'Banks do not work for the IRS,' Lummis announced. 'This is an invasion of privacy. Wyoming's people literally will find alternatives to traditional banks just to thwart IRS access to their personal information, not because they're trying to hide anything, but because they are not willing to share everything.'
The senator asked Yellen if she was 'aware how unnecessary this regulatory burden is?'
'Do you distrust the American people so much that you need to know when they bought a couch?' Lummis asked. 'Or a cow?'
'I am astounded by what you're supporting and proposing. I think it's invasive. I think privacy for individuals is being ignored. And I think that treating the American people like they are subjects of the government is unconscionable.'
Yellen told Lummis that she thinks the senator is misunderstanding the proposal, as it needs banks to hand over the IRS data on aggregate inflows and outflows of an account for transactions over $600, instead of details on each individual transaction.
Yellen remarked that the tax gap is supposed to swell to $7 trillion over the next decade, about 15% of taxes owed.
The IRS would know how much money is in an individual's bank account in a given year, whether the individual made income on that account and precisely how much was going in and out.
The deep dive into financial transactions would be financed by earmarking an additional $80 billion to the IRS.
'The IRS has a wealth of information about individuals,' she continued. Yellen said the proposal would target high earners who have 'opaque sources of income.'
'A $600 threshold is not usually where you're going to find the massive amount of tax data you think Americans are cheating you out of,' the Wyoming Republican shot back.
'That's true but it's important to have comprehensive information,' Yellen announced.
The proposal would ask banks to report gross inflows and outflows to the IRS, including transactions from Venmo, PayPal, crypto exchanges, and the like to fight tax evasion.
The IRS estimates that compliance on taxes due on wages is 99% while compliance on 'less visible' sources of income is just 45%.
The Treasury Department claimed that the plan would have little effect on 'already compliant' taxpayers, yet would help the IRS better target its audits.
'For non compliant taxpayers, this regime would encourage voluntary compliance as evaders realize that the risk of evasion being detected has risen noticeably,' the Treasury Department stated.