The Treasury Secretary has defended plans to monitor bank transactions of more than $600, insisting that the scheme was designed to end ‘tax fraud’ by billionaires, and would not mean Americans’ accounts were recorded.
Janet Yellen last month caused alarm with her scheme to note any transaction above $600.
Amid the backlash in Congress, some proposed raising the threshold from $600 to $10,000.
But Yellen insisted on Tuesday that there was a lot of unwarranted panic.
‘Does this mean that the government is trying to peek into our pocket books?’ CBS’ Norah O’Donnell asked Yellen in an interview. ‘You want to look at $600 transactions?’
Yellen replied: ‘Absolutely not.
‘I think this proposal has been seriously mischaracterized. The proposal involves no reporting of individual transactions of any individual.’
“There’s a lot of tax fraud and cheating that’s going on.” Treasury @SecYellen tells @NorahODonnell the proposed $600 IRS reporting requirement for banks is “absolutely not” a way for the government to peek into American’s pocketbooks but to hold billionaires accountable. pic.twitter.com/M3VKOhdtSu
— CBS Evening News (@CBSEveningNews) October 12, 2021
Yellen insisted that the move was designed to reduce under-reporting of income by wealthy individuals, in a bid to avoid tax.
‘The big picture is, look, we have a tax gap that over the next decade is estimated at $7 trillion,’ she said.
‘Namely, a shortfall in the amount the IRS is collecting due to a failure of individuals to report the income that they have earned.’
The White House estimates that the plan would raise more than $460 billion over the next decade for the federal government.
Yellen told O’Donnell the problem ‘tends to be among high-income individuals whose income is opaque and the IRS doesn’t receive information about it.’
She said that most people would not be flagged under the new scheme.
‘If you earn a paycheck, you get a W-2, the IRS knows about it,’ she said.
‘But high-income individuals with opaque sources of income that are not reported to the IRS, there’s a lot of tax fraud and cheating that’s going on, and all that’s involved in this proposal is a few aggregate numbers about bank accounts – the amount that was received in the course of the year, the amount that went out in the course of a year.’
She added: ‘If someone reports an income of $10,000, and they had $3 million go out of their checking account, that tells the IRS that’s an individual that you might audit.’
Yellen has faced significant pushback against the proposal.
Senator Cynthia Lummis, a Republican representing Wyoming, pointed out during a September 28 Senate hearing that the ‘$600 threshold is not usually where you’re going to find the massive amount of tax revenue you think Americans are cheating you out of.’
Yellen replied: ‘That’s correct, but it’s important to have comprehensive information so that individuals can’t game the system and have multiple accounts.’
Banks and their trade groups are lobbying against the proposal, saying it would give the IRS excessive control over an individual’s finances.
Banks already submit tax forms to the IRS about interest earned by their customers’ accounts, but the new proposals would also provide information about account balances.