In Brief: The $10,000 IRS Tax Dragnet
Democrats are using enforcement as an excuse to generate more tax revenue.
Does anyone want more IRS involvement in their lives? Well, Democrats want more IRS involvement in your life. Their plan to monitor the transactions of millions of Americans under the guise of ferreting out rampant tax fraud is hugely problematic, even as revised to appear less intrusive. The Wall Street Journal editorial board explains:
Democrats walked into a political ditch with their plan to let the Internal Revenue Service snoop on American banks accounts, and so far they’re doing a lousy job of scrambling to get out.
[Last] week Senate Democrats backed by the Biden Treasury released a revised proposal that raises the threshold for financial institutions to report to the IRS on individual accounts to $10,000 from the previously mooted $600. The proposal also tries to dodge the charge of snooping on Everyman by exempting wage income from “certain payroll companies” and Social Security checks.
The details are murky, but most Americans could still get ensnared in this dragnet unless they pay bills and buy goods in cash. Democrats say banks will only have to report total annual inflows and outflows, not discrete transactions. But nearly all Americans spend more than $10,000 a year.
The real political goal here is to create a mechanism for triggering audits — probably through an algorithm — so the IRS can rifle through all of a taxpayer’s business and other financial records.
For a party that’s supposed to be about protecting the little guy, this stinks to high heaven.
Treasury also says audit rates won’t increase for Americans with less than $400,000 in income. That’s disingenuous. Democrats know the IRS audit trigger would by necessity have to sweep in tens of millions of Americans who report less than $400,000 in income to catch the many tax cheats they claim are under-reporting income.
“The Administration has been clear that audit rates will not rise relative to recent years for those with under $400,000 in actual income” (our emphasis), wrote Treasury deputy assistant secretary Natasha Sarin last month. But there’s no way for the IRS to know a taxpayer’s actual income unless it completes an audit. The whole purpose of this exercise is to pursue people who say they earn less than $400,000 but might be earning more.
Treasury’s main targets are small businesses whose income is less visible than wages, dividends, capital gains and interest, which already must be reported by third parties.
The bottom line is, as always, wringing more revenue for the Treasury to supposedly pay for all of Democrats’ Big Government schemes.
The IRS already has enough data to go after the wealthy and genuine tax cheats. It wants to look at everyone’s bank account so its agents have another excuse to audit and squeeze more money from non-wealthy Americans.
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