Secretary of the Treasury Janet Yellen defended Democrats’ plan to allow the Internal Revenue Service (IRS) to retrieve Americans’ personal information from their banks, a plan that Republicans have decried since news of it became public.
Since the introduction of their reconciliation bill, Democrats have insisted that the bill will not add to the debt or the deficit, claiming that all new spending in the bill will be paid for.
Along with significantly increasing marginal tax rates to pay for the it, Democrats wrote into the bill a section to allow the IRS to gather Americans’ private information from banks, including on activity totaling more than $600.
On CBS, Yellen defended the plan, saying that it “has been seriously mischaracterized.”
According to Yellen, some opponents of the measure have trumpeted the revenue scheme as granting the IRS information on individual transactions totaling $600 or more. This is not the case, Yellen said.
Rather, she indicated that the plan has a much larger scope. If the measure is passed into law, the IRS would be able to get all information from bank accounts with more than $600 total activity per year, rather than simply information on individual transactions.
Despite this extremely low threshold, Yellen said the measure is designed to target wealthy Americans who hide income from the IRS. Because of the measure, Yellen said that the IRS will be able to collect more taxes from the wealthy and close the “tax gap.”
“We have a tax gap that over the next decade is estimated at $7 trillion, namely a shortfall in the amount that IRS is collecting due to a failure of individuals to report the income that they have earned,” Yellen contended.
House Minority Leader Kevin McCarthy (R-Calif.) argued that the measure is meant to target people whose wages come from tips, which are often given in cash and go unreported to the IRS. Yellen declared that this is not the case.
“It tends to be among high-income individuals whose income is opaque,” Yellen said. “All that’s involved in this proposal is a few aggregate numbers about bank accounts.”
Yellen’s support for the measure comes as no surprise, as she has also previously defended it.
During a Sept. 30 House oversight hearing, Rep. David Kustoff (R-Tenn.) questioned Yellen over the plan, arguing that it constitutes an invasion of privacy.
Yellen defended it, saying, “I don’t believe it’s an invasion of privacy and, look, the IRS gets a great deal of information that it needs in order to make sure the taxpayers comply with the tax code.”
Republicans Fume Over Planned Measure
Republicans quickly pushed back against Yellen’s efforts to defend the proposal.
Senate Minority Leader Mitch McConnell (R-Ky.) said that Democrats “want to finance their spending spree by effectively treating every ordinary American as if they were under IRS audit.”
“I must have forgotten when the president campaigned on giving everybody their own audit,” McConnell quipped.
Sen. Tommy Tuberville (R-Ala.) decried the plan in a press release as “[violating] the liberty of every freedom-loving American who values their financial privacy.”
Sen. Cynthia Lummis (R-Wyo.) commented that, “No amount of explaining will change the fact that this $600 reporting threshold is completely unacceptable, a massive government overreach, and gives the IRS data they can’t manage properly.”
“Secretary Yellen is essentially implying the American people are regularly committing tax fraud,” Lummis continued, warning that “this rule would facilitate unwarranted snooping by the IRS.”
McCarthy added, “This surveillance program crosses a line, it’s un-American,” and promised that “Republicans will do everything possible to stop it before it ever gets off the ground.”
Despite heavy criticism, House Speaker Nancy Pelosi (D-Calif.) said at a press conference that the proposal would remain in the bill.
“If people are breaking the law and not paying their taxes, one way to track them is through the banking measure,” Pelosi argued.
Key moderate Democrats in the Senate, whose support will be necessary for any reconciliation bill to pass in the thinly-held upper chamber, have not yet commented on the plan.