Bank Reporting Rules May Be Sacrificed to Pass Infrastructure Bill

By:
Chris Gaetano
Published Date:
Jun 28, 2021
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Mandatory bank reporting rules, a key part of the plan to enhance IRS enforcement and thereby add funding to the White House's infrastructure plan, may be discarded in order to mollify opponents and pass a bipartisan bill, the Washington Post reported.

The proposal put forward by the Biden Administration would require that financial institutions report information on account flows so that earnings from investments and business activity are subject to reporting, as wages already are. Republicans in Congress blanched at this idea, though, fearing that the tax data would not be secure, which could lead to more leaks such as the one that fueled the recent ProPublica story on the sophisticated tax avoidance tools used by the very wealthy. They also cited concerns that the IRS may overstep its bounds and create trouble for small business owners. As a result, the Post reported, it is expected that the final version of the bipartisan deal will not have the mandatory reporting provision, leaving only wage income to be subject to this regulation, as it has been for years. The Post noted that a White House fact sheet on the deal released on Thursday left vague the issue of funding.

However, without such reporting measures, it is questionable how effective enhanced enforcement will be in providing extra funds and closing the tax gap. The Congressional Budget Office, said the Post, estimated that adding about $20 billion to the IRS enforcement budget will generate about $61 billion over a decade, while adding $40 billion would lift that number to $103 billion. These figures seem like mighty sums until one realizes that the estimated tax gap in 2019 is $584 billion.

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