At a House Appropriations subcommittee hearing on Wednesday, Treasury Secretary Timothy Geithner was questioned by Rep. Diaz-Balart regarding an IRS proposal sure to drive hundreds of billions in foreign investment from the US. As CF&P has warned on many occasions, the proposed regulation to collect information from foreign depositors to share with their home governments raises significant privacy and human rights concerns that will ultimately drive those depositors to relocate their money offshore, where financial privacy rights are respected.
At the hearing, Secretary Geithner offered little more than ‘you can trust us’ to assuage these concerns. The IRS, he says, will only share the information with countries that have tax information exchange treaties with the US.
There are 2 fundamental problems with his argument:
- The US has treaties with Venezuala and Mexico. Citizens in these countries face significant threats from corrupt government and/or high crime rates.
- Depositors from other nations aren’t going to trust the US, regardless of whether we currently have a treaty with their home country. Rather than wait around for new treaties to be signed, they’ll preempt the potential privacy invasion and flee from US banks.
Unfortunately, and despite significant Congressional opposition, Secretary Geithner says the rule will be finalized soon. As CF&P has documented (including in this Economic Lessons video), this will mean a significant loss of foreign investment in the US and thus a hit to the US economy.
