During testimony before the Senate Banking Committee on Tuesday, Sen. Cynthia Lummis, R-Wyo., sharply criticized Treasury Secretary Janet Yellen for supporting a proposal that would require banks to report transactions of $600 or more to the Internal Revenue Service.
Addressing Yellen directly during the hearing, Lummis said: "My constituents cannot believe that you support a proposal to require banks and credit unions to report customer data to the Internal Revenue Service for transactions of $600 or more."
She added, "There are obvious privacy concerns for all Americans here and this represents a dramatic new regulatory burden for community banks and credit unions in Wyoming and elsewhere. Our banks will have to hire contractors to rat on their customers, implement new computer software, [and] deploy resources better used elsewhere in order to collect data for the government."
The senator went on to say that "bank customers are not subjects of the federal government, banks do not work for the IRS, this is invasive of privacy. Wyoming’s 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."
She then asked Yellen, "Are you aware of how unnecessary this regulatory burden is, do you distrust the American people so much that you need to know when they bought a couch or a cow?"
Yellen responded: "I really disagree with the assessment that you have, and I think you misunderstand the proposal. Banks already report directly to the IRS the interest they pay on accounts when it exceeds $10, and this is not a proposal to provide detailed transaction level data by banks to the IRS. It is a proposal to add two additional pieces of easily ascertained information onto the 1099-INT form that banks already file. Namely, the aggregate inflows into the account during the year and the aggregate outflows."
The secretary added, "I think it’s important to recognize that we have a tax gap that’s estimated at $7 trillion. Over the next decade, that is taxes that are due and are not being paid to the government that deprive us of the resources we need to do critical investments to make America more productive and competitive, and the reason that the tax gap in part exists, partly it’s because the IRS has been deprived of revenue to hire auditors, but the IRS has a wealth of information about individuals if you work at a job where you get labor income … but 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, and that’s where the tax gap is, not low-income people."
She also said that the $600 threshold is there "so that individuals can’t game the system and have multiple accounts."
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