Thune, GOP senators denounce Democrats’ proposed tax reporting rules

The nation’s tax gap — the difference between taxes owed and paid — has been “a stubborn problem for decades,” according to U.S. Sen. John Thune (R-SD) and numerous GOP lawmakers, who say it won’t be fixed by allowing financial institutions to report private information from Americans to the federal government.

“Congress is currently considering a variety of proposals to address the tax gap and improve federal tax compliance,” the senators wrote in a Sept. 27 letter sent to U.S. Senate Majority Leader Chuck Schumer (D-NY). “While we should pursue bipartisan measures to reduce the tax gap and better enforce our tax laws, we write to highlight our concern about the Biden administration’s proposal to expand the reporting of private, confidential taxpayer information from financial institutions to the Internal Revenue Service (IRS).”

Sen. Thune and his colleagues noted that while the details of the legislation being negotiated by congressional Democrats remains unclear, they wrote that one of the proposals within President Joe Biden’s American Families Plan would violate taxpayers’ privacy and place onerous new reporting requirements on financial institutions. 

“Specifically, this proposal would require banks, credit unions, and other financial institutions to report financial account information to the IRS for nearly all of their customers — including gross inflow and outflow information, and possibly transaction information,” according to their letter, which was also signed by lawmakers including U.S. Sens. Marsha Blackburn (R-TN), Richard Burr (R-NC), Bill Cassidy (R-LA), Steve Daines (R-MT), John Hoeven (R-ND), Jerry Moran (R-KS), Rob Portman (R-OH), Mike Rounds (R-SD), Thom Tillis (R-NC), and Todd Young (R-IN).

The senators wrote that the proposal would create privacy concerns for American taxpayers; further burden financial institutions; inundate the IRS with new paperwork and taxpayer data; and would represent “a radical departure” from existing reporting requirements associated with national security and actual taxable events.

“For these reasons, we reiterate our strong opposition to the inclusion of these new IRS reporting requirements on financial institutions,” Sen. Thune and his colleagues wrote. “It is a misguided and privacy-invasive proposal, and its consideration is nothing more than an attempt to find a way to pay for a fraction of this irresponsible spending bill currently under consideration.”

The letter is supported by the American Bankers Association, Independent Community Bankers of America, and the Credit Union National Association.