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Tracking bank account information could help curb tax evasion, but there's pushback


Drivers are less likely to speed when they know there's a police officer around the corner with a radar gun. Same goes for taxpayers. They are less likely to cheat when they think they might get caught. The Biden administration and congressional Democrats want to give the IRS a better financial radar gun, banking information to help spot tax cheats. Republicans and the banking industry are fighting the idea, as NPR's Scott Horsley reports.

SCOTT HORSLEY, BYLINE: The American Bankers Association held its annual convention in Tampa this week, and President Rob Nicoll says there was a lot of nervous chatter about the Treasury Department's proposal to make banks share account information with the IRS.

ROB NICHOLS: As I was walking through the convention hall, people were pulling me left and right to share stories of customers who had heard about it and were very, very concerned about it.

HORSLEY: Republican Senator Chuck Grassley says he's hearing the same concerns.


CHUCK GRASSLEY: I hear from Iowans all the time that they don't want the peering eyes of the IRS snooping on them.

HORSLEY: No one is suggesting that banks give the IRS detailed information about every transaction, just an annual total of deposits and withdrawals. Still, no one particularly likes the idea of having the government look over their shoulder, and the complaints about this new proposal are as old as the income tax itself.

JOSEPH THORNDIKE: It's just a reminder that tax issues never die, right? They just keep coming around and around and around.

HORSLEY: Tax Notes historian Joseph Thorndike says ever since Congress created the income tax early in the last century, there have been fights over the information needed to collect it. Over time, though, people get used to having that information shared. Workers have had their wages reported to the government for more than a hundred years. And it's been almost 40 years since Senator Grassley co-sponsored a requirement that brokerage firms report the proceeds of stock trades. Other kinds of income, like business profits and rent, are still a blind spot for the government, though. It's as if people who draw a paycheck are constantly having their speed monitored, while landlords and law partners are miles from the nearest radar gun.

THORNDIKE: There's virtually zero cheating that goes on in terms of nonreporting of wage income. There's a fair amount of cheating that goes on in nonreporting of other kinds of income.

HORSLEY: The Treasury Department estimates that cheating costs the government some $600 billion a year. Democrats hope to collect some of that to help finance their agenda. And to help the tax collector know where to look, the Biden administration wants banks to report the total amount of money flowing in and out of accounts each year. If someone's bank account grows by a million dollars, but they report just $50,000 of income, the IRS might have a few questions. Banks argue the reporting would be too costly and make extra work for their customers at tax time. But a quick glance at a bank statement shows banks already have this information. And Natasha Sarin of the Treasury Department says there's no extra paperwork for customers.

NATASHA SARIN: From the taxpayer's perspective, literally nothing is required.

HORSLEY: Still, Rob Nichols and the Bankers Association are fighting hard against sharing account information with the government.

NICHOLS: We're very concerned that A, they can't use the data efficiently, effectively. It's very unclear if they can keep it safe. And it's going after hardworking, average Americans who pay their taxes.

HORSLEY: Faced with that opposition, congressional Democrats did scale back the proposal this week, so banks would only have to report on accounts with more than $10,000 in total deposits or withdrawals each year. What's more, wages and government benefits would not count towards that total. Historian Thorndyke still thinks the requirement will be a tough sell politically, but he understands why Democrats are pushing for it.

THORNDIKE: There is an awful lot of income that goes unreported, and they need to find ways to identify it because that unreported income really does cost the rest of us money.

HORSLEY: Democrats argue the well-heeled opposition only highlights how much money is at stake. Scott Horsley, NPR News, Washington. 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.