A new bill by U.S. Sen. Tommy Tuberville would prohibit the Internal Revenue Service from requiring banks and credit unions to report customers’ transactions or account balances beyond current statutory requirements.
Currently, the Bank Secrecy Act requires financial institutions to report transactions of $10,000 or more. A new proposal floated as part of President Joe Biden’s “Build Back Better” taxing and spending overhaul would lower that threshold to $600.
In an interview with Alabama Daily News Monday, Tuberville called the proposal “an outrageous intrusion of the government into people’s lives.”
“We want everybody to pay their fair share. I’ve got no problem with that. But I don’t want the federal government, ‘big brother,’ to be harassing private citizens. I don’t want them harassing banks,” Tuberville said before introducing his bill, dubbed the Protecting Financial Privacy Act.
However, given his status in the Senate minority and how that makes passing bills difficult, Tuberville’s true intent is to draw attention to the new tax proposal in hopes that public pressure will persuade Democrats to cast it aside.
“Most folks have no idea this is part of the Biden plan. So what we’re trying to do is get the information out to the American taxpayer, not just Republicans, but Democrats, too. This should be a bipartisan piece of legislation. I tell you, the Democrats don’t want the IRS any bigger than we do.”
Democrats negotiating the issue in Congress last week agreed to scale back the Biden IRS plan, according to Bloomberg News. House Ways and Means Committee Chairman Richard Neal told the news outlet that he wants to raise the $600 reporting threshold.
According to the Treasury Department, which oversees the IRS, the new reporting requirement is part of a larger proposal to close the “tax gap” by collecting taxes that people and businesses owe but do not pay. Treasury estimates that total to be $600 billion annually.
According to Deputy Assistant Treasury Secretary for Economic Policy Natasha Sarin, the new requirements for banks pertain to information they already possess and would not impose a burden on taxpayers, “so the IRS can deploy these additional resources to audit more sophisticated tax evaders.”
In a Sept. 7 report, Sarin estimated the new reporting requirements would generate as much as $480 billion in tax revenue over a decade.
“For the IRS to appropriately enforce the tax laws against high earners and large corporations, it needs funding to hire and train revenue agents who can decipher their thousands of pages of sophisticated tax filings. It also needs access to information about opaque income streams — like proprietorship and partnership income — that accrue disproportionately to high-earners,” Sarin wrote.
Tuberville said the new IRS requirements will most negatively impact rural Americans and minorities by discouraging them from making bank transactions for fear they will be tracked by the government. He is also concerned about the impact of community banks and credit unions and the new costs such a mandate would impose.
“That’s what I’m concerned about: rural Alabama,” Tuberville said. “You know, it’s going to be a problem with the rural banks because they can’t afford to staff the people to do this.”
Chris Latta, President of F&M Bank in Piedmont agreed. He said he and others in small financial institutions will struggle with compliance costs, while bigger banks could more likely absorb them.
“We’re a highly regulated industry, so we’re going to hire auditors to make sure that our systems are in place and our checks are in place so it’s all being done correctly,” Latta told Alabama Daily News. “So you can just imagine the expense it’s going to take to put a system in a process and procedures in place for something of that magnitude to make sure that is being done correctly.”
Latta is also concerned with customers losing confidence in banking for lack of privacy.
“I think it would push people out of the banking system, to be honest with you, just because they don’t want the government to know all those transactions that are going on inside their accounts.”