Treasury Secretary Yellen Wants Transactions Above $600 To Be Reported. Terrible Policymaking

And, while on paper, the rule may look like something minor, it should be pointed out that its consequences will be far-reaching.

When asked as to why such a weird tax reform was being introduced all of a sudden, Yellen noted that the requirement will help fill the $7 trillion tax gap ‘from places where the information on income is opaque and can be hidden’. Analyzing this statement, it seems all too clear that she may be alluding directly to cryptocurrencies, an asset class she has vehemently opposed since coming into power last year.

Yellen has been a vocal critic of digital currencies for some time now, with the former Federal Reserve chairman calling Bitcoin an illicit medium of finance earlier in 2021. Not only that, but she also opined that cryptos — BTC in particular — were an extremely laborious and ineffective medium of trade that took up too much energy. Lastly, she has also been reported as brushing off Bitcoin as being a highly speculative asset, adding:

“It can be extremely volatile, and I do worry about potential losses that investors can suffer.”

What Does the Proposal Entail Exactly?

As part of the above-stated proposal, financial institutions operating within the US are required to report the total amount of money that went in and out of their coffers (including all loan and investment accounts) for every calendar year — given that the total value of the said transactions is at least $600.

To put it another way, if the total volume of funds entering/exiting one’s accounts, be it debit or credit, equals a bare minimum of $600, it is the duty of the financial institution in the custody of the funds — which could range from paychecks to funds accrued through avenues like Western Union, PayPal and everything else in between — to report those numbers to the IRS.

Why This is a Poor Decision

Straight off the bat, even though the government always wants to establish a clear link between its citizen’s finances and their tax statuses, the power that can potentially be acquired over one’s personal info by introducing such a low tax reporting ceiling could have far-reaching implications in regard to sensitive issues such as individual data privacy and security.

Furthermore, another major concern that has arisen due to the $600 inflow/outflow reporting requirement is that fintech products — such as various crypto purchasing apps, payment platforms — will also fall under the purview of the above-said rules. In this regard, the US Treasury Dept. noted that any “accounts with characteristics similar to financial institution accounts will be covered under this information reporting regime.”

As a result, people’s private data associated with these accounts can be accessed by various government agencies without the knowledge of their owners.

Lastly, following the release of Secretary Yellen’s new taxation requirements, prominent individuals operating within the global economic sector such as Alan Butler, executive director, and president of the Electronic Privacy Information Center, noted that the above-stated reporting scheme would be beneficial if the threshold would have been higher.

However, the fact that transactions as small as $600 are also included in the rules indicates that the government may be using them as a means of surveilling its citizens rather than simply keeping a tab on any illicit financial activities taking place within its borders.

What Lies Ahead?

While the US government continues to harp on the fact that the new rules only require individuals to report two additional pieces of information, such as aggregate inflows and aggregate outflows from the past fiscal year, as per a Senate committee meeting last month, it came to light the confidence of the masses in the IRS’ ability to safeguard personal data is currently at an all-time low. Therefore, it will be interesting to see how things continue to play out, especially as we head into a future that is heavily influenced by future-oriented technologies like cryptocurrencies, stablecoins, CBDCs, and so forth.

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