To pay for a glut of new federal spending, President Joe Biden on Wednesday announced plans to hike taxes on businesses and wealthy Americans—and to sic the federal tax cops on everyone.
Biden’s American Families Plan calls for spending $ 80 billion on the Internal Revenue Service (IRS) to increase tax compliance in the hopes of generating $ 700 billion over the next 10 years to partially offset the plan’s $ 1.8 trillion price tag. The $ 700 billion that will supposedly come from stepped-up tax enforcement will be the largest single funding source for the American Families Plan—the revenue from tax enforcement is six times larger than what will be produced by raising the top income tax rate back to 39.6 percent.
The additional funding for the IRS will allow the agency to hire 15 percent more enforcement staff. The White House’s fact sheet on the American Families Plan says the additional resources will be aimed primarily at high-earners and corporations. “The IRS will crack down on millionaires and billionaires who cheat on their taxes,” Biden said during his address to a joint session of Congress on Wednesday, adding that he was “not out to punish anyone.”
Everyone should pay the taxes they owe, of course, but it is virtually certain that a beefed-up IRS will create new headaches for banks, financial institutions, and anyone who uses them. Biden says he’s targeting only the wealthiest Americans, but his own Treasury Department is already signaling that increased tax enforcement will require hoovering up more data from bank accounts and third-party payment providers like PayPal and Venmo.
Among other things, that means banks and third-party apps will be required to give the IRS data about account holders’ “aggregate account outflows and inflows,” the Treasury Department said in a statement on Wednesday.
“This reform aims to provide the IRS information on account flows so that it has a lens into investment and business activity,” according to the Treasury’s statement. “Providing the IRS this information will help improve audit selection so it can better target its enforcement activity.”
Keeping an eye on the inflow and outflow of bank accounts won’t automatically tell the IRS that someone is hiding unreported, taxable income, The Wall Street Journal notes. But it would be a “first step” in determining how much additional scrutiny might be necessary.
Think of it as giving another opportunity for the federal tax cops to establish probable cause for a financial stop and frisk. And that comes after Biden has already ordered the IRS to give greater scrutiny to transactions in the so-called sharing economy.
The entire IRS budget for the current fiscal year is about $ 12 billion, with $ 5.2 billion earmarked for enforcement activities. That means Biden’s $ 80 billion funding increase, spread out over 10 years, amounts to a 150 percent increase in spending on tax audits and investigations.
But Biden is throwing so much new funding at the IRS that it isn’t clear whether the agency will be capable of using it all. “I’m not sure you’d be able to efficiently use that much money,” John Koskinen, who ran the IRS for part of the Obama presidency, tells The New York Times. “That’s a lot of money.”
It sure is. And it won’t just be the rich paying the costs.
View Article Here Taxes – Reason.com