6 October 2021

Biden’s Proposed IRS Bank Account Snooping Authority Runs Into State Resistance

Patrick Gleason

A White House or Congress can propose all manner of controversial policies, as is occurring now, but state lawmakers can fight back in a number of ways. Such resistance is now underway in the Maine Legislature, with lawmakers in other states likely to follow suit.

A resolution introduced in the Maine House of Representatives today, September 22, urges U.S. Senators Susan Collins (R), Angus King (I), and the rest of the Maine congressional delegation to oppose President Joe Biden’s proposal to empower the IRS to monitor aggregate transactions going into and out of personal and business bank accounts whose value or total transactions exceed $600 in value, which ensnares the majority of active bank accounts. As the new state resolution filed by Maine Representative John Andrews points out, “President Joe Biden wants the IRS to have automatic access to information about every Americans' bank account as well as every PayPal, Venmo, and CashApp account, even if without any accusations of wrongdoing.”

“This is unprecedented Federal intrusion into the financial lives of every day Americans,” said Representative Andrews. “It is an expansion of the surveillance state and it is time to pushback. As state legislators it is our duty to stand up, be proactive and protect those we represent. This resolution should be filed and supported in every statehouse in the nation. Legislators need to be bold and find ways in their state statutes to legislatively nullify this unconstitutional abuse of power.”

Representative Andrews’ resolution points out that more than 96 million Americans use peer-to-peer payment transaction apps and that millions of Americans who use such apps will be subject to taxation on transactions greater than $600 if President Biden’s proposal is enacted. Just as the tobacco and vape tax hikes proposed in Congress are regressive and disproportionately harm low income households, the White House’s IRS empowerment proposal will also inequitably burden those of relatively modest means.

The state resolution introduced in Maine points out that 54% of Cash App users have a credit score under 600; and that peer-to-peer transaction apps have never been a proven facilitator of significant tax fraud. Biden’s proposal is unlikely to thwart widespread tax fraud, but it will create administrative headaches for many employers.

“The IRS has no business snooping around the bank accounts of honest small employers,” Ryan Ellis, president of the Center for a Free Economy and an IRS-enrolled agent, said of the White House’s IRS proposal. “These nitpicking tax audit schemes are born in faculty lounges and musty bureaucratic files courtesy of tax law professors who have never had to meet a payroll or file a business tax return.”

As the Maine resolution points out, President Biden is seeking to grant the IRS sweeping new powers to violate the privacy of Americans, along with $80 billion in additional funding over the next decade, to a government agency that “has already demonstrated an unwillingness or inability to protect taxpayer information via its leak of tax return data to Pro Publica.” The resolution goes on to cite a 2017 Treasury Inspector General for Tax Administration (TIGTA) report, which discovered that the IRS “routinely skirted or ignored due process requirements when investigating taxpayers for violating the $10,000 currency transaction requirements that exist under the Bank Secrecy Act.”

If Rep. Andrews’ resolution is approved when it comes up for a vote, the Maine House of Representatives would be on the record officially urging Maine’s congressional delegation “to oppose this unprecedented intrusion into the privacy of all Mainers and every American.” Representative Andrews is also filing a bill, ‘An Act to Protect Financial Privacy,’ to enact statutory changes that can be made to block the Biden administration’s effort to snoop in bank accounts without a warrant or court order, at least for those living in the state of Maine.

State legislatures “will alway be not only vigilant, but suspicious and jealous guardians of the rights of the citizens against encroachments from the federal government,” Alexander Hamilton predicted in Federalist Paper Number 26. Hamilton went on to add that state legislators “will constantly have their attention awake to the conduct of the national rulers, and will be ready enough if anything improper appears to sound the alarm to the people and not only to be the voice but, if necessary the arm of their discontent.”

The vigilance and willingness of state legislators to protect their constituents from the sort of federal overreach that Hamilton described is exactly what Representative Andrews is now demonstrating in Maine. That dynamic has also been on display this year in the form of the lawsuits filed by more than 20 state attorneys general against the provision in the American Rescue Plan Act, the $1.9 trillion spending bill approved in March, that seeks to prohibit state tax cuts.

While Hamilton’s aforementioned prediction from more than two centuries ago has been confirmed by the actions of Rep. Andrews and other state officials this year, the U.S.’s first Treasury Secretary didn’t get everything right. In Federalist Number 17, written in late 1787, Hamilton asserted that it would “always be far more easy for the State governments to encroach upon the national authorities.”

As is documented by the policy agenda now being pushed by the Biden administration and congressional Democrats — which entails a federal takeover of state-run election systems, federal preemption of Right-to-Work laws in 27 states, and an attempted prohibition of state tax relief, to name a few top legislative priorities — Hamilton got it very wrong with his prediction about states being more likely to encroach upon federal authority than vice versa.

Don’t be surprised if legislators, governors, and officials in other states join Maine lawmakers in taking action to resist White House and congressional proposals to expand federal authority at the expense of state governments and the American people, which is a central theme of the top policy changes currently being pursued in Washington.

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