A proposal by the Biden administration and congressional Democrats to require banks and other financial institutions to send the IRS additional information about Americans’ bank accounts is another step too far on a road that the government should not be traveling at all — the conscription of private companies into warrantless government surveillance.
The proposed law would mandate financial service providers to track and submit to the IRS data on accounts with total annual deposits or withdrawals totaling more than $10,000, except for payroll or benefit deposits. This is a change, though not an improvement, from the original proposal requiring reporting of accounts with only $600 of activity.
The Biden proposal is at odds with the limits on government power that are spelled out in the Fourth Amendment to the Constitution: “The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no warrants shall issue, but upon probable cause, supported by oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.”
That means the government does not have an unlimited license to rummage through everyone’s desk drawers, or their electronic equivalent, to see if it can find evidence of a crime. It needs probable cause and a warrant to conduct a search.
After the attacks of September 11, 2001, Congress passed and President George W. Bush signed legislation that required banks to “know their customers,” building on the 1970 Bank Secrecy Act’s requirement for reporting currency transactions of $10,000, or any possibly related transactions that totaled $10,000. The purpose was said to be the need to disrupt the funding of terrorist attacks. The side effect was more paperwork and potential liability for financial institutions, more inconvenience for customers conducting legitimate transactions, and an erosion of privacy that previously had existed in the United States.
The Biden administration now wants to expand mandatory reporting to the IRS, claiming there is a “tax gap” of $7 trillion over the next decade, money that it says it must collect in order to pay for the rest of the president’s agenda. The Treasury Department characterizes this total as “unpaid taxes,” but anyone who has ever filed a 1040 form and experienced the complexity of the U.S. tax code might dispute whether those taxes are owed, or whether they are avoided through fully legal means. In any case, the government already has the power to investigate tax evasion. What the administration wants is the equivalent of warrantless surveillance of U.S. bank accounts.
Republicans are pushing back. Georgia Congressman Drew Ferguson on Wednesday introduced the Prohibiting IRS Financial Surveillance Act (HR 5586), which was quickly endorsed by CUNA, the Credit Union National Association. In a letter of support for HR 5586, CUNA said that the Biden proposal “would result in banks and credit unions turning over to the IRS sensitive account details that in and of themselves do not constitute taxable events. This would leave the IRS with a massive trove of personal financial data that would be used in a manner that is not detailed in the proposal. This is risky and dangerous.”
It also treads ominously on Americans’ Fourth Amendment rights. House Democrats should drop their support for the Biden proposal, at any price.
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