Sen. Joe Manchin, D-W.Va., has said he won’t support a $3.5 trillion federal spending bill Congress is working to take up because of its hefty price tag. This piqued my interest as a local community banker given concerns with a provision in the bill that would require banks to report their customers’ account information to the Internal Revenue Service, which is eliciting opposition from voters in West Virginia and across the country.
The IRS reporting proposal is designed to close the “tax gap” between what American taxpayers pay and what they owe to help fund the spending bill. But the comprehensive, untargeted nature of the proposal is eliciting broad opposition not just from bankers who would be required to report the information to the IRS, but from the consumers whose data the IRS would be collecting.
A new poll commissioned by the Independent Community Bankers of America — a national organization for which I volunteer as secretary — and conducted by the polling firm Morning Consult found that two-thirds of voters (67%) oppose the IRS collecting their bank account information. More than half (53%) of voters strongly oppose the plan, while only 22% support it.
Further, more than three in five voters (64%) do not trust the IRS to monitor their deposit and withdrawal information, while more than half (54%) do not trust the agency to keep their financial data safe from data breaches. This distrust should come as little surprise given the recent high-profile tax return leak the IRS is investigating as well as consumer anxiety over “math-error notices” triggered by stimulus payments.
According to the ICBA polling, consumers find IRS monitoring of their personal financial account transaction histories to be an invasion of privacy and no business of the government. Consumers are also expressing concerns that the plan could potentially harm small businesses by increasing their tax liability. These concerns were amplified by an amendment from Senate Finance Committee Ranking Member Mike Crapo, R-Idaho, to strip the IRS proposal from the spending bill, though it was voted down along party lines.
Further, a recent joint letter to congressional leaders from the International Franchise Association, National Federation of Independent Business, U.S. Chamber of Commerce and other business groups notes that IRS account reporting could undermine efforts to reduce the unbanked population. With distrust of institutions and government agencies inhibiting banking relationships — particularly among marginalized communities and those who have fled authoritarian regimes — indiscriminate financial account reporting risks increasing the challenge of bringing these individuals and families into the banking system and away from predatory lenders.
Instead of gathering heaps of new taxpayer information, consumers indicate they support closing the tax gap by making better use of the data the IRS already has.
As the IRS proposal takes shape in Washington, consumers and their bankers in West Virginia and nationwide will continue expressing opposition to the IRS proposal while the work to advance the economic recovery in local communities.