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Treasurer Ellsworth: Big Brother leans in

Staff Writer | October 21, 2021 1:00 AM

Idaho officials say a proposal from the Biden administration geared to help the Internal Revenue Service "crack down" on tax cheats poses serious issues to privacy and data security.

If implemented, the plan would require banks to provide data on customer accounts with total annual deposits or withdrawals of more than $10,000 to the IRS. Previous renditions of the proposal set the threshold at $600.

According to the U.S. Department of Treasury, the plan aims to address the "tax gap — the difference between taxes that are owed and collected." In the Treasury proposal summary, deputy assistant secretary Natasha Sarin says the gap widens about $600 billion annually and could accumulate "approximately $7 trillion of lost tax revenue over the next decade."

So, who's widening the gap?

"Wealthy taxpayers, who are often able to avoid a large share of the taxes they owe," the summary states.

Sarin says researchers suggest that over $160 million is lost annually from "taxes that top 1 percent choose not to pay."

Idaho State Treasurer Julie Ellsworth sees things differently.

In a visit with The Press on Tuesday, Ellsworth said the proposal by the Biden administration won't simply apply to that "top 1%."

"This is an IRS dragnet that will catch everybody up in it," she said.

For many citizens, $600 transactions happen at least once a month. Knowing that the average American has about $61,000 in the bank, Ellsworth said the $10,000 threshold will apply to most taxpayers.

"If you want to cut down on drunken driving, you do not stop every driver," Ellsworth said. "You need to focus on your target. If you're going after the rich, why are you dragging the net over every citizen?"

Ellsworth’s main issue with the proposal is not "the dollar amount" but the "unconstitutional power grab" it represents.

"The reason why I say it is unconstitutional is that it assumes we're all guilty with no probable cause," she said. "What's worse is the due process when you implement an ongoing audit of people that is unnecessary."

The Currency and Foreign Transactions Reporting Act of 1970 requires banks to report any transaction of over $10,000 to the IRS. Federal officials designed the rule to catch transactions between drug dealers and other potentially illegal activities, Ellsworth said.

Now, individuals could hit the $10,000 threshold through medical expenses that would "be tracked constantly," she explained.

"It triggers that you will now disclose all your information to them in an ongoing manner because you are above the threshold," Ellsworth said.

To finance what Republicans on the U.S. Senate Committee on Finance coined the IRS "reporting dragnet," the proposal would increase the IRS budget by $80 billion over the next 10 years.

As a return, Sarin said the program would generate an estimated $1.6 trillion in additional tax revenue within a decade.

Still, Ellsworth said there are privacy breaches today that have still not been addressed by the IRS. Specifically, she pointed to the ProPublica report released in June that pulled tax statements from men like Bill Gates, Mark Zuckerberg and Jeff Bezos to demonstrate how "America's billionaires avail themselves of tax-avoidance strategies beyond the reach of ordinary people."

In a statement signed by the U.S. Senate Committee on Finance ranking member Idaho Sen. Mike Crapo, the lawmaker questioned the viability of a "major data-security breach at the IRS."

"In light of the significant threats to privacy associated with the IRS request for monitoring of taxpayers' financial accounts, and unknown vulnerabilities at IRS, we write to ask for an investigation into IRS research activities and security protocols," the Oct. 4 statement reads.

Ellsworth said privacy breaches are something she and Idaho State Controller Brandon Woolf tackle "constantly."

"I think the most ominous element of this whole proposal is the vulnerability of our data," she told The Press.

"This proposal is uniting people to join together against it," she said. "Its express purpose is to catch the rich, and it targets the average man."

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