IRS Account Watch Plan Brings Consumers Into Reconciliation Debate

While Sen. Joe Manchin (DW.Va.) has raised concerns on the $3.5 trillion price tag of fiscal reconciliation legislation that Congress is set to pass resume this weekAmericans are increasingly speaking out against a provision that would require banks to report customer account information to the Internal Revenue Service.

Proposal – first disposed by the Treasury Department and which is expected to be presented during this week’s committee markups – is designed to bridging the “tax gap” between what American taxpayers pay and what they owe to help fund the spending bill. But the blanket, untargeted nature of the proposal is drawing broad opposition not only from bankers who would be required to report the information to the IRS, but also from the consumers they serve.

A poll commissioned by my organization – the Independent Community Bankers of America – and conducted by Morning Consult found that two-thirds of voters (67%) object to the IRS collecting their bank account information. More than half (53%) of voters strongly oppose the plan, while only 22% support it.

Additionally, more than three in five voters (64%) do not trust the IRS to monitor their deposit and withdrawal information. And more than half (54%) don’t trust the agency to protect their financial data from data breaches. This last data point is not unexpected given the recent high profile tax return leak the IRS is investigating as well as consumer anxiety about “Notice of math errors” triggered by stimulus payments.

The survey response indicates that consumers view the IRS’ monitoring of the transaction history of their personal financial accounts as a privacy invasion that does not concern the government. Consumers are also expressing concerns that the plan could potentially hurt small businesses by increasing their tax liability.

Additionally, the intrusive account reporting to the IRS could undermine Washington’s ongoing policy initiative to reduce the unbanked population. Distrust of government institutions and agencies inhibit banking relationships – particularly among marginalized communities and those who have fled authoritarian regimes – indiscriminate reporting of financial accounts is likely to increase the difficulty of reaching these people and these families.

Instead of gathering piles of new taxpayer information, consumers say they support closing the tax gap by making better use of the data the IRS already has. Likewise, a recent joint letter to Congressional Leaders of the International Franchise Association, the National Federation of Independent Business, the United States Chamber of Commerce and other advocacy groups identifies less intrusive ways to close the tax gap.

As the IRS proposal takes shape in Washington, Community Bankers will continue to educate their clients about its potential impact while continuing to contribute to economic recovery in their local communities.

Rebeca Romero Rainey is President and CEO of the Independent Community Bankers of America.


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