Here’s an update on S. 1813, the “highway bill” which would ban credit cards and wire transfers from non-FATCA banks and confiscate passports of U.S. Persons abroad who refuse to pay thousands of dollars per year to accountants to file forms like 3520, 8621, and 8858 that no one in the Homeland has ever heard of.
In the past few weeks, while we’ve all been distracted by Eduardo Saverin’s renunciation and the Ex-PATRIOT Act, Congress has been quietly continuing its efforts to gnaw away at the other rights of U.S. Persons abroad. On 8 May, the House and the Senate held the first meeting of their joint Surface Transportation Conference. The conference aims to achieve bicameral agreement on a “highway bill” before the 30 June expiration of existing transport funding measures. According to an article in The Hill, Sen. Harry Reid (D-NV), the author of the passport-confiscation amendment (S.A. 1761), is “cautiously optimistic” that the Conference can make that deadline.
In a press release last week, Sen. Barbara Boxer (D-CA) stated that 80% of the bill was “uncontroversial”, and that the Conference is continuing to make progress on the remaining 20%. (American Citizens Abroad issued a position paper last week and a press release a few days ago to remind Congress that the passport-confiscation provisions are hardly “uncontroversial”). No transcript of Boxer’s remarks is available, but you can watch the video on YouTube. Details are very slim as she refuses to discuss specific provisions, but apparently some sort of compromise has been reached on the revenue offset provisions of the bill. As the NationalJournal Transportation Experts Blog puts it:
The pay-fors in a compromise bill will still most likely closely resemble what’s in the current Senate bill, a fact underscored by the Joint Committee on Taxation’s Friday release comparing the revenue provisions in the House and Senate bills, showing that, well, the House bill doesn’t have any.
However, some House Republicans apparently still oppose the Senate bill; in particular, as far as I can understand this report from The Hill, Rep. Paul Broun (R-GA) is opposed to all of the revenue offsets and wants to limit highway spending to what can be brought in by the federal gas tax. The Hill suggests that this is a sign that he and his allies will take a hard line against the Senate bill during the upcoming negotiations.
The JCT report about the “highway bill” makes for amusing reading. It includes revenue projections for each portion of the bill. For Reid’s “Revocation or Denial of Passport in Case of Certain Tax Delinquencies”, it predicts $69 million of additional revenue in 2013, rising to $159 million by 2015 and totalling $743 million by 2022. For Levin’s “Authorize Special Measures Against Foreign Jurisdictions, Financial Institutions, and Others That Significantly Impede United States Tax Enforcement”, it predicts $45 million of additional revenue in 2012 and a total of $1 billion over the next decade.
In both cases, their revenue projections peak around 2015 and then hold steady at around half to two-thirds of the peak value. Apparently they expect there’s a sort of “backlog” of taxes that are not being collected right now that could be collected in the future under these measures, and that afterwards collections will continue at a steady level. This of course misses the fact that taxpayers are undoubtedly going to alter their behaviour in response to these new provisions.
It’s obvious what the response to the passport provisions will be. Right now, five to seven thousand Americans naturalise in European Union countries each year; faced with the threat of their U.S. passports being taken away for missing out on obscure tax forms when no taxes are actually owed, more U.S. Persons abroad will likely pursue naturalisation in their countries of residence. Even if they do not renounce U.S. citizenship at the same time, this will remove some of the leverage that the IRS has to hold them hostage in order to extract fines.
The response to Levin’s attack on non-FATCA banks will be more complex. Certainly one obvious effect is that tourism spending in the U.S. will decrease. A lot of non-Americans who have never heard of FATCA are going to come to the U.S., try to check into their hotels or pay for dinner, and find that their credit cards get declined and their ATM cards get eaten; they’ll return home confused and angry and with far fewer U.S. purchases. Beyond that, it’s an open question whether affected customers will blame their banks and put pressure on them to cooperate with FATCA (the outcome Levin hopes for), or whether this will cause large numbers of tourists to choose another destination for their next vacation after hearing their friends’ credit-card horror stories.