Center for Freedom and Prosperity Foundation
For Immediate Release
Thursday, April 14, 2011
202-285-0244
www.freedomandprosperity.org
Coalition for Tax Competition Urges
Withdrawal of Destructive IRS
Interest-Reporting Regulation
(Washington, D.C., Thursday, April 14, 2011) The Center for Freedom and Prosperity Foundation, joined by 14 of the country’s most influential free market and taxpayer advocacy organizations, urged Treasury Secretary Timothy Geithner to immediately withdrawal an Internal Revenue Service (IRS) regulation “that would undermine American banks and the U.S. financial system.” The rule (REG-146097-09), proposed in January, would force U.S. banks to report deposit interest paid to nonresident aliens – even though Congress repeatedly has chosen not to tax that income as part of a strategy to attract capital to the U.S. economy.
Link to the full text of the Coalition for Tax Competition Letter:
http://www.freedomandprosperity.org/2011/letters/ctc-letter-to-treasury-secretary-geithner/
The letter from the Coalition for Tax Competition stated, “This initiative is an abuse of the regulatory process that seeks to overturn the law rather than to enforce it. Moreover, it will undermine our economy’s performance by causing capital to flee the American banking system. This will have a negative impact on homeowners, consumers, and businesses.” The letter further stated, “On several occasions, lawmakers have visited the issue of how to treat the interest income earned by nonresident aliens. In every case, the desire to attract capital to the American economy led legislators to decide not to tax the income and not to require that the income be reported to foreign tax authorities.”
When a similar proposal was initiated under the waning days of the Clinton administration, it was met by overwhelming opposition. More than 150 members of Congress came out against the legislation in the early 2000s. This time around, the entire bi-partisan Florida Congressional delegation has already expressed their disapproval, with many more expected to do so in the near future.
“The last time the IRS proposed this regulation, they held two hearings and were unable to find a single supporter,” said Andrew Quinlan, President of the Center for Freedom and Prosperity Foundation. “Congress was overwhelmingly against it then, and we are seeing a similar groundswell of opposition again this year. Driving capital out of the U.S. is simply not good fiscal policy.”
Dan Mitchell, Senior Fellow at the Cato Institute, added, “This recycled Clinton-era regulation represents bad tax policy, bad regulatory policy, bad privacy policy, and bad economic policy. If the IRS cared about the democratic process, the rule of law and America’s economic welfare, this misguided proposal never would have been put forward.”
Fellow Coalition for Tax Competition members added the following:
Grover Norquist. President, Americans for Tax Reform: “If the goal is to tell non-resident aliens to take their money out of the United States and park it somewhere else, this is a good way to go about it.”
Duane Parde, President, National Taxpayers Union: “So many aspects of U.S. fiscal and regulatory policy already send an unproductive and uncompetitive message to investors here and abroad, and implementing this interest reporting regulation would make matters far worse. For the sake of our own citizens as well as people and institutions around the world, the Treasury should abandon this reckless path to further economic turmoil.”
J. Bradley Jansen, Director, Center for Financial Privacy and Human Rights: “The government-mandated information sharing regulations are the heart of our identity theft problem. This proposal would exacerbate this problem by sending US financial record information abroad without adequate controls–already some US financial regulators have abused access to our data, just imagine what the Russians, Chinese, Nigerians and Venezuelans have in store for us.”
Karen Kerrigan, President and CEO, Small Business & Entrepreneurship Council: “Many of the financial institutions affected by this regulation are small businesses, and would face an overwhelming burden in implementing this unnecessary rule. Small businesses of all kinds also rely on the availability of investment capital to expand and create jobs. If this destructive regulation is allowed to be implemented, the inevitable capital flight would pull the rug out from under the very businesses we are relying on to drive economic recovery.”
Stephen J. Entin, President, Institute for Research on the Economics of Taxation: “Real tax reform would stop trying to impose layer after layer of taxation on saving and investment. If all nations gave all saving “Roth IRA” treatment, no government would need to track down any investment income by its citizens anywhere in the world, and every nation would create more wealth and have higher incomes.”
James L. Martin, President, 60 Plus Association: “Many areas with financial institutions that rely on a large percentage of international capital are also home to a high concentration of senior citizens. By threatening the financial institutions that serve seniors, this regulation directly endangers the financial well-being and security of the Greatest Generation. 60 Plus urges that the regulation be withdrawn while there is still time to protect America’s seniors.”
Representatives of the following 15 organizations signed the Coalition for Tax Competition letter:
Center for Freedom and Prosperity Foundation, American Family Business Institute, Americans For Prosperity, Americans for Tax Reform, Center for Financial Privacy and Human Rights, Citizen Outreach, Citizens Against Government Waste, Competitive Enterprise Institute, Independent Women’s Forum, Institute for Policy Innovation, Institute for Research on the Economics of Taxation, The National Tax Limitation Committee, National Taxpayers Union, 60 Plus Association, and Small Business & Entrepreneurship Council.
