Janet Yellen still supports making banks give the I.R.S. new customer data.

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WASHINGTON — Treasury Secretary Janet L. Yellen said on Tuesday that she still supported an embattled proposal that would require banks to turn over additional information about their customers’ accounts to the Internal Revenue Service, arguing that the proposal would help ensure that the wealthy were not dodging taxes.

The bank reporting idea had been central to the Biden administration’s plan to shrink the $7 trillion “tax gap” — the shortfall in taxes that are owed but not collected — and help pay for the $2.2 trillion social policy and climate legislation that Democrats are trying to pass this year. After fierce backlash from banks and Republicans, who derided the idea as an invasion of privacy, it was dropped from the bill that House Democrats passed this month.

The Biden administration has been hoping that a more modest version of the proposal could make it into the Senate’s version of the bill. Ms. Yellen said she still backed the concept of having banks share data for accounts with total annual deposits or withdrawals of more than $10,000, with exceptions for wage earners or people who receive federal benefits like Social Security.

“I do support it,” Ms. Yellen said at a Senate Banking Committee hearing. “I think it’s important that the I.R.S. have visibility into opaque income streams and that’s an important way of improving tax compliance.”

Republicans insisted that the I.R.S. could not be trusted with additional data because of recent leaks of taxpayer information and the agency’s history of targeting political groups.

“Certainly my constituents can’t condone this aspect of the Build Back Better plan that would give even more authority and a tenfold increase in the budget to snoop on more Americans, audit more Americans and invade our privacy,” Senator Bill Hagerty, Republican of Tennessee, said.

Ms. Yellen said the plan was not an attempt to “snoop” on taxpayers or collect detailed information about their banking activity.

“The burden on financial institutions was minimal, and there was no attempt to target income earners whose actual incomes are below $400,000,” Ms. Yellen said.

Although the chances of the bank reporting requirement’s making it into the final legislation appear slim, Democrats are counting on an investment of $80 billion to expand the enforcement capacity of the I.R.S. to generate $400 billion of additional tax revenue over a decade. That estimate, which is more optimistic than the projections of the Congressional Budget Office, allows the Biden administration to claim that the new spending will not add to the national debt.

“These are very important resources that are needed to make sure that the wealthiest individuals, and corporations particularly, comply with the tax laws and pay their fair share, what’s due,” Ms. Yellen said.


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