The Biden administration is facing growing backlash over a plan to provide the Internal Revenue Service with data on individual bank accounts with more than $600.

The proposal emerged as a way to recover some of the estimated $600 billion per year in unpaid taxes, largely owed by wealthy people and businesses, to help pay for President Joe Biden's Build Back Better social spending program. House and Senate Democrats are currently debating the measure as part of the budget reconciliation bill.

The plan, which would affect over 100 million households, has sparked concerns about government overreach and individual privacy.

The Independent Community Bankers of America (ICBA) warned that requiring financial institutions to report the deposits and withdrawals of all accounts with over $600 would be "an unwarranted infringement on the privacy of bank customers."

Banking organizations are mounting a grassroots movement urging customers to call Congress and their local banks to oppose the measure. Hundreds of thousands of messages have gone to members of Congress and bank branch operators have said they are hearing from upset customers.

Members of the Biden administration are facing difficult questions about why they want the information and how it will help them catch the biggest tax evaders. In an interview with CBS News Tuesday, Treasury Secretary Janet Yellen was asked whether the government was trying to "peek into [Americans'] pocketbooks."

"Absolutely not," Yellen responded. "I think this proposal has been seriously mischaracterized. The proposal involves no reporting of individual transactions of any individual."

Banks are already required to submit information on account deposits in excess of $10,000. They also have to report interest paid on customer accounts in excess of $10. The new proposal would give the agency even more visibility to compare the income reported by an individual or a business to what they have in their bank account and investigate whether any of that money is unreported income.

According to the Treasury Department, the additional information would help close a massive tax gap over the next decade that would otherwise cost the United States $7 trillion in owed taxes that are never collected. The administration estimates that the reporting requirements could allow the IRS to recover about 6.5% of the lost revenue or $460 billion over a decade.

"It’s important to have comprehensive information so that individuals can’t game the system," Yellen explained at a recent hearing on Capitol Hill.

The Biden administration has emphasized that the program would be directed at high-net-worth individuals and businesses with opaque sources of income, not lower-income taxpayers who typically have the highest rate of compliance. Officials also pledged that audit rates would not increase for people earning less than $400,000 per year.

But lawmakers and financial institutions have argued that setting the bar as low as $600 in account inflows and outflows would create a "dragnet," more likely to impact everyday Americans than tax evaders.

"While the stated goal of this vast data collection is to uncover tax dodging by the wealthy, this proposal is not remotely targeted to that purpose or that population," a group of over 40 banking and credit industry trade groups wrote in a letter to Congress last month.

The banking groups argued that the excess scrutiny would create costly regulatory burdens for banks while potentially exposing a trove of personal financial information. They went on to attack the Biden administration for failing to explain "why virtually every American should sacrifice their financial privacy to enable closer inspection of the top 1% of taxpayers."

Republicans in Congress have emerged as the most vocal opponents of the proposal, though they were already expected to vote unanimously against the reconciliation package.

Senate Minority Leader Mitch McConnell, R-Ky., wrote an op-ed in The Courier-Journal last week denouncing the plan as an "unprecedented expansion of government surveillance." McConnell argued, "The IRS already knows how much you earn. Now they want to know exactly how you spend it."

Mike Crapo of Idaho, the top Republican on the Senate Banking Committee claimed the proposed rule would turn local banks and credit unions "into agents of the IRS, monitoring and reporting of inflows and outflows on deposits and withdrawals made in private accounts."

Sen. Cynthia Lummis, R-Wyo., warned that Americans would "find alternatives to traditional banks just to thwart IRS access to their personal information."

GOP lawmakers have also raised concerns about the heightened risk of data breaches and leaks, following recent incidents that resulted in hundreds of thousands of taxpayers' data being compromised.

The requirements have even left some Democratic lawmakers squeamish. According to The Wall Street Journal, Rep. Don Beyer, D-Va., has expressed concerns about the security of taxpayer data after a ProPublica report earlier this year disclosed the leaked tax records of thousands of the country's wealthiest individuals.

Other lawmakers worry that the $600 reporting requirement is just too low. In response, House Ways and Means Committee Chair Richard Neal, D-Mass., and Senate Finance Committee Chair Ron Wyden, D-Ore., have reportedly proposed raising the threshold from $600 to $10,000 while exempting any payments in the account from payroll processors.

The Treasury has stood by its figure, noting the congressional Democrats' proposal would halve the amount of unpaid taxes the Treasury could recoup in a decade.

House Speaker Nancy Pelosi, D-Calif., said Tuesday that the threshold was negotiable but that she stood firmly behind the Biden proposal to recoup unpaid taxes.

"Yes there are concerns that some people have," she said at a news conference. "But if people are breaking the law and not paying their taxes, one way to track them is through the banking measure."

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