Finance

Biden administration pushing to include IRS proposal in spending bill despite criticism

The Biden administration is still working to include a version of its IRS bank-reporting proposal in Democrats' social spending package, according to an administration official, following criticism of the proposal from Sen. Joe Manchin (W.Va.) and several other Democratic lawmakers.

The administration official said there are efforts to adjust the proposal so that it focuses on taxpayers making more than $400,000 and that negotiators are looking at whether a carveout could be created for those with income under that threshold.

The administration earlier this year proposed requiring financial institutions to report on existing IRS forms the total amount of money that came into a bank account during a year and the total amount that came out of it. The proposal is aimed at strengthening the IRS's ability to conduct enforcement on high-income taxpayers, and its proponents say it would raise revenue to help finance Democrats' spending priorities.

The initial version of the proposal would have imposed the reporting requirement for accounts with more than $600 in deposits and withdrawals, but congressional Democrats modified the proposal to raise the threshold to $10,000 and exempt wage payments. The administration now is considering additional changes to the proposal.

Banks and GOP lawmakers have aggressively criticized the proposal, arguing that it is an invasion of privacy. 

In recent days, a growing number of Democratic lawmakers have also raised concerns. Notably, Manchin, a key moderate Democratic senator, raised objections during an event Tuesday by The Economic Club of Washington D.C.

The efforts to make new adjustments to the IRS bank-reporting proposal come as Democrats are struggling to figure out how to pay for their spending package. Manchin has also raised concerns about a proposal to tax billionaires' investment gains annually, while Sen. Kyrsten Sinema (D-Ariz.) has indicated that she doesn't want to raise tax rates.

Sens. Tom Carper (D-Del.), Mark Warner (D-Va.) and Angus King (I-Maine) said in a statement Wednesday that "misconceptions" about the IRS bank-reporting proposal shouldn't stop Democrats from working to close the "tax gap" between taxes paid and taxes owed in the spending bill.

"We are committed to working with our colleagues to address any concerns with proposals to close the tax gap and to make sure that wealthy taxpayers and corporations pay the taxes that they have the ability to pay and legally owe," they said.

Updated at 4:39 p.m. 

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