Yes, "US tax collectors" would include the IRS and the tax collection departments of the various states. The IRS today gets information about how much interest the bank paid you for the balance held in your various accounts. It doesn't generally get information about how much money went into and out of your account though it will get notified if you make a suspicious transaction (walking in to the bank with more than $10,000 in cash in one or more transactions over a short period of time for example). Other than those suspicious activity reports, the vast majority of the information the IRS has about a taxpayer is the information that is found on the tax forms businesses send to the taxpayer (W2's, 1099's, K-1's, etc.) Of course, if the IRS is investigating you for committing a criminal offense, they can subpoena additional information from your bank. But they aren't sent that information proactively to determine who to consider investigating.
It's just a proposal so the exact contours are rather nebulous (and there are undoubtedly multiple versions of the proposal circulating around). Broadly, though, it appears to be suggesting that the 1099's that banks send customers to report their accumulated interest be expanded to include a few additional numbers-- total inflows and total outflows broken down by cash, flow to other accounts owned by the taxpayer, and flow to foreign accounts. Currently, the proposal would add these total amounts for any account whose balance exceeds $600 at any point during the year (I'm guessing it's not coincidental that they chose the same cut-off that businesses use to determine whether to issue a 1099 though I don't see why) but the Arizona Republic suggests they might increase that limit to something more like $10,000 to exclude low value accounts.
If the proposal passes, the intention would be to alert the IRS that, say, John Doe is reporting $40,000 in total income but John Doe's checking account saw $20,000 in cash deposits over the course of the year and a total inflow and outflow of $80,000. That might cause the IRS to audit Mr. Doe to see if he's working another job under the table or otherwise underreporting his income.
Whether this is positive overall is, of course, a political question. It would undoubtedly cause tax collections to increase when the IRS is able to detect the John Doe's of the world. Proponents suggest that it will be targeting the very rich who are failing to report large chunks of income to the IRS.
Personally, I'm pessimistic. My wager is that the very rich are largely sheltering their income entirely legally (making money through capital gains rather than income, getting non-taxable loans against their investments rather than selling those investments and realizing the gains, etc.) rather than getting paid under the table. Auditing the very rich who can afford very good lawyers and accountants that keep great records is costly and time consuming. On the other hand, auditing the various dishwashers, waitresses, nannies, and mechanics of the world who do a little off-the-books work or who might underreport some tips is pretty easy. They're not going to bring tax attorneys with them that are quoting tax court decisions about why Richy Rich's honey farm qualifies for some special tax-free status. They're going to either not contest the IRS's suggestion that they owe some additional taxes or they're going to come to the audit and roll over when the auditor says they owe a few hundred bucks. And knowing that the IRS is going to get that information, plenty of these working class folks are going to decide to avoid banks (partially or completely) which is unlikely to help them in the long term.
