Last week, Senator Tim Scott (R-S.C.), with Senate Finance Committee Ranking Member Mike Crapo (R-Idaho) and Senate Banking Committee Ranking Member Pat Toomey (R-Penn.), introduced the “Prohibiting IRS Financial Surveillance Act,” which would bar the IRS from implementing Democrats’ proposed reporting regime on the bank, loan, and investment accounts used by virtually every American. There is also a House companion bill introduced by Rep. Drew Ferguson (R-Ga.).  

Democrats’ reporting regime would force financial institutions to collect any personal or business account in which the total withdrawals and deposits exceed at least $10,000 throughout the year. The Joint Committee on Taxation (JCT) estimates that taxpayers in every single income bracket would be impacted by this reporting requirement. This is a radical violation of privacy, will subject virtually every American to IRS abuse, and is not consistent with Democrats’ goals of making the “rich pay their fair share.” 

Sen. Scott’s bill explicitly prohibits the disclosure of any account’s outflows and inflows: 

“The Secretary of the Treasury (including any delegate of the Secretary) may not require any financial institution to report – 

(1) the inflows or outflows of any account maintained by such institution, or  

(2) any balances, transactions, transfers, or similar information with respect to any such account…” 

The proposed reporting regime is a radical violation of privacy. This policy would give the federal government access to virtually every American’s account inflows and outflows. The proposal is not tailored nor targeted at all towards higher-income taxpayers or more “suspicious” behavior. Steven Rosenthal with the left-leaning Tax Policy Center explained that this reporting regime proposal would "bury the agency in a sea of unproductive information.” In fact, if a family's monthly expenses total just $833 a month, or about $200 a week, their bank information would be reported to the IRS.

Additionally, the IRS already abuses current reporting laws. The IRS Criminal Investigation Division (IRS-CI) regularly violated taxpayers’ rights and skirted or ignored due process requirements when investigating taxpayers for allegedly violating the existing $10,000 currency transaction reporting requirements, according to a 2017 report by the Treasury Inspector General for Tax Administration (TIGTA).  

The report found numerous abuses – IRS agents often failed to properly identify themselves, seized financial assets before ever having talked or consulted with investigated taxpayers, didn’t attempt to verify reasonable explanations investigated taxpayers offered, and did not inform taxpayers of important information nor the purpose of interviews. The outcome of these cases was often determined by how willing a taxpayer was to engage in litigation against the government, rather than how severe the alleged offense was, a clear violation of the Eighth Amendment. To make matters worse, the vast majority of taxpayers targeted were innocent. 

Finally, one must wonder: “Why would Democrats be pushing for this policy if their stated goal is to make millionaires and billionaires pay their fair share?” Evidently, even Democrats know that the IRS will need tools to use against the middle class in order to raise the amount of money they claim the IRS will raise through increased funding. 

Cosponsors of the "Prohibiting IRS Financial Surveillance Act" include Senators Mitch McConnell (R-Ky.), John Thune (R-S.D.), John Barrasso (R-Wyo.), Joni Ernst (R-Iowa), Roy Blunt (R-Mo.), John Cornyn (R-Texas), Roger Marshall (R-Kan.), Thom Tillis (R-N.C.), Cynthia Lummis (R-Wyo.), Steve Daines (R-Mont.), John Kennedy (R-La.), Jerry Moran (R-Kan.), Kevin Cramer (R-N.D.), Richard Shelby (R-Ala.), Mike Rounds (R-S.D.), Chuck Grassley (R-Iowa), Richard Burr (R-N.C.), Todd Young (R-Ind.), John Hoeven (R-N.D.), Cindy Hyde-Smith (R-Miss.), Roger Wicker (R-Miss.), Marsha Blackburn (R-Tenn.), Jim Risch (R-Idaho), Mike Braun (R-Ind.), Shelley Moore Capito (R-W.Va.), Ben Sasse (R-Neb.), Tom Cotton (R-Ark.), Mitt Romney (R-Utah), James Lankford (R-Okla.), Jim Inhofe (R-Okla.), Dan Sullivan (R-Alaska), Josh Hawley (R-Mo.), Marco Rubio (R-Fla.), Rick Scott (R-Fla.), Ted Cruz (R-Texas), Bill Hagerty (R-Tenn.), Tommy Tuberville (R-Ala.), Lindsey Graham (R-S.C.), Ron Johnson (R-Wis.), Rand Paul (R-Ky.), John Boozman (R-Ark.), Mike Lee (R-Utah), Susan Collins (R-Maine), Deb Fischer (R-Neb.), and Rob Portman (R-Ohio).

The IRS has a long record of targeting and harassing taxpayers. This proposed new financial reporting regime is a violation of privacy, would provide another way for the agency to target taxpayers, and would disproportionately harm low- and middle-income Americans. To protect taxpayers, all lawmakers should support the “Prohibiting IRS Financial Surveillance Act.” 

Partisanship and left-wing extremism epitomize the Biden administration. This has made it exceedingly difficult for the administration to finalize a deal with moderate Democrats on the multi trillion-dollar tax-and-spend package. What is important to note though is that this partisanship extends beyond the doors of the White House and is present at every agency throughout the federal government.

In particular, the Department of Justice (DOJ) and Federal Trade Commission (FTC) are led by liberals Merrick Garland and Lina Khan, respectively. Recently DOJ and FTC filed letters in support of the Federal Reserve’s notice of proposed rulemaking, which would amend provisions of Regulation II so that certain debit card routing restrictions would apply to transactions that occur online (i.e. card-not-present transactions).   

The fact that these agencies publicly support the Federal Reserve’s rulemaking to further bolster the routing restrictions from the Durbin amendment, which is widely lauded by Democrats, is par for the course.

If officials at DOJ and FTC were nominated by a conservative Republican administration, it is unlikely they would support policy that is clearly an expansion of a federal government mandate.

Moreover, the language on routing restrictions in the Durbin amendment has been misconstrued by the Federal Reserve. The language in statute requires the Federal Reserve to issue rules that prohibit restricting “the number of payment card networks on which an electronic debit transaction may be processed.” However, statute does not authorize the Federal Reserve to write rules “to impose an affirmative obligation” on banks and credit unions to make sure that each merchant and transaction is provided with at least two unaffiliated payment networks. Clearly, the Federal Reserve is overstepping its statutory authority in its proposed rulemaking.

The DOJ and FTC’s claims that banks, credit unions, and payment card networks are actively conducting anticompetitive behavior to the detriment of merchants is false. In many cases merchants are the ones limiting routing options. Banks and credit unions cannot help it if merchants refuse to use updated and more secure technology to access payment networks.

In 2011, the Federal Reserve admitted that banks and credit unions could not be at fault if a merchant decided to not install new card processing technology, such as card reader terminals. The Federal Reserve stated that, “To the extent a merchant has chosen not to accept PIN debit, the merchant, and not the issuer or the payment card network, has restricted the available choices for routing an electronic debit transaction.”

This issue continues today. Merchants have limited payment options for consumers to cut corners while the technology for alternative payment methods for card-not-present transactions has existed for years.

Merchants “have been making a conscious decision not to adopt technologies” that would broaden payment transaction choices for card-not-present transactions.

Biden’s DOJ and FTC have it all wrong. It is not the banks, credit unions, or payment card networks that reduce competition, it is the large multi-billion-dollar merchants that prefer to cut corners than prioritize secure and efficient debit transactions.

The Americans for Tax Reform Foundation today released the 2021 International Trade Barrier Index. Singapore, New Zealand, and the Netherlands scored the top spots for trade liberalization. While India, Algeria, and China ranked the worst for deploying the most protectionist trade barriers. Due to Brexit, the UK is the most improved moving from 8^th to 4^th as it implements its own tariff schedule reducing trade barriers between it and the rest of the world. 

Trade barriers on the rise 

The TBI measures the direct and indirect trade barriers imposed by 90 countries affecting 84% of the world’s people and 95% of world GDP. The 2021 edition records a global .5% increase in the use of trade barriers from the first edition in 2019. 

Western Europe, as a region, leads the world in open trade. Yet the region was held back by a large number of new digital trade barriers that impose cross-border data restrictions, content moderation, and limit the scope of intermediary liability.  Only India, Indonesia, and China impose more digital trade restrictions than the European Union.  

Barrier-free trade is associated with beneficial social and economic outcomes. The Index finds countries with lower trade barriers experience more prosperity, economic freedom, and human development; while countries with higher trade barriers perceive greater rates of corruption, abuse of the press, and illicit trade. 

The United States largely maintained its restrictive trade profile, improving slightly from 54^th to 51^st mainly due to nominal reductions in non-tariff measures as a response to COVID-19. Yet the U.S. position as a global rule maker may be in jeopardy as the UK, China, the European Union, and each the 90 countries in the TBI on average signed at least one additional trade agreement granting comprehensive market access and cementing new rules. China also improved its score by reducing its average applied MFN tariff rate. 

India increased use of trade barriers to maintain the last spot on the Index. Not only did India increase its MFN average applied tariff rate; at the start of the COVID pandemic India had one of the world’s highest tariff rates on medicines and medical equipment and during the pandemic India added the most restrictive non-tariff barriers on medical equipment and vaccines.  

