By David Lawder
WASHINGTON (Reuters) -A senior U.S. Treasury official said on Wednesday she hoped a dropped requirement for banks to report account information to the Internal Revenue Service can be restored to sweeping social and climate spending legislation that Democrats are trying to finalize.
Natasha Sarin, Treasury deputy assistant secretary for economic policy, told an online forum that the reporting proposal would significantly improve the estimated revenue that could be raised from the measure's $80 billion in IRS investments over a decade.
The proposal initially would have required reporting on aggregate account inflows and outflows of as little as $600 per year. The threshold was raised to $10,000 but it was dropped https://www.reuters.com/world/us/democrats-scrap-bank-reporting-requirement-us-spending-package-2021-10-28 from the "reconciliation" bill last week after a strong lobbying effort against it from the financial services industry.
The aim was to allow the IRS to match account activity with reported income, cutting down on the underreporting of business and investment income and allowing the tax agency to more easily find wealthy audit targets.
Normal wage income is withheld and reported to the IRS, but business and other sources of income relies on voluntary reporting.
"I think that the information reporting provisions were an incredibly important part of the compliance agenda," Sarin told an event hosted by the Center for American Progress.
"And I think that without them, there's a lot of good that's going to be done, but honestly a lot of good that we won't be able to do unless we have some light into these opaque income streams."
The Treasury estimates that without the bank information reporting, the investments in modernizing 1960s-era IRS computer architecture and rebuilding a decimated enforcement staff would raise $400 billion in new revenue over 10 years.
An earlier Treasury proposal https://home.treasury.gov/system/files/131/General-Explanations-FY2022.pdf that included the bank reporting provision estimated raising $700 billion in revenue over a decade.
Sarin said that there was an effort underway by "a very committed group" of senators, including Angus King, a Maine independent and Democrats Mark Warner of Virginia and Tom Carper of Delaware, that were working to try to restore the provision.
"I think there are ways that we can get there and that we're going to be able to provide the IRS both information and resources that are going to fundamentally overhaul" tax administration, Sarin said.