( Washington , D.C. , Tuesday, February 21, 2012) The Center for Freedom and Prosperity Foundation, joined by 23 of the country’s most influential free market and taxpayer rights organizations, sent a letter to Treasury Secretary Timothy Geithner urging withdrawal of an Internal Revenue Service (IRS) regulation that would discourage capital from the U.S. economy and weaken the American financial system.
The rule (REG-146097-09), proposed in January 2011, would force U.S. banks to report deposit interest paid to nonresident aliens – even in the face of 90-plus years of law designed to attract such funds and despite bipartisan Congressional opposition. Text of the letter can be found below.
Link to Coalition for Tax Competition Letter:
(Note: link removed due to Word Press restrictions… You will need to google the title to the full letter or read below.)
The letter from the Coalition for Tax Competition expresses the frustration felt by many who would be impacted by a regulation that “will do considerable damage to the U.S. economy and its already fragile banking system,” while serving no domestic tax purpose. The letter also highlights the failure of the IRS “to conduct a cost-benefit analysis on the rule,” most likely “because there is no benefit and they are unwilling to address the considerable evidence regarding the regulation’s high costs.”
In addition to the arguments cited in the letter, the regulation would have serious human rights implications for many living overseas, who turn to the U.S. banking system as a source of security, stability and safe keeping. Exposing the deposit information of citizens from countries such as Venezuela and Mexico to their home governments is often tantamount to placing them and their families in harm’s way.
The IRS has continued to pursue implementation of the rule despite strong bipartisan opposition from Congress, organized under the leadership of Senator’s Rubio, Nelson, Cornyn and Hutchison, as well as Rep. Posey in the House of Representatives.
“The only people who support this regulation are international tax bureaucrats and tax-and-spend zealots in Washington ,” notes Andrew Quinlan , President of the Center for Freedom and Prosperity Foundation. “Lawmakers of both parties who are elected to serve the interests of American taxpayers are overwhelmingly against this regulation.”
“This proposed regulation would be the camel’s nose under the tent,” warned Dan Mitchell of theCato Institute, who added that, “the IRS, if successful with this proposal, will doubtlessly demand reporting of other forms of interest, as well as capital gains.”
Additional comments from Coalition for Tax Competition Signers:
John Berlau, Director, Ctr. for Investors and Entrepreneurs, Competitive Enterprise Institute:
“All at once, this rule would (A) Reduce U.S. competitiveness in attracting foreign capital; (B) harm the safety and soundness of U.S. banks and credit unions; (C) threaten the privacy and safety interests of individuals throughout the world by putting sensitive information in the hands of governments with lax data security systems, in which criminal gangs could access the data to target victims for kidnapping; (D) empower corrupt dictators by giving them access to financial information of dissidents who may hold U.S. accounts.”
Pete Sepp, Executive Vice President, National Taxpayers Union:
” America ‘s prosperity already suffers because of an uncompetitive tax system, and this interest reporting regulation would make the pain much worse. While Congress must do the heavy lifting on tax reform, the Treasury can and should keep from adding to the burden by canceling this unnecessary and unproductive rule