Only six countries with a combined population of 142 million people enjoy the highest level of barrier-free trade, with a TBI score below 3.0 Meanwhile, 13 countries remain in the “highly protected” range with TBI scores above 5.0, where 3.8 billion people have severely limited access to barrier-free trade.  

Philip Thompson, author of the Index remarked “it is people who trade, and when barriers are in the way it’s harder to source material, respond to consumer preferences, and create win-win exchanges to recover from a pandemic.”  

The Index includes eight case studies from leading free-market think tanks around the world that examine harms trade barriers impose from the availability of affordable housing in Sri Lanka to diversion of legitimate market activity to criminal syndicates in the illicit market.  

• Mercosur and the Automobile Industry: Trade Diversion and Protectionism in the Southern Cone; By Pedro Raffy Vartanian & Vladimir Fernandes Maciel, the Mackenzie Center for Economic Freedom, Brazil 
• South Africa’s Next Steps for Trade Liberalization, By Christopher Hattingh, Free Market Foundation, South Africa 
• Benefits of Bilateral and Multilateral Free Trade Agreements; By Natalia Gonzalez & Tomas Flores, Libertad y Desarrollo, Chile 
• The Effects of Pre-Shipment Inspections (PSI) on Food Trade in Indonesia; By Kukuh Sembodho & Arumdriya Murwani, Center for Indonesian Policy Studies, Indonesia 
• Protectionist Tariffs Compromising Sri Lanka’s Middle-Income Earners’ Right to Shelter; By Sathya Karunarathne & Aneetha Warusavitarana, Advocata, Sri Lanka 
• The Illicit Trade of COVID-19 Items: Poor Trade Enforcement as a Barrier to Access; By Giorgina Agostini, Rowan Saydlowski, & Philip Thompson, Property Rights Alliance, U.S.A 
• The Proliferation of Digital Trade Barriers Threatens Innovation, Free Trade; Competition, and Free Speech; By Philip Thompson & Andreas Hellmann, Americans for Tax Reform, USA 
• Lessons in High Tobacco Taxes and Smuggling in the Philippines; By Bienvenido S. Oplas, Jr., President, Minimal Government Thinkers, Philippines 

The executive summary of the International Trade Barrier Index can be found [here] and the interactive website is [here]

Tomorrow, the Senate Judiciary Committee will be holding a markup on S. 2428, The False Claims Amendments Act of 2021, legislation introduced by Senator Chuck Grassley (R-Iowa) and Patrick Leahy (D-Vt.). This bill would flip due process on its head by modifying the burden of proof in False Claims Act (FCA) cases so that companies would be required to prove their innocence, instead of requiring the government to prove its own case against defendants. Lawmakers should reject this proposal.

Specifically, the legislation requires defendants to disprove the plaintiff’s contention with a heightened “clear and convincing” standard of proof. In this way, the defendant’s burden to prove their innocence is higher than the plaintiff’s burden of proof to prove the defendant’s guilt. To make matters worse, this would apply retroactively to any FCA case that is pending on the date of enactment.  

FCA cases are taken up when the government suspects a company has falsely billed the government, over-represented the amount of a delivered product, or under-stated an obligation to the government.  

Adopting this new evidentiary standard ignores the views of an unanimous Supreme Court. Universal Health Servs. v. U.S. ex rel. Escobar explained that the FCA materiality element is “demanding” and “rigorous” because of its potentially penal application, detailing that the FCA “is not ‘an all-purpose antifraud statute’ or a vehicle for punishing garden-variety breaches of contract or regulatory violations.”   

In this case, the Court required the government to prove that the alleged false claim “went to the very essence of the bargain,” but imposed no additional burden on defendants in these cases. Imposing a higher burden of proof for defendants than for plaintiffs in these cases is the opposite of what the SCOTUS attempted to achieve in Escobar. 

While this amendment makes it more difficult for companies to defend themselves, it also shifts the cost of government discovery to defendants. It would require defendants to pay the government’s attorney fees and discovery costs unless the defendant proves that the information sought is “relevant, proportionate to the needs of the case, and not unduly burdensome.” As the National Law Review notes, this would “effectively require defendants to pay for the costs of government discovery in nearly every case because of the practical impossibility of proving a negative – the absence of an undue burden on the government.”  

The Grassley-Leahy bill would establish an evidentiary standard that is antithetical to both the aforementioned 2016 SCOTUS case and the principles which guide the function of our court system. If lawmakers are serious about protecting defendants’ presumption of innocence, a principle core to this country’s judicial system, they should reject this legislation.