Play Live Radio
Next Up:
0:00 0:00
Available On Air Stations

Biden's proposal to give IRS more info on bank accounts faces criticism


President Biden is proposing higher taxes on corporations and the wealthy to help pay for his ambitious $3.5 trillion Build Back Better plan. He also wants the government to do a better job of collecting taxes already owed. As part of that effort, the president wants to give the IRS more information about money moving in and out of people's bank accounts, an idea that is drawing protests from Republicans in Congress. NPR's Scott Horsley reports.

SCOTT HORSLEY, BYLINE: If you draw a regular paycheck in this country, it's pretty hard to cheat on your taxes. The IRS knows to penny how much you make because it's right there on your W-2. The IRS has much less information, though, about people who own businesses or rental properties or have other sources of income. Treasury Secretary Janet Yellen says that makes it easier for those people to avoid paying taxes and get away with it.


JANET YELLEN: There are a class of partnerships, businesses, high-income individuals who have opaque sources of income that the IRS doesn't have direct information about. That's where the tax gap is.

HORSLEY: The administration hopes to narrow that gap by hiring more auditors to look for tax cheats. And to focus that search, it wants to require banks and other financial institutions to report how much money is flowing in and out of accounts worth at least $600. Yellen got a lot of pushback this week from Republican lawmakers. Wyoming Senator Cynthia Lummis suggested incorrectly that the government wants to monitor every financial transaction.


CYNTHIA LUMMIS: Do you distrust the American people so much that you need to know when they bought a couch or a cow?

HORSLEY: Yellen stressed the government is not asking for details about individual bank withdrawals or deposits - just the annual totals.


YELLEN: 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 that taxpayers comply with the tax code.

HORSLEY: Lummis was not swayed. She suggests people might boycott legitimate financial institutions just to avoid the additional scrutiny.


LUMMIS: People literally will find alternatives to traditional banks just to thwart IRS access to their personal information not because they're trying to hide anything, but because they're not willing to share everything.

HORSLEY: Critics also worry about whether the IRS can keep a secret. This summer, the nonprofit news outlet ProPublica published a series of stories about wealthy people who legally avoid paying taxes based on what it called a vast trove of IRS data.

Tennessee Senator Bill Hagerty was less concerned that billionaires Jeff Bezos or Elon Musk paid zero income tax in some years than with the fact that information leaked out.


BILL HAGERTY: That's the concern that my constituents have raised with me and that the American public has in the ability to keep this information confidential.

HORSLEY: Yellen insists protecting taxpayer privacy is a top priority, but the leaked information does pose a political challenge for those trying to give the IRS more tools. The American Bankers Association, which is fighting the reporting requirement, says it would be ill-advised to give the government more sensitive financial data. Still, Yellen's not giving up in her efforts to help close the multitrillion-dollar tax gap.


YELLEN: That is taxes that are due and are not being paid to the government that deprive us of the resources to make America more productive and competitive.

HORSLEY: As lawmakers wrestle with how much to spend on the president's agenda and whose taxes to raise to help pay for it, they'll also be negotiating over how far to go in collecting taxes that are already owed.

Scott Horsley, NPR News, Washington.

(SOUNDBITE OF MUSIC) Transcript provided by NPR, Copyright NPR.

Scott Horsley is NPR's Chief Economics Correspondent. He reports on ups and downs in the national economy as well as fault lines between booming and busting communities.