This issue should spark outrage across the political spectrum and yet I imagine there will be very little said about what the banking lobby is doing here. American politics is in a dreadful state right now.
Thank you for posting about this. My sister ran a great little company, employed 10 people, and was able to just scratch out about $50k/year for her salary. During the 10 years she ran the company, she was audited by the IRS THREE TIMES, each audit taking 4-6 months. The first one found nothing wrong. The second one found out she'd overpaid and they gave her a small refund. The third audit showed she'd overpaid, but by a smaller amount than previously. All of this time and effort by the IRS came to exactly ZERO results, caused undue stress and down time for my sister's business, and eventually she closed the company to avoid further business-decimating intrusions by the IRS. Meanwhile, the rich were getting off with obvious and apparent tax evasion tactics, and well-known techniques. Shine more light on the failure of the IRS to do its basic duty of collecting taxes, please! This needs to change NOW.
Fixing that problem is the purpose of the Restoring the IRS Act of 2021, introduced by Senator Elizabeth Warren. Its chance of becoming law? Slim to none.
I agree with your general message, but this post is out of date and/or muddled on a number of points:
(1) This is years out of date: _People who don't earn income through wages — business owners and wealthy investors — operate under an entirely different set of rules. In many cases, the IRS receives no information about their income, apart from what the individual voluntarily reports to the government._ Since inflation-adjusted bank interest rates have been in the toilet for a decade plus, most affluent clients moved their savings to money-market funds, bond ladders, mutual funds, and ETFs. Brokers report all of these to the IRS on 1099-B and 1099-DIV, including cost basis since 2011-2012. As other commenters point out, FATCA introduced automated exchange of tax information with other countries in 2014, to act as a cross-check for FBAR/FinCEN reporting that has been in place since the 1970s. IRA providers report balances on Form 5498 (which is how we learned about Peter Thiel's $5B Roth IRA). SEC filings cover public company officers, directors, and significant shareholders (https://www.sec.gov/smallbusiness/goingpublic/officersanddirectors).
(2) The 20% number is based on data that predates FATCA, which made the vast majority of offshore tax shelters untenable. From the same Washington Post article: _Steven Rosenthal, a tax policy expert at the Urban Institute who was not involved with the research, cautioned that tax return data from the pre-offshore crackdown era may be limited in terms of what it can tell us about evasion today. “Since the 2000s, the IRS effectively shut down offshore accounts by aggressive enforcement, reporting, etc.,” he said via email. “And I do not see why we would expect taxpayers who used offshore accounts in the 2000s to migrate to other unlawful activity.”_
Personally, I see this more as a testament to banks' creaky IT (lobbying may well be cheaper than COBOL consultants these days?) and a distraction from higher-value reforms. Such as a progressive wealth tax, or at the very least restoring IRS funding!
Isn’t it interesting how the wealthy will spend multimillions to fight fair taxation rather than just pay it!
However, banks have been reporting transactions of $10k or more for decades! In fact, a bank can (or used to) report any suspicious transaction, even if it was $5k. But $10 was set as the attention-getter.
Maybe that changed at some point. Can you comment on that?
We have learned so much about the audacious ways the uber wealthy and corps get away with criminal behavior.
IRS can just issue refunds or collect amounts owing. Skip the complicated tax system for the other half.
I agree that wealthy individuals and corporations must pay their fair share. Full stop. I’m not hiding income, so in general I am not opposed to my bank records being included in a reported aggregate. All that said, this proposal must be “bad” or the banking industry wouldn’t be campaigning so hard against it. (I discount any known far-right commentators like Candace Owens, because they react negatively and usually with a false narrative over anything this admin does or says.) If the target is the 1%, then I don’t see how aggregation will accomplish that. Simplistically, if Mike Bloomberg reports gross income of $100k and the net is all the income that flows through his bank account, then that’s worth investigating, but in aggregate his data will be merged with all the others from that bank, and if no one with an income of $400k or less will be flagged, his account will not be flagged, either. That makes me wonder if 1) there really is tracking of specific individuals’ private banking records, which I can’t believe is legal, or 2) if the target isn’t only the taxpayer but also the banks that facilitate taxpayers’ evasion, the latter of which would explain the banking association negative campaigning.
Wait what? “The savings that Manchin is seeking ($1.5 trillion) is less than the amount that could be recovered if the wealthiest 1% of Americans stopped cheating on their taxes.” - but in the previous para, you pegged that as $160 billion? I smell a typo,
Aside from that (typo), I give this report a C+ (which only slightly impacts PI’s cumulative GPA, now standing at A-). No self respecting tax evader is laundering money through a US bank; if they were, the amounts would be far in excess of $10,000 per transaction let alone per year. Adding what my old law professor Cass Sunstein would call “sludge” to our banking AND tax enforcement functions would mostly impact middle class folks, as ABA’s Nichols wrote/said - people who work in the cash economy, hairdressers, carpenters, etc., and make the life of bankers/tax collectors more hellish than it already is, which IMHO is hella hellish. Finally, this alarmist report fails to address the question embedded in the right wing tweeters statement (I forget her name): would the Administration proposal attempt to capture info from Venmo, other non bank sources? And (post finally) what about crypto inputs/extractions?
This issue should spark outrage across the political spectrum and yet I imagine there will be very little said about what the banking lobby is doing here. American politics is in a dreadful state right now.
