Pulling Out All the Stops
Insights - September 2021
I grew up very active in church music and I loved the vintage pipe organ we had in our church. On special occasions – think a choral performance of Handel’s Messiah for instance – the organist would literally pull out all the stops in the organ to yield the maximum crescendo possible from the pipes. It was something to behold. Over time, pulling out all the stops has evolved to also convey a sense of going all out on something. As Merriam Webster defines it, “to make every possible effort or use all available resources to achieve an end.”
Sometimes in advocacy it becomes clear that it’s time to pull out all the stops and we are in one of these times as we speak. In its effort to find revenue sources for its $3.5 trillion infrastructure package, the White House has endorsed the idea of having IRS collect information on all consumer and business deposit accounts with inflows and outflows exceeding $600 per year. They estimate the IRS would use this data to catch mostly high-wage earners who underreport their income and capture as much as $700 billion over ten years. Can you imagine the amount of data IRS would have and how in the world they would even begin to manage this overwhelming amount of information, much less keep it secure?
Not only would there be a huge burden on banks to report transactions on the vast majority of accounts, but consumers being comfortable with that much information going to the IRS is highly doubtful. Trying to draw a direct link between my teenage daughter’s checking account and her tax return for part-time employment is hard to comprehend; multiply that by a few hundred million accounts and it’s unclear how this gives the IRS the intended result.
Banks have made great strides recently in bringing more people into the banking system and reducing the number of unbanked and underbanked people in America. We know that one prevailing reason some people are unbanked or underbanked is a lack of trust in the banking system – FDIC insurance notwithstanding – and adding IRS reporting of their account transactions would certainly seem to work against the ability to gain trust from these individuals. I have an acquaintance who has a bank account, pays his taxes and yet keeps way too much cash in his home, as he won’t be persuaded the cash would be much safer in the bank. If we go the way the Administration would like on IRS reporting, my tax-paying, law-abiding acquaintance would most likely transact as much business in cash as possible and would view the reporting as a huge invasion of his privacy.
Banks, many other industries, tax policy groups and even consumers and small business owners have been urging Congress to reject this proposal, for so many reasons, including those mentioned above. If the goal is to catch high-income earners who underpay their taxes, casting such an enormous net in the hopes of doing so is the wrong way to go. It’s time to pull out all the stops.