Banks lobby Biden to crack down on wealthy ‘tax cheaters’

Federal government loses $ 600 billion every year because rich Americans avoid paying taxes. The richest 1% of Americans “choose not to pay” more than $ 160 billion in taxes a year, according to a Treasury Department analysis last month. Tax enforcement should rely on the IRS, but Congress has steadily cut its budget year after year. The rate of high net worth taxpayers has declined dramatically over the past two decades. “They play by a different set of rules,” President Joe Biden said last month. The ultra-rich, he said, pay “virtually nothing” in taxes because, with lax reporting requirements, the IRS doesn’t know how much they’ve earned.

Democrats are planning to do something. The bill that makes its way through the reconciliation process, which Democrats use to avoid filibuster, includes provisions designed to make sure people pay what they owe; target wealthy Americans whom Biden called “tax cheats”; and close the corporate tax loophole. One approach is to change IRS reporting requirements, which the Treasury Department says would generate $ 460 billion in revenue over the next decade, to require banks to report accounts receivable information.

The movements come up against opposition. Democrats are reportedly set to drop the corporate tax hike, saying they could include it in another bill. And, in recent months, big banks and financial industry lobby groups have stepped up efforts to fight the improved IRS reporting requirements of the reconciliation package. Republicans – inclined to ask how social programs like Biden’s Build Back Better program will be paid for – are also pushing against the tax reporting provisions. Twenty Republican attorneys general sent a letter Oct. 15 to Biden and Treasury Secretary Janet Yellen opposing the measures.

“We can pay for these revolutionary investments in economic growth by asking the richest Americans to pay their fair share,” White House spokesman Andrew Bates said in a statement. “The fact that Republicans and the big banks are bending over backwards to protect wealthy tax evaders who break the law and actively take advantage of all other Americans says everything you need to know about what is at stake in this debate on the issue. future of the middle class American. “

Opponents of the reporting requirements argue that forcing banks to disclose gross flows from individual accounts to the IRS would infringe on individuals’ privacy, place an undue burden on banks, and open up a wealth of data to potential breaches. Groups like the Independent Community Bankers of America, a trade group that represents 5,000 small and medium-sized banks, have lobbied against the new reporting requirements, describing the proposal as the “IRS monitoring plan.”

“Banks and their high net worth clients are lying bluntly about this proposal, claiming it would give the IRS information on individual transactions,” said Finance Committee Senator Elizabeth Warren, D-Mass. of the Senate, during a press call last week with Finance President Ron. Wyden, D-Ore., To push back what they called a disinformation campaign by bank lobbyists and Republicans. “And many Republicans are supporting them to satisfy their corporate and wealthy donors. It’s no surprise that those with billions in unpaid taxes at stake would willingly spend millions of dollars lobbying against this proposal, as it would help disrupt the tax system a bit.

Senator Elizabeth Warren, D-Mass., And Senator Ron Wyden, D-Ore., Speak with reporters on July 21, 2021.

Photo: Tom Williams / CQ-Roll Call, Inc via Getty Images

Banks have started lobbying seriously directly against the reporting measures earlier this year, when the proposal was rolled out as part of the US Plan for Biden Families, the first iteration of the Democrats’ social spending program. The American Bankers Association, the nation’s largest banking lobbying group, has sent representatives to Capitol Hill to push back the proposals.

In August, Sen. Mike Crapo, R-Idaho, a senior member of the Senate Finance Committee, introduced an amendment to prevent the IRS from using funds to assess individual account flows and called the Biden’s proposal for “a scandalous violation of the privacy of American citizens.” He thanked the Independent Community Bankers of America and other groups for supporting his amendment, which failed 49-50. Crapo received at least $ 10,000 this year from industry banks and PACs, including at least two groups fighting against the measure.

In September, opposition from banking groups increased. The American Bankers Association, along with the Community Bankers Association, the Independent Community Bankers of America, the Mortgage Bankers Association, the Auto Care Association, the National Association of Professional Insurance Agents, and 35 other banking lobby and interest groups have sent a letter to House Leadership expressing “strong opposition” to the IRS reporting requirement.

Bank of America lobbied last quarter on issues related to “financial account reporting” in the reconciliation package, according to the disclosures. JPMorgan Chase has issued guidelines in recent months asking bank tellers not to make political statements or explain the proposed report to customers who have requested or complained about the potential changes; Spokeswoman Patricia Wexler told The Intercept the bank had not spent on advertisements or lobbied against the proposed changes and had not urged its customers to contact members of Congress.

In addition to national groups, more than a dozen state-owned banking and industry lobby groups have also spoken out against the proposal, including a host of state-level chambers of commerce. The Texas Bankers Association said last month it was considering a legal challenge if the reconciliation package included a “bank watch” program. The group launched statewide radio ads against the proposal last month, and spokesman Carlos Espinosa said it had so far received 40,000 responses to its efforts. Several local banks posted the same statement on Facebook last month: “While we don’t generally raise issues that arise in Washington with our customers, Congress is considering requiring financial institutions to report detailed account information. banking clients to the IRS. “

The leaders of the banking interest groups justified their opposition by arguing that the declaration would be too onerous for the banks. “It’s not just about adding a few lines to something,” said Paul Merski, executive vice president of Independent Community Bankers of America, who said new software and new staff would be needed to put implement the changes.

Experts wondered if the burden on banks would be so high when virtually all banking transactions were computerized. “You are talking about two pieces of information on a given account. You’re talking about information the bank already has, ”William Gale, an economic policy expert at the Brookings Institution, told The Intercept. “The objection that this is an intolerable administrative burden seems to me to be quite out of place.”

“If you show me a bank that manages its bookkeeping and accounts by hand, then I would agree that for that bank it would be heavy regulation,” Gale said. “I think this is much more of a reflective statement from financial institutions that they don’t want to have to report anything.

Biden’s proposal is a significant effort to curb tax evasion, Gale said. “It is difficult to see how policymakers are prepared to support the high levels of tax evasion that we are seeing. “

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