To the motivated believers at the bottom of the critical-thought challenged pyramid, there are two abiding beliefs. Tax the rich and get stuff free. The former, because no one deserves to be better off than they are, and the latter because everything they want and need has morphed into an entitlement. People have a right to health care, food, housing, education, child care and wifi.
And to some extent, they’re not entirely wrong, as the top of the wealth pyramid has gone from merely rich to obscenely rich, and the bottom has watched as the incentives to work hard and succeed appear to have gone out of reach, with too many unable to afford basic services despite playing by the rules and working hard. There are a great many reasons that make these beliefs more true or false under various circumstances, but that doesn’t change the fact that many believe these two things, tax the rich and get stuff free, is the right thing for the Biden Administration to do.
Recognizing opportunity, the Biden administration has promoted the notion that the rich are evading taxes by both legal and illegal means, and those lost taxes can be found, and put to good use giving people free stuff, if only the IRS is allowed to do two little things.
In order to make sure the rich are paying their fair share in taxes, President Joe Biden says the IRS just needs two bits of information: all the money that goes into your bank account, and all the money that comes out.
Perhaps that seems a bit intrusive, but since it’s just the rich, and we hate the rich because they’re rich, who can cry sad tears for their massive loss of privacy to the government.
The plan “will give the IRS the resources it needs to keep up with the lawyers and accountants of the super-wealthy. It would ask just for two pieces of information from the banks of these folks: the amounts that come into their bank accounts and what amounts go out of their bank accounts,” Biden said. Right now, he added, “the IRS can’t see what they’re making, and can’t tell that they’re cheating.”
But the IRS already receives a vast array of financial information, from 1099s to W2s, providing information about income, whether earned or gained, all subject to tax. What is it that this extraordinarily intrusive information will provide that the IRS doesn’t already have? There is, of course, the cash economy, where people pay for stuff in green which never finds its way into a form. There is the birthday gift from Aunt Suzy and grandpa’s helping out with the rent, which will appear on bank statements as money in without any source known to the IRS. But these aren’t the dirty money problems that plague the uber-wealthy who deserve to pay more taxes.
“The administration’s proposed ‘comprehensive financial account reporting regime’ would dramatically increase the types of financial institutions and transactions exposed to the feds’ prying eyes,” Reason‘s Matt Welch recently wrote. “The new domestic surveillance program, which requires congressional approval, is one prong of a tripartite strategy for transforming the entire global financial system into a harmonious, haven-free collection funnel to the IRS.”
When funds are moved from an account in one country to an account in another, the red light at the local IRS office will start blinking and the SWAT team can swoop in. Certainly the wealthy do that, right? And is it wrong to let the wealthy take advantage of the laws, tax havens, shelters, and deny the poor their right to free wifi just because they have fancy lawyers and accountants?
It is disingenuous to suggest, as Biden did Thursday, that letting the IRS peep at your bank records is about ensuring “that the wealthy can no longer hide what they’re making, and they can finally pay the fair share of what they owe.”
As the details of his proposal make clear, enhanced tax enforcement will mean hoovering up more data from crypto wallets, bank accounts, and third-party payment providers such as PayPal and Venmo. And that comes after Biden already ordered the IRS to give greater scrutiny to transactions in the so-called sharing economy.
The sharing economy isn’t about the wealthy, but about the ordinary. This proposal will throw open all the finance doors that protected the privacy of regular folks from the government knowing your most personal financial details. Does Bill Gates drive Jeff Bezos around in his Porsche Uber in exchange for his free WaPo subscription to beat the IRS out of taxes?
Still not convinced that this is the way Joe is going to stick it to the rich and send you another Covid check? The threshhold proposed for banks, paypal, and others to have to report your financial ins and outs kicks in at $600.
Under the measure, financial institutions would be required to annually report gross inflows and outflows from all business and personal accounts — including bank, loan and investment accounts — if the inflows and outflows of an account total at least $600 in a year, or if the account has a fair market value of at least $600.
Does this strike you as the amount intended to catch either a Koch or Soros cheating on their taxes? By creating a reporting requirement that starts at $600, the IRS is targeting pretty much everyone, and the less sophisticated a person is, the more exposed they will be to a letter proclaiming a jeopardy assessment with a demand for $297,351 including penalties and interest on the failure to report $12 from your kid’s tips for delivering newspapers.
But Biden is selling it as the way to catch the rich tax cheats, the super-wealthy, the people we all despise for being so much richer than we are, who are hiding it $600 at a time in their venmo accounts. It’s not as if we haven’t heard this sales pitch before. When civil in rem forfeiture took hold, the government swore it was only to “take the profit out of crime” for those nasty drug dealers and mobsters everyone hated. Until it wasn’t.
This is how it starts, with a sales pitch that is calculated to appeal to the unwary by targeting the things they hate and love, the rich and free stuff, until they finally come to the realization that their financial privacy is gone as well, and the IRS has a special letter just for them demanding to know where they got the cash to pay for that iPhone.
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