Center for Freedom and Prosperity
Date: November 17, 2011
To: Supporters of tax competition, fiscal sovereignty, and financial privacy
From: Andrew Quinlan and Brian Garst
Re: Congressional Hearing on IRS Nonresident Alien Interest Reporting Proposal
The proposed IRS non-resident alien interest deposit reporting requirement received an unfriendly reception at an October 27 hearing held by a subcommittee of the House Financial Services Committee. We were on hand to represent CF&P, and noted that the hearing was both a testament to our success in disseminating the many arguments against the proposed regulation, as well as affirmation of the need to continue fighting vigorously against the IRS proposal.
Testifying at the hearing were three panelists opposed to the rule and one in support. Testifying against the rule was J. Thomas Cardwell, former Commissioner of the Florida Office of Financial Regulation; Alex Sanchez, President of the Florida Bankers Association; and Gerry Schwebel, Executive Vice President of International Bancshares Corporation. In support was Rebecca Wilkins of Citizens for Tax Justice, and part of the liberal network which works closely with Senator Levin’s office promoting a high-tax agenda.
Several members of the Committee offered opening statements. CF&P is pleased to note that the criticisms we have levied for over 10 years were heavily represented. Cited in the opening statements was the threat of capital flight, including the estimation done by the Mercatus Center which CF&P has first brought to light years ago and continues to highlight today; the lack of a cost-benefit analysis by the IRS, which has consistently been included as a major criticism by CF&P; the threat the rule poses to human rights, an issue which dovetails with our commitment to financial privacy; and the IRS’s complete disregard for 90 years of Congressional intent, as first evidenced in a study published by CF&P.
Congressman Posey and Financial Services Chairman Bachus, though not members of this particular subcommittee, were both also present. Chairman Bachus really drove home our point on financial privacy when he asked, “Do we really want this blood on our hands?” Bachus and Posey also quoted from portions of the letter signed by the entire Florida House delegation against the rule, and then entered it into the record. CF&P worked with Cong. Posey and others as they drafted these delegation letters, in an effort to ensure that our objections were included, and helped recruit signers.
None of the members present at the hearing, even on the Democratic side of the aisle where some ideological support could be expected, were gung-ho in support of the rule, although Senator Levin’s office did submit a letter for the record which is no doubt effusive in its love of the proposed regulation. At most, some members on the Democratic side hedged their bets and offered noncommittal commentary citing both sides of the debate. Others, such as Rep. Hinojosa of Texas, were clearly opposed.
The same cannot be said for Ms. Wilkins, whose testimony provides a blueprint of the baseless charges that supporters of financial privacy need to be prepared to debunk. Both her prepared remarks and her answers to member questions included some particularly outrageous claims. Not only was the old and discredited $100 billion in tax evasion figure bandied about, but Ms. Wilkins boldly declared that “those who oppose the proposed rules have a vested interest in facilitating tax cheating.” There was push-back from some members in response to this diversionary claim, and Mr. Cardwell also testified that in his work as Financial Regulator he had found “no credible evidence” that these funds came from tax cheating.
During a break in the hearing, we talked with Alex Sanchez and Gerry Schwebel, who both thanked us for CF&P’s years of work in fighting all versions of the IRS proposal. Gerry also praised our video on the subject as “powerful,” and noted that he has personally shown it to clients in order to educate them on the issue.
CF&P has been aggressive on Capitol Hill in recent months, working to educate members of Congress on the IRS proposal. In total we’ve met with over 100 House and Senate offices, and are pleased to report growing support for the two pieces of legislation currently in Congress to block the rule. Rep. Posey’s bill (H.R. 2568) currently has 9 cosponsors, and Sen. Rubio’s (S. 1506) has 18. Both have bipartisan support.