“This is going to be a massive invasion of financial privacy,” Merski said. “The last thing we need is everyone’s financial account information being turned over to the IRS in a massive dragnet.”
Treasury Secretary Janet Yellen has said that the reporting requirements would reveal “opaque income streams that disproportionately accrue to the top” and that the measure would help catch wealthy tax dodgers, according to a letter she wrote in September to House Ways and Means Chairman Richard Neal (D-Mass.).
“These information reporting provisions will make use of information financial institutions already know to help shed light on taxpayers who evade their tax obligations,” Yellen wrote.
Her letter came attached with a memo from Mark Mazur, the Treasury Department’s acting assistant secretary for tax policy, in which he estimated that a narrower reporting regime—even if it ends up above the $600 threshold—would yield additional tax revenues of $200 billion to $250 billion over the 10-year budget window.
Besides the proposal opening up privacy concerns, Merski said compliance costs for banks would run into “billions of dollars” for new technology, computer equipment, software programming, and new staff.
“It’s our job as a national banking trade association to sound the alarm bells not only for the banking sector, but really alerting people of what’s happening with their financial data and their financial privacy,” Merski said.
Yellen, in an interview on CNBC’s “Squawk Box” last week, dismissed privacy concerns, calling the collection of such information “routine.”
“It’s just a few pieces of information about individual bank accounts, nothing at the transaction level that would violate privacy,” Yellen said.
In the letter addressed to House Speaker Nancy Pelosi (D-Calif.) and House Minority Leader Kevin McCarthy (R-Calif.), the groups said the proposal would create “reputational challenges” for large financial services firms, increase the cost of tax preparations for Americans and small businesses, and create serious “financial privacy concerns.”
“We urge members to oppose any efforts to advance this ill-advised new reporting regime,” the groups said in the letter.
“While the stated goal of this vast data collection is to uncover tax dodging by the wealthy, this proposal is not remotely targeted to that purpose or that population,” they said.
Also expressing opposition were 23 state treasurers and auditors, who, in a September letter, called it “one of the largest infringements of data privacy in our nation’s history.”
The proposed new reporting requirement is part of the $3.5 trillion package that Democrats are seeking to advance via reconciliation.