Following political backlash, the Biden administration announced a roll back of its initial proposal to monitor Americans’ bank accounts to increase tax revenue on Tuesday.
Under the new proposal, first reported by The Washington Post, the Internal Revenue Service (IRS) will require banks to provide additional information on accounts that have more than $10,000 in annual withdrawals and deposits. The Democrats’ previous proposal set the reporting threshold at $600, which would have impacted nearly every American bank account. The median bank account held a balance of $5,300 in 2019, according to the Federal Reserve, while the mean bank account had a balance of $42,000.
The new proposal would also exempt wage income from the $10,000 threshold.
Today’s Congressional tax compliance proposal reflects the Administration’s strong belief that we should zero in on those at the top of the income scale who don’t pay the taxes they owe, while protecting American workers who do.
My full statement on the tax compliance proposal: pic.twitter.com/rKOXif3lHg
— Secretary Janet Yellen (@SecYellen) October 19, 2021
“Today’s new proposal reflects the Administration’s strong belief that we should zero in on those at the top of the income scale who don’t pay the taxes they owe, while protecting American workers by setting the bank account threshold at $10,000 and providing an exemption for wage earners like teachers and firefighters,” Treasury Secretary Janet Yellen said.
Democrats have cited stepped-up IRS enforcement as a way of paying for the Build Back Better Act, which could add more than $1 trillion to the federal debt. The IRS misses out on about $166 billion in unpaid taxes per year, according to a Treasury Department fact sheet.
“There is more to be done to ensure that corporations, individuals who are at the highest income are paying more of their fair share, hence it’s in the President’s proposals, his budget, and part of how he’s proposing to pay for his ideas,” White House press secretary Jen Psaki said in June of strengthening IRS enforcement capabilities.
Republicans have expressed concern over the provision, arguing that it would allow the federal government to snoop on the finances of regular Americans. A Senate vote to eliminate the provision entirely failed on party lines. (RELATED: Democrats Reject Measure To Prevent IRS From Collecting Americans’ Sensitive Banking Information)
GOP elected officials still oppose the provision, even with a higher threshold.
“The average American runs over $61,000 through their [bank] account” on a yearly basis, Idaho Sen. Mike Crapo said at a press conference shortly after the announcement.
“Housing, $20,000. Transportation, $9,000. Personal insurance, $7,000,” he continued, citing numbers from the Bureau of Labor Statistics.