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Kansas Republicans maintain objections to new IRS banking rules, raising privacy concerns

Topeka Capital-Journal | Andrew Bahl

Kansas Republicans are continuing to beat the drum in opposition to an effort by Democrats and President Joe Biden to beef up enforcement at the Internal Revenue Service, arguing it will infringe on residents' privacy.

This is despite a move by U.S. Senate Democrats to scale back the scope of their proposal, which aims to crack down on tax fraud by requiring banks working with the IRS to provide key information on certain accounts.

Initially, the proposal would have required data be turned over on accounts with over $600 in annual deposits and withdrawals, a move which Republicans argued would implicate most Americans.

"Your proposal seeks to leverage private transaction information by effectively transforming banks into large-scale data processors for the IRS," Attorney General Derek Schmidt and 20 other GOP attorneys general wrote in a letter to Treasury Secretary Janet Yellen last week. "Forcing the banks to provide private information regarding common transactions such as rent payments, paying for groceries, and other transactions that are part of everyday life of Americans who have done nothing wrong, are not under suspicion of having done anything illegal and for which the government has no evidence or reason to believe are guilty of civil or criminal violations."

Yellen has defended the proposal against accusations that it is tantamount to snooping. The plan does not track individual transactions, but rather officials have hoped the aggregate amounts could catch unusual behavior — and potentially raise funds for Biden's policy agenda.

"There’s a lot of tax fraud and cheating that’s going on, and all that’s involved in this proposal is a few aggregate numbers about bank accounts — the amount that was received in the course of the year, the amount that went out in the course of a year,” Yellen told CBS earlier this month.

Democrats on Tuesday announced they were changing the proposal in response to the criticism. That would include increasing the minimum amount for accounts affected by the proposal to $10,000 and excluding wages and some federal benefits, like Social Security, from the threshold.

But U.S. Sen. Jerry Moran, R-Kan. joined Republican colleagues at a press conference Tuesday in maintaining his objections. Moran said he was told by Kansas financial institutions that customers were threatening to close their accounts over the proposal.

"Kansans do not want the federal government to have more information and intrude upon their privacy," Moran said. "In addition, the cost of complying will mean our small financial institutions in Kansas will have the burden of more regulations forced upon them.”

The proposal is part of a sweeping set of social safety net programs coveted by the Biden Administration, dubbed the Build Back Better package. It is unclear if the banking proposal will make the cut in the final version of the bill, as lawmakers negotiate over how much spending is acceptable in the gargantuan legislation.