With the IRS forecasting that $7 trillion in federal taxes will go unpaid over the next 10 years, the idea of figuring out how to collect that money should be something that spurs bipartisanship on Capitol Hill.
Instead, the two parties remain bitterly at odds over how to get Americans to pay what they owe, and for a second time this year, Republicans are trying to derail efforts to help the IRS find tax cheats.
“Democrats want to weaponize the IRS to probe into American citizens’ lives for political gain,” said U.S. Rep. Drew Ferguson, R-West Point, leading a GOP charge against the plan.
Even Gov. Brian Kemp weighed in on the matter this week, assailing what he called ‘the Biden administration’s ridiculous IRS power grab.’
Earlier this year, Republicans balked at using stronger tax enforcement to help fund a bipartisan infrastructure bill. So, the plan was shifted to a reconciliation bill in Congress.
In changes unveiled this week, the IRS would get basic financial data about bank accounts with more than $10,000 per year in annual deposits or withdrawals — not including money from a regular paycheck.
“This means the IRS can spot when a wealthy tax cheat has millions of dollars flowing into an account but isn’t reporting that money on their tax return,” said Sen. Elizabeth Warren, D-Mass.
The banking industry has been lobbying heavily against the IRS plan. For example, the Georgia Credit Union Association said, “whether the IRS reporting threshold is $1, $600, or $10,000, this proposal is fundamentally flawed.”
Democrats and the IRS argue that when there is comprehensive reporting of financial information to the IRS — such as the withholding details on your paycheck — people follow the rules and pay their taxes.
But when individuals and businesses have to tell the IRS about other income sources, the tax compliance rate goes way down.
“Tax Gap studies through the years have consistently demonstrated that third-party reporting significantly raises voluntary compliance,” the IRS argues.
If some of this sounds familiar, it’s because we’ve been down this road before.
When Congress set up the Obama health law in 2011, one provision required businesses to file 1099 forms for any transactions of more than $600 per year.
The idea had nothing to do with health insurance coverage, but it had everything to do with collecting tax revenues not being reported to the IRS.
But after an outcry, the provision was repealed — and the tax gap kept climbing.
Jamie Dupree has covered national politics and the Congress from Washington, D.C. since the Reagan administration. His column appears weekly in The Atlanta Journal-Constitution. For more, check out his Capitol Hill newsletter at http://jamiedupree.substack.com