Thank you for posting about this. My sister ran a great little company, employed 10 people, and was able to just scratch out about $50k/year for her salary. During the 10 years she ran the company, she was audited by the IRS THREE TIMES, each audit taking 4-6 months. The first one found nothing wrong. The second one found out she'd overpaid and they gave her a small refund. The third audit showed she'd overpaid, but by a smaller amount than previously. All of this time and effort by the IRS came to exactly ZERO results, caused undue stress and down time for my sister's business, and eventually she closed the company to avoid further business-decimating intrusions by the IRS. Meanwhile, the rich were getting off with obvious and apparent tax evasion tactics, and well-known techniques. Shine more light on the failure of the IRS to do its basic duty of collecting taxes, please! This needs to change NOW.
Fixing that problem is the purpose of the Restoring the IRS Act of 2021, introduced by Senator Elizabeth Warren. Its chance of becoming law? Slim to none.
https://www.warren.senate.gov/newsroom/press-releases/warren-introduces-irs-bill-to-stop-wealthy-tax-cheats-and-close-the-tax-gap
I agree with your general message, but this post is out of date and/or muddled on a number of points:
(1) This is years out of date: _People who don't earn income through wages — business owners and wealthy investors — operate under an entirely different set of rules. In many cases, the IRS receives no information about their income, apart from what the individual voluntarily reports to the government._ Since inflation-adjusted bank interest rates have been in the toilet for a decade plus, most affluent clients moved their savings to money-market funds, bond ladders, mutual funds, and ETFs. Brokers report all of these to the IRS on 1099-B and 1099-DIV, including cost basis since 2011-2012. As other commenters point out, FATCA introduced automated exchange of tax information with other countries in 2014, to act as a cross-check for FBAR/FinCEN reporting that has been in place since the 1970s. IRA providers report balances on Form 5498 (which is how we learned about Peter Thiel's $5B Roth IRA). SEC filings cover public company officers, directors, and significant shareholders (https://www.sec.gov/smallbusiness/goingpublic/officersanddirectors).
(2) The 20% number is based on data that predates FATCA, which made the vast majority of offshore tax shelters untenable. From the same Washington Post article: _Steven Rosenthal, a tax policy expert at the Urban Institute who was not involved with the research, cautioned that tax return data from the pre-offshore crackdown era may be limited in terms of what it can tell us about evasion today. “Since the 2000s, the IRS effectively shut down offshore accounts by aggressive enforcement, reporting, etc.,” he said via email. “And I do not see why we would expect taxpayers who used offshore accounts in the 2000s to migrate to other unlawful activity.”_
Personally, I see this more as a testament to banks' creaky IT (lobbying may well be cheaper than COBOL consultants these days?) and a distraction from higher-value reforms. Such as a progressive wealth tax, or at the very least restoring IRS funding!
The facts are on our side, and we don't need to muddle them to make the progressive case. FTR, this is an expanded version of: https://twitter.com/MatejVela/status/1451211526640005122
Yeah. What Matej said. (Thanks Matej for straightening this out.)
Isn’t it interesting how the wealthy will spend multimillions to fight fair taxation rather than just pay it!
However, banks have been reporting transactions of $10k or more for decades! In fact, a bank can (or used to) report any suspicious transaction, even if it was $5k. But $10 was set as the attention-getter.
Maybe that changed at some point. Can you comment on that?
We have learned so much about the audacious ways the uber wealthy and corps get away with criminal behavior.
IRS can just issue refunds or collect amounts owing. Skip the complicated tax system for the other half.
I agree that wealthy individuals and corporations must pay their fair share. Full stop. I’m not hiding income, so in general I am not opposed to my bank records being included in a reported aggregate. All that said, this proposal must be “bad” or the banking industry wouldn’t be campaigning so hard against it. (I discount any known far-right commentators like Candace Owens, because they react negatively and usually with a false narrative over anything this admin does or says.) If the target is the 1%, then I don’t see how aggregation will accomplish that. Simplistically, if Mike Bloomberg reports gross income of $100k and the net is all the income that flows through his bank account, then that’s worth investigating, but in aggregate his data will be merged with all the others from that bank, and if no one with an income of $400k or less will be flagged, his account will not be flagged, either. That makes me wonder if 1) there really is tracking of specific individuals’ private banking records, which I can’t believe is legal, or 2) if the target isn’t only the taxpayer but also the banks that facilitate taxpayers’ evasion, the latter of which would explain the banking association negative campaigning.
Very clear writing as always. Good explanations.
Keep it up, Judd. You’re providing a great service. Thank you.
micharaterizing = mischaracterizing?
Wait what? “The savings that Manchin is seeking ($1.5 trillion) is less than the amount that could be recovered if the wealthiest 1% of Americans stopped cheating on their taxes.” - but in the previous para, you pegged that as $160 billion? I smell a typo,
Aside from that (typo), I give this report a C+ (which only slightly impacts PI’s cumulative GPA, now standing at A-). No self respecting tax evader is laundering money through a US bank; if they were, the amounts would be far in excess of $10,000 per transaction let alone per year. Adding what my old law professor Cass Sunstein would call “sludge” to our banking AND tax enforcement functions would mostly impact middle class folks, as ABA’s Nichols wrote/said - people who work in the cash economy, hairdressers, carpenters, etc., and make the life of bankers/tax collectors more hellish than it already is, which IMHO is hella hellish. Finally, this alarmist report fails to address the question embedded in the right wing tweeters statement (I forget her name): would the Administration proposal attempt to capture info from Venmo, other non bank sources? And (post finally) what about crypto inputs/extractions?
Over the course of a decade $160 billion x 10 = one trillion six hundred million
Yes, so the quoted sentence shoulda said “in ten years”
It said DECADE…that is 10 years
Ok I see your point but the reference to decade was two sentences earlier. So, I still think the quoted sentence was unclear.