After widespread condemnation, the Biden Administration announced Tuesday that it would no longer support a proposal to allow the Internal Revenue Service (IRS) to monitor bank accounts for any transactions greater than $600, ABC News reports.
Following criticism of the proposal, which was widely derided as a violation of privacy, the administration instead suggested raising the threshold to $10,000 worth of annual transactions, while adding that income from any paycheck that automatically deducts federal taxes will not be included in such monitoring efforts. In addition, those who receive federal benefits such as Social Security and other unemployment benefits will be excluded from such searches.
The Treasury Department announced the changes to the proposal, which now aims for the IRS to gather the totality of withdrawals and deposits from any bank account that makes more than $10,000 in non-payroll income. This new policy allegedly will not collect information on individual transactions.
“In response to considerations about scope, [Congress] has crafted a new approach to include an exemption for wage and salary earners and federal program beneficiaries,” the Treasury Department said in a fact sheet describing the newly-revised proposal. “Under this revised approach, such earners can be completely carved out of the reporting structure. This is a well-reasoned modification: for American workers and retirees, the IRS already has information on wage and salary income and the federal benefits they receive.”
The goal of the policy is to focus on wealthier Americans who are collecting money from other sources besides income, such as investments, real estate, and other methods that are much more difficult for the IRS to keep track of, while at the same time taking the focus off of regular Americans by exempting them from the reporting requirement.
According to he fact sheet, the policy hopes to monitor the accounts of such people as “a taxpayer who reports $10,000 of income; but has $10 million of flows in and out of their bank account. Having this summary information will help flag for the IRS when high-income people under-report their income.”
The new proposal is part of the $3.5 trillion spending bill that is currently stalled in Congress. Even if the law was passed this year, this particular policy would not take effect until December of 2022.
But the bill, which Democrats are attempting to pass through the budget reconciliation process, has been held up in a legislative tug-of-war between the moderate wing of the Democratic Party and the more radical, progressive wing; Senators Joe Manchin (D-W.V.) and Kyrsten Sinema (D-Ariz.) have opposed the unusually high price tag of the bill, while progressives and self-identified socialists such as Congresswoman Alexandria Ocasio-Cortez (D-N.Y.) have refused to concede any ground.
The progressive wing of the House of Representatives has threatened to shoot down a separate, $1 trillion infrastructure bill that has already been passed in the Senate unless the reconciliation bill is passed first. The moderates want to see the infrastructure bill passed first before they will consider the reconciliation bill. The congressional stalemate on both bills threatens to torpedo Joe Biden’s entire domestic legislative agenda, and has contributed to his declining approval ratings and increasingly bleaker outlooks for the Democrats’ chances in the 2022 midterms.