We’re hearing rumors that Secretary Geithner has agreed to provide a cost benefit on the proposed nonresident alien interest reporting regulation before it is finalized. But as I reported the other day, he has also stated their intention to go forward with finalizing the rule in the near future. Under the circumstances it should be safe to assume that the cost-benefit analysis will fail to properly account for the well documented destruction which the regulation will cause if implemented.
CF&P has long called on Treasury to provide the legally required cost-benefit analysis to the rule, but there’s little reason to believe they’ll provide an accurate accounting of the rule’s damage. A study released by the Mercatus Center estimated that an older, more limited (and thus less destructive) version of the rule would drive $88 billion in foreign investment out of the US economy. The Florida Office of Financial Regulation has similarly cataloged the state’s numerous financial institutions that would be in danger of insolvency if Treasury finalizes the regulation. Yet in order to satisfy Secretary Geithner’s prediction that the regulation be finalized soon, any cost-benefit analysis by the agency would have to ignore these facts, as there simply is nothing on the benefit side to which they can point that would offset the damage.
It is time now for Congress to step in and put an end to this regulatory overreach. A clear resolution is needed, which only the nation’s elected legislators can provide, regarding the purpose of US tax and information reporting policies. Does the Treasury Department serve the people of the United States or foreign tax collectors? Must US citizens sacrifice their economic wellbeing in order to end financial privacy rights of foreigners, many of whom legitimately fear their corrupt and incompetent governments? To answer these questions, Congress must first step in and stop Treasury’s attempt at unilateral policy-making through regulation. Then, Congress should once again make clear their intention to keep the US an attractive destination for job-creating foreign investment.