- The Washington Times - Monday, August 16, 2021

Democrats are planning a massive expansion of the IRS to help pay for their $3.5 trillion party-line spending package, with lawmakers even proposing to give the federal agency access to private information on how Americans spend their money.

The Senate Finance Committee, which is drafting some provisions, plans to offset all the new spending by boosting IRS enforcement. Sen. Ron Wyden, an Oregon Democrat who chairs the committee, said significant emphasis would be placed on narrowing the gap between taxes owed to the federal government and the amount actually paid.

“A decade of Republican budget cuts to the IRS has resulted in rampant tax cheating at the top,” said Mr. Wyden. “Tax enforcement is going to require new resources and new tools to crack down on the high-flying tax cheats.”

Democrats believe they can narrow the gap by spending more on the IRS. Some argued earlier this year that spending as much as $40 billion on the agency could result in an additional $100 billion in federal revenue over the next decade.

Mr. Wyden said the actual tax gap could run upward of $1 trillion — money he hopes can be collected to pay for new programs and services.

“Current tax-gap estimates likely to miss a large number of the high-flyers who clearly are driving this tax gap up and up,” he said.

Democrats also want new, strict reporting requirements for banks and other financial institutions.

If successful, the new rules would force banks to report to the IRS any financial transactions above $600. The requirements would be broad enough to cover both personal and business accounts. Some Democrats are also pushing the new rules to cover mobile money transfer systems, like PayPal and Venmo.

The reporting requirements would essentially give the IRS unfettered access to how Americans spend their money. Mr. Wyden argues average citizens will have nothing to fear from the new rules.

“Taxpayers acting to conceal this income from tax authorities are going to have a much tougher time,” said Mr. Wyden. “Our interest, on our side, is to go after the big guys who generate significant in-flows and outflows of cash and other assets.”

Republicans, however, argue such regulations are too ambitious and risk harassing taxpayers for little proven benefit. Many point to the extensive loopholes within the federal tax codes and delay times filers receive in paying taxes as the reason for the gap.

“An overwhelming majority of taxpayers in this country are law-abiding, and pay the taxes they owe,” said Sen. Mike Crapo of Idaho, the top Republican on the finance committee.

Republicans also argue the privacy concerns generated by the proposal should not be taken lightly.

“Under this regime, financial institutions would become agents of the IRS,” said Mr. Crapo. “The proposal, which is sold under the guise of trying to close the tax gap, is very concerning and pulls almost all taxpayers into a surveillance dragnet.”

Mr. Crapo and others point to recent events at the IRS as proof it’s not ready for such authority.

For example, the agency came under fire earlier this year after ProPublica published the private tax information of some of America’s wealthiest individuals. Included among the trove of information were the private tax filings of Amazon founder Jeff Bezos, former New York City Mayor Michael R. Bloomberg, and two prominent GOP senators.

The IRS has denied it was the source of the leak. Under federal law, it is a crime to release private tax information without authorization by the individuals or entities to whom they belong.

“The era of big data should not be viewed as an opportunity for big brother,” said Mr. Crapo. “I do not agree with some high-tax advocates that private tax information should be a public good, with governments and the public knowing every private aspect of individual and business income and assets.”

There are also logistical questions over how the new reporting requirements would work. At the moment, the American Bankers Association and other financial industry groups are opposing the effort.

“Despite assertions by some that a new reporting regime would be simple to execute and represent a low or even no-cost mechanism to help narrow the tax gap, designing system capabilities to capture account inflows and outflows and other information is complex, expensive, and will take years,” Rob Nichols, president of the American Bankers Association, recently wrote to lawmakers. “Having the raw data somewhere in a bank system does not mean it is easily compiled or produced to government specifications.”

The push to adopt the new requirements comes as Democrats struggle to find a way to pay for their massive, $3.5 party-line spending bill.

Dubbed “human infrastructure,” the legislation is being pitched by far-left Democrats as the most consequential expansion of the federal government since the New Deal era.

“For too many decades, Congress has ignored the needs of the working class, the elderly, the children, the sick and the poor,” said Senate Budget Committee Chairman Bernard Sanders, a self-described socialist from Vermont. “Now is the time for bold action.”

The package is slated to include amnesty for undocumented immigrants, free community college, job training for felons and new climate-change regulations. Democrats also plan to use the legislation to expand Medicare and Medicaid, provide free universal pre-kindergarten, and create a civilian climate corps for unemployed youth.

Since the $3.5 trillion package is unlikely to garner Republican support, Democrats plan to pass it along party lines via budget reconciliation. The process allows some spending measures to avoid the Senate’s 60-vote filibuster threshold and pass with a simple majority of 51 votes.

• Haris Alic can be reached at halic@washingtontimes.com.

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