Democrats to scale back Treasury's IRS bank reporting plan, raise threshold from $600 to $10,000

Senate Democrats are set Tuesday to announce a scaled-down version of the Biden administration's proposal to crack down on Americans it suspects are dodging taxes.

The administration's original proposal was greeted with overwhelming opposition from fiscal conservative groups, the banking industry and other over concerns about financial privacy.

The initial plan, conceived by the Treasury Department and Senate Democrats, would have allowed the Internal Revenue Service access to information on bank accounts that had at least $600 worth of annual deposits or withdrawals. 

The new proposal will still allow the IRS to access information on accounts that transfer or receive more than $10,000 annually. However, it will exclude all wage income from counting toward the $10,000 threshold. 

While Treasury Secretary Janet Yellen has been adamant in her position that the new measure would amount only to essentially a technical set of changes, critics of the proposal argue that the new rules would massively expand the IRS's ability to snoop on the accounts of Americans. 

The goal of the proposal, broadly, is to enable the IRS and Treasury to better identify wealthy tax evaders, which in turn will assist congressional Democrats and the Biden administration to pay for the proposed trillion-dollar spending plans of which it is a part. 

GOP attorneys general from more than a dozen states have signed a letter to President Biden and Yellen calling the plan "unacceptable, illegal, and contrary to the well-founded constitutional principles against illegal searches and seizures."