Democrats who want to spend more money than a reasonable government budget will allow often talk about “improving tax compliance” and the “tax gap,” suggesting that there really is enough money to pay for lots of new spending if only the tax code was enforced more aggressively.
A 2021 proposal to require financial institutions to report inflows and outflow for every account with at least $600 in or out in a year was estimated to raise $206 billion over the 2022-31 budget window, according to the staff of the Congressional Joint Committee on Taxation. However, the idea of scrutinizing small bank accounts for suspected unreported income ran into obvious political problems.
The JCT staff pointed out that more than half of the “tax gap” revenue was estimated to come from taxpayers with reported income between zero and $50,000. While it’s possible that the intense IRS scrutiny would catch well-off tax cheaters, it seemed just as likely that mandatory reporting of $600 in financial activity would ensnare moms selling crafts on eBay to help pay the family’s bills.
