Secretary of the Treasury Janet Yellen has relented in response to backlash over a controversial proposal by Democrats that would have allowed the IRS to gain information from any American bank account with more than $600 of activity in a year.
The measure initially came to light as a part of Democrats’ $3.5 trillion reconciliation bill. Trying to head off concerns from moderates, Democratic leaders and rank-and-file lawmakers have desperately marketed the bill as being completely paid for with no substantial effect on the deficit or national debt.
One proposal to achieve that end was the IRS measure. Despite immediate backlash, Speaker of the House Nancy Pelosi (D-Calif.) and Yellen adamantly defended the planned IRS overhaul.
Yellen, the former Chairwoman of the Federal Reserve who took control of the Treasury in January, said the measure is designed to target wealthy Americans who hide income from the IRS. Because of the measure, Yellen said the IRS will be able to collect more taxes from the wealthy and close the “tax gap.”
“We have a tax gap that over the next decade is estimated at $7 trillion, namely a shortfall in the amount that IRS is collecting due to a failure of individuals to report the income that they have earned,” Yellen said.
Now, Yellen has somewhat changed course, supporting a raise in the reporting threshold from $600 to $10,000.