A White House proposal requiring political figures to report their campaign contributions would require someone – not the government – to check large bank deposits, IRS officials are worried.
Senior White House officials, in a speech in Philadelphia on Friday, vowed to crack down on tax avoidance by wealthy Americans, new disclosures had pointed to Biden as a potential target. However, outside experts said the IRS had no legal justification for requiring somebody else to physically check donated funds – and they have promised a political fight if the agency pushes such an idea.
Under current law, financial institutions must, in general, report suspicious or extraordinary bank deposits and transactions totaling more than $10,000 to the Federal Deposit Insurance Corporation (FDIC).
Under the White House plan, however, the checks would have to be personally logged by the Treasury Department’s Internal Revenue Service (IRS) and banks would be required to inform the agency of suspicious transactions.
“If the funds in question are received by a campaign account or a campaign committee, the report must be made to the FEC or, in the case of an individual, the Internal Revenue Service,” the officials said.
The directive would not apply to corporations or foundations, which often provide large sums of money to campaigns.
But Paul Light, a New York University public policy professor who has written extensively about the role of campaign contributions in US politics, said the IRS lacks the authority to carry out detailed monitoring of donor’s payments.
“It wouldn’t be the first time that the IRS developed such an intrusive and cumbersome process, but they haven’t decided to do it on the premise that there’s a problem,” he said.
Light said the IRS has no data on political donations beyond those reported to the Federal Election Commission.
In June, the Joint Committee on Taxation estimated that the new campaign oversight would cost between $19m and $73m per year, a small fraction of the federal budget.
After Biden’s speech, Treasury Department officials assured reporters that the proposal would not affect the IRS’ efforts to obtain information on foreign donations, already a significant problem that has led to devastating cyberattacks on the US.
The officials, who briefed reporters on a conference call on Friday afternoon, said the plan would not cover individuals who put up money for one individual’s campaign without regard to campaign committees.
A statement from the Treasury officials said the plan “would not require banks or financial institutions to directly monitor contributions to, or payments made by, presidential campaigns or committees”.
Biden offered his own explanation on Friday, telling reporters: “I’m not proposing to put the IRS in charge of checking the bank accounts of citizens.”
The political world was slow to catch on to the new proposal, even after the White House billed Biden’s speech as a major policy milestone.