joe evans

After selling State Bank and Trust, Joe Evans of Smarr has more time to spend at his family farm.

Motivated by what it believes to be an opportunity to raise an estimated $460 billion from tax evaders, the Biden Administration has proposed requiring all financial institutions- banks, credit unions, and investment firms, to report to the IRS the total inflows and outflows of all accounts exceeding $600 a year.  That’s right- not $6,000 or $60,000 or $600,000, but $600.

If enacted, this would cover virtually everyone- even those who have relatively small amounts of money like your teenager that earns $25 a week cutting grass and deposits the money in his savings account.

I am all for catching tax cheats and would be open to a more targeted proposal for catching them, but this proposal strikes me as bad policy on several counts.

First, the volume of information it would generate would be enormous and difficult to interpret.  Your teenage lawn-mower’s savings account would be thrown in there right along with Warren Buffett’s billions.  It will take an army of bureaucrats and computers to process all this data and to try and sort out the 5% or so of cheaters from everyone else. Keeping this mountain of data secure will be an added challenge.

The proposed monitoring would look at the total inflows and outflows going through an account regardless of purpose. This means the $50,000 deposit you make from taking out a second mortgage on your house will look the same as a big-time lawyer’s $50,000 fee, and the IRS will only be able to tell the difference by doing a lot more digging.

Second, banks, credit unions, and other financial service providers will have to spend a lot of time and money developing the computer systems required to collect and report all this information.  As both a banker and a bank customer, I am strongly resistant to proposals that divert a bank’s attention away from serving its customers, and this would be one massive diversion.

Finally, this proposal strikes me as the antithesis of our historic presumption of innocence until proven guilty. Universal surveillance is something George Orwell warned about in his futuristic 1949 novel about totalitarian government over-reach, “1984”. I feel the level of government monitoring of our personal finances being proposed by the Biden Administration is best left in science fiction novels.

If our tax system is so complicated that it requires this level of surveillance, perhaps what we really need is a simpler tax system. 

Joe Evans of Smarr is Chairman of State Bank and Trust Co. and the 2018 receipient of the Lifetime Achivement Award from American Banker magazine. Email