden administration is proposing to empower the Internal Revenue Service to collect information from banks about accounts "with total annual deposits or withdrawals worth more than $600," according to The New York Times. The proposal has already begun to inspire criticism among banks and their customers — and for good reason.
Banks already report information to the IRS about cash deposits of $10,000 and higher — and that sometimes results in hassles (audits, investigations, and even civil asset forfeiture) for individuals and small business owners. But what the Biden administration is proposing now is far more onerous. It would drop the threshold for scrutiny of deposits all the way down to $600 and include all withdrawals above that level as well.
It's hard to imagine the IRS effectively processing the tsunami of data this rule would require banks to send their way. But it's even harder to believe banking customers will be content to go along. As the Times reports, a backlash has already begun, and it's bound to get worse. This is a country with very low trust in government — so low that persuading people to take advantage of life-saving vaccines promoted by both the Centers for Disease Control and Prevention and the Food and Drug Administration has been a challenge. Now the IRS will be closely monitoring every bank account in the country with a modest level of annual activity to determine if an audit or investigation is in order?
With this plan, the administration is running the significant risk of generating a whole new groundswell of opposition to government. Biden should back off — all the way back, at least, to the $10,000 level. An unnamed official at the Department of Treasury quoted in the Times indicates that this is being considered, along with the creation of an exemption for people paid through payroll processing companies, so Americans who withdraw cash from accounts containing income from paycheck deposits can avoid scrutiny.
That seems perfectly reasonable, even if it results in the continued loss of a certain amount of revenue every year. Such losses may well be an unavoidable cost of living in a free society.