Note: The letter sent to Secretary Geithner was also submitted during IRS’s public comment period for the proposed regulation. In addition, representatives of the Coalition for Tax Competition will speak in opposition to the rule at the public hearing scheduled for April 25th.
Link to the full text of the Coalition for Tax Competition Letter:
http://www.freedomandprosperity.org/2011/letters/ctc-letter-to-treasury-secretary-geithner/
_____________________________________
Text of Letter and List of Signers
April 7, 2011
Hon. Timothy F. Geithner
Secretary of the Treasury
1500 Pennsylvania Avenue, N.W.
Washington, D.C. 20220
Dear Secretary Geithner:
We are writing to express our deep concern with an onerous regulation (REG-146097-09),
proposed by the Internal Revenue Service, that would undermine American banks and the U.S.
financial system by requiring the reporting of deposit interest paid to nonresident aliens.
This regulation is both contrary to existing law and is not needed to enforce tax law. This
proposed rule, which is a retread of a rejected Clinton-era proposal, should be withdrawn.
There are many reasons why this proposed regulation faces strong opposition from Congress,
private industry and public policy organizations. This initiative is an abuse of the regulatory
process that seeks to overturn the law rather than to enforce it. Moreover, it will undermine our
economy’s performance by causing capital to flee the American banking system. This will have a
negative impact on homeowners, consumers, and businesses.
The proposed regulation flouts statutory language and congressional intent. On several
occasions, lawmakers have visited the issue of how to treat the interest income earned by
nonresident aliens. In every case, the desire to attract capital to the American economy led
legislators to decide not to tax the income and not to require that the income be reported to
foreign tax authorities.
- The proposed regulation is not required to administer U.S. law. Interest income paid to nonresident aliens is not subject to tax. Other regulations and forms already ensure that citizens and/or resident aliens are not able to falsely claim nonresident alien status to benefit from this preferential tax status.
- The proposed regulation is not required by tax treaties. The IRS has openly admitted in the past that it wants to collect this data in order to provide the information to nations that have signed tax treaties with America. Tax treaties, however, only require the exchanging of information that is collected for purposes of domestic law enforcement. There is no obligation to impose additional regulatory burdens solely for the purpose of enforcing other nation’s laws.
- The proposed regulation would impose significant damage on the U.S. economy. The IRS failed to perform an economic analysis or conduct any cost/benefit analysis. Nonresident aliens are estimated to have deposited over $3 trillion in U.S. financial institution, yet if this regulation is approved, a substantial portion of this money will flee to competing institutions in other jurisdictions.
- The proposed regulation endangers human rights. Innocent people seeking to protect themselves and their assets from tyrannical, corrupt, and venal governments will be thwarted by this regulation. The unfortunate reality is that most of the world still lives in countries where there is persecution based on ethnic, racial, religious, economic and political characteristics. Sharing private financial information about U.S. bank deposits with thugs such as Venezuela’s Hugo Chavez should not be the objective of the U.S. government.
The likely withdrawal of several hundred billion dollars from the U.S. economy would have a
deleterious impact on many financial institutions. Borrowers also would suffer. Families seeking
mortgages, consumers seeking car loans, and businesses seeking money to create jobs and
expand operations all would be adversely affected. This means less economic growth at a time
when policymakers are overwhelmingly focused on promoting economic recovery.
Because the proposed rule is irreparably flawed, we urge its immediate withdrawal.
Sincerely,
Andrew F. Quinlan ~ President, Center for Freedom and Prosperity Foundation
Grover Norquist ~ President, Americans for Tax Reform
Duane Parde ~ President, National Taxpayers Union
Thomas A. Schatz ~ President, Citizens Against Government Waste
James L. Martin ~ President, 60 Plus Association
Karen Kerrigan ~ President and CEO, Small Business & Entrepreneurship Council
John Berlau ~ Director, Ctr. for Investors and Entrepreneurs, Competitive Enterprise Institute
Carrie Lukas ~ Executive Director, Independent Women’s Forum
Phil Kerpen ~ Vice President-Policy, Americans For Prosperity
J. Bradley Jansen ~ Director, Center for Financial Privacy and Human Rights
Tom Giovanetti ~ President, Institute for Policy Innovation
Dick Patten ~ President, American Family Business Institute
Stephen J. Entin ~ President, Institute for Research on the Economics of Taxation
Lew Uhler ~ President, The National Tax Limitation Committee
Chuck Muth ~ President, Citizen Outreach
___________________________________________
For additional comments:
Andrew Quinlan can be reached at 202-285-0244, andy@freedomandprosperity.org
Dan Mitchell can be reached at 202-218-4615, dmitchell@cato.org
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