The on-again, off-again proposal to require banks to monitor and report on the activity of America’s bank accounts that have $600 or more in business transactions is back in the latest version of H.R. The House is currently debating the 5376 Build back Better Act.
This is the text exactly as it was amended:
SEC. 138402. APPLICATION OF BACKUP WITHHOLDING WITH RESPECT TO THIRD
TRANSACTIONS PARTY NETWORK
(a) In General.–Section 3406(b) is amended by adding at the end
The following paragraph is new:
“(8) Other reportable payments include payments in
Only where it is possible to settle third party transactions through a network
aggregate for calendar year is $600 or more.–Any payment in
Settlement of third-party network transactions must be
This information is required to be included on the return under section 6050W.
Each calendar year shall count as an annual reportable
payment only if–
“(A) the aggregate amount of such payment and all
Previous such payments by the third-party
Settlement Organization to Participating Payee
In such calendar years, the amount of $600 or more is
“(B) the third party settlement organization was
To file a return under section 6050W, you must be registered
Preceding calendar year for payments to
participating payee.”.
(b) Conforming Amendment.–Section 6050W(e) is amended by inserting
“equal or” before “exceed $600”.
(c) Effective Date.–The amendments made by this section shall
Calendar years that begin after December 31st 2021 are eligible.
(d) Transitional Rule for 2022.–In the case of payments made
Section 3406(b),(8)(A) (Cycle Year 2022)
Revenue Code of 1996 (added by this subsection) shall apply
inserting “and the aggregate number of third party network
Transaktions that were settled through a third party settlement agency
Respect to participating payees during such calendar years exceeds
200” before the comma at the end.
What this does is place a requirement on banks and credit unions to monitor ordinary Americans’ checking accounts to detect payments coming in from third-party payments sources. They include monies received from PayPal and CashApp as well as Venmo.
A parallel law will also require that these services monitor account payments up to $600 per year and report income to the IRS on Form 1099-K. It is due to take effect in 2022. This amendment to H.R. 5376 doubles up on the surveillance of small business America’s money activities.
These moves are necessary because the government must find tax income below the nickel-and-dime level in order to finance the huge infrastructure investment contemplated and funded by Congress. They literally dropped the threshold of “we care to tax you” from a $10,000 and over 200 transactions per year tolerance to a $600 per year level, regardless if it is even for one transaction, as the new line in the sand.
It says a lot how insufficient cash the government considers itself to be relative to spending.
The US is running out of ways to create artificial spending by government quantitative easing. As market forces push for a balance, inflation is threatening the US as it has in the past. Bottom line: You cannot print money long enough to make Venezuela a reality.
This imbalance is being actively debated by Wall Street pundits. Lawrence Kudlow penned the article “Stunning News on Inflation Shatters the Illusion of a Transitory Problem”, where he argues to stop the spending by Congress in order to stop the country from going into an inflation spiral. Larry writes, “Inflation is becoming embedded in our economy. That suggests it might well be higher and longer than a whole lot of people — including myself — might have thought five or six months ago. Put aside politics. Look at the numbers. They aren’t good. This story goes beyond pandemic-related supply chain problems.” He goes on to say, “… for crying out loud, stop federal spending and the central bank’s money printing.”
Congress’ $600 threshold takes a different and somewhat more foreboding attitude about paying for government investments. It says that Congress now believes that things like the gig economy and cottage business of America, a part of the small business portion of the US economy that comprises around 43.5 percent of the country’s gross domestic product (GDP), is their vast, untapped reservoir of tax revenue that will pay for our infrastructure reinvestment.
And, in what Harvard Law professor Shoshana Zuboff calls “The Age of Surveillance Capitalism,” the way Congress wants to find all that uncollected tax money is to monitor people’s PayPal and checking accounts. H.R. 5376.
At the extreme end of these solutions to monitoring the micro-transactions of ordinary people, there’s the “changing banking as we know it” theories to take demand deposit accounts (DDA’s) like checking and savings accounts out of the commercial banks and put all of America’s transactions into a computer system run by the Federal Reserve. As it examines the nomination of Saule Omarov to head the Office of the Comptroller of the Currency, the Senate Banking Committee considers this level of surveillance of American currency coming and going.
Does this really work? A good portion of the small-business economy pays their taxes. Is the US now such a poor nation that it cannot find other ways to tap the nation’s wealth reserves? Do we really have to resort to sending the IRS to knock on anyone’s door who receives over $600 in Venmo payments exchanging money for concert tickets each year?
Americans will tolerate such intrusion. Or, will they choose to opt out of US banks and take all their transactions to them? This would undermine the years-long effort of bank regulators in encouraging Americans not to trust US banks with their financial affairs.
It’s even possible that many third-party payment systems and merchant banking systems that power the gig and cottage economy could atrophy as a consequence of an IRS push to tax every nickel and dime under orders from Congress to pay for its spending packages.
These are serious political consequences. This has implications for the viability and sustainability of cottage industries as well. There’s the viability of 43.5 percent of US GDP consequence to consider. The potential for a well-constructed house of cards to be destroyed by a chase after pennies is real. And none of us should be naïve enough to believe that this intricate system of interdependencies we have built in an America where core factories have long gone offshore and been replaced by piece work to support our population can’t come tumbling down.
You have many options for financing infrastructure. Our country is extraordinarily wealthy. We have a massive liquidity reserve in the balance sheets of our industrial base that sits on the sidelines; hesitant because there’s no clear direction on where the US government wants to go other than continuing gridlocked autopilot. We have tremendous wealth locked up in our land, both financially and materials-wise, that can be converted into “found” wealth to invest in infrastructure.
Financial elite thinkers are available to advise the nation on these matters.
But we’d rather tax the little guy because zero-sum wealth transfer via taxation is the only thing we know how to do. That’s our core competency as a nation? That’s our post-industrial legacy to the world? Congress can’t put anything together better than this?
I’m not so sure this nation is being creative enough with the resources we must use to solve our need to build a better America.
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