West Virginia state treasurer Riley Moore said that no state should comply with a Biden proposal to force banks to hand over transaction data over $600 to the IRS, which he describes as an 'unconstitutional invasion.'
'The impact this is going to have on community banks, this is like Dodd Frank on steroids,' Moore told DailyMail.com.
Moore said big banks who supported Biden would be the beneficiaries of the proposal.
'In terms of compliance, a community bank, to be able to be in compliance, to set that type of regime up is just going to put them out of business,' he said. 'So who wins? The big banks win. The same banks that were bankrolling Biden's campaign in 2020.'
The proposal, backed by $79 billion in additional funding, would allow the IRS to peer into the aggregate inflows and outflows of a bank account with over $600.
This crackdown on unreported income is expected to generate $463 billion over the next decade, according to the Office of Tax Analysis. That money would be used to partially fund Biden's $3.5 trillion budget reconciliation plan.
'The $600 requirement is absolutely unconstitutional. It's a massive invasion of privacy, it’s huge government overreach. I don't think any state should comply with this, Moore continued.
Banks are already required to file a currency transaction report to the financial crimes division of the Treasury on transactions over $10,000 to prevent money laundering.
Moore praised Nebraska Treasurer John Murante, who last week said he would defy the policy if it were to take effect.
'I think it's great what Treasurer Murante said, I think we should all follow suit in our respective states by not complying with this.'
'If the feds feel like they wanna sue every state that's not complying with it, then okay. Bring it on.'
So far, 23 state treasurers, auditors and financial officers have signed onto a letter opposing the policy. 'This would be one of the largest infringements on data privacy in our nation's history and is a direct assault on the financial disclosures of all Americans.'
The letter said the proposal would increase the number of unbanked Americans and sow distrust of financial institutions.
Moore also noted that the IRS has been subject to hacks and such information could 'fall into the wrong hands.'
In June, a massive trove of taxpayer information was shared with ProPublica. The investigative news outlet did not share how it obtained the tax records and three months later in September the IRS said it did not know if it had been there had been a data breach or threat of a breach.
On Tuesday, Sens. Mike Crapo, R-Idaho, and Chuck Grassley, R-Iowa, sent a letter asking for an audit of IRS research activities and security protocols, as the agency 'promotes legislative mandates for massive increases in private taxpayer information flowing to the IRS from individuals’ accounts at financial institutions.'
And as Republican condemnation of the fundraising policy continued to pour in, Sen. John Barrasso, R-Wyo., expressed the same concern.
'The IRS is the most powerful and truly the most unresponsible, unaccountable agency of government,' Barrasso told reporters at the Capitol Tuesday. 'They have proven they are unable to keep tax records secure.'
He said he had gotten more emails and calls on the IRS proposal in the last three weeks than he'd gotten on any other topic ever.
'The Republican Party is not going to let the IRS spy on bank accounts,' the Wyoming Republican added. 'We are not going to allow Joe Biden to give the IRS more power we want to stop this in its tracks.'
Treasury Secretary Janet Yellen has defended the proposal, the tax gap is expected to swell to $7 trillion over the next decade, roughly 15% of taxes owed.
'It's a simple way for the IRS to get a sense where that might be – it's just a few pieces of information about people's bank accounts,' Yellen said Tuesday on CNBC's Squawk Box.
'There's an enormous tax gap in the U.S. estimated at $7 trillion over the next 10 years in terms of a shortfall of tax collections to what we believe are owed,' she said. 'And that's not coming from people failing to report wage income or dividend income where there's good information. It comes from places where the information on income is opaque and can be hidden.'
The IRS would know how much money is in an individual's bank account in a given year, whether the individual earned income on that account and exactly how much was going in an and out.
The proposal would require banks to report gross inflows and outflows to the IRS, including transactions from Venmo, PayPal, crypto exchanges and the like in an effort to fight tax evasion.
The IRS estimates that compliance on taxes due on wages is 99% while compliance on 'less visible' sources of income is only 45%.
The Treasury Department claimed that the plan would have little effect on 'already compliant' taxpayers, but would help the IRS better target its audits.
'For noncompliant taxpayers, this regime would encourage voluntary compliance as evaders realize that the risk of evasion being detected has risen noticeably,' the Treasury Department said.