Biden wants to give the IRS access to all transactions in the accounts of Americans: he is accused of violating the Constitution - ForumDaily
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Biden wants to give the IRS access to all transactions in the accounts of Americans: he is accused of violating the Constitution

One of the key elements of US President Joe Biden's intentions to fund the $ 3,5 trillion budget plan is to track gross inflows and outflows from individual bank accounts. Writes about it Daily Mail.

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The Biden administration says such surveillance will target inspections and prevent tax evasion, but some are concerned that it may stumble upon the Fourth Amendment (bans on unreasonable searches and seizures).

The proposal will require banks to report gross inflows and outflows to the IRS, including transactions from Venmo, PayPal, crypto exchanges, and more, in order to combat tax evasion.

The IRS will know how much money is in a person's bank account in a particular year, whether they received income in that account, and exactly how much money was deposited and withdrawn.

Biden, Treasury Chief Janet Yellen, IRS Chief Charles Rettig, and a number of Senate Democrats, notably Elizabeth Warren, are pushing for deep diving into individual financial transactions as part of a $ 80 billion tax compliance plan.

Patrick Hedger, vice president of policy for the Taxpayer Protection Alliance, warned that such a proposal could violate the Fourth Amendment, which protects citizens from being searched and confiscated for no apparent reason.

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“The IRS is first and foremost a law enforcement agency, and the Fourth Amendment protects against unreasonable searches. In my opinion, it would face significant Fourth Amendment hurdles,” Hedger said.

Other parts of the plan include setting a global minimum corporate tax rate of 15% and a system that prevents multinational companies from registering profits in the lowest tax jurisdictions.

A May Treasury report claimed the tax gap was nearly $ 600 billion in 2019 and will grow to $ 700 trillion in the next decade if left unchecked.

The IRS estimates that payroll tax compliance is 99%, while compliance on “less visible” income sources is only 45%.

The Treasury said the plan would have little impact on "already abiding" taxpayers, but would help the IRS better target its scrutiny.

“For recalcitrant taxpayers, this regime will encourage voluntary tax compliance as tax evaders realize that the risk of detection has increased markedly,” the Treasury Department said.

But Hedger said such a policy would disproportionately harm the poor: "You are going to push more people into small-scale cash transactions, you are going to push more banks to offshore."

“It’s a regressive tax,” Hedger added. “You're going to punish low-income people who have historically been the target of aggressive IRS audits in this country because they don't have CPAs and lawyers to fight back.”

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This pursuit of unreported revenues will generate $ 460 billion over the next decade, according to the Office of Tax Analysis.

Banks are largely opposed to this proposal, which they believe imposes onerous reporting requirements for institutions.

In a letter to the Senate Finance Subcommittee, the American Bankers Association, the Banking Policy Institute, the Consumer Bankers Association and others argued that "the new reporting requirements for financial institutions will entail costs and complexity that will not be met."

Trade groups called the reporting requirements “subjective”.

“We believe that additional reporting requirements based on subjective criteria have privacy and fairness implications and may place financial institutions at a disadvantage to account holders,” the statement said.

Instead, they proposed increasing funding for audits.

IRS chief Rettig supports this proposal, as well as the increased IRS funding that will be associated with it.

“Every measure important to effective tax administration has suffered greatly,” Rettig wrote in a letter to Warren.

Stephen Rosenthal, senior fellow at the Urban Brookings Institute for Tax Policy, is convinced this proposal is not worth the effort.

“In practice, the IRS's task would be complex and would effectively bury the agency in a sea of ​​unproductive information,” he said. — Most people get all their income from wages and investment income, which have already been reported to the IRS. And larger enterprises are often audited by audit firms. While there are many ways these businesses can reduce their taxes, missing out on revenue is rarely one of them. Why involve these people and businesses in a new program?”

Former Treasury heads Tim Geithner, Jacob Lew, Henry Paulson Jr., Robert Rubin and Lawrence Summers also defended Biden's proposal.

“Relying on financial institutions to share some basic information about account holders is a reasonable way forward,” they wrote. “The more information there is for the IRS, the higher the level of voluntary compliance.”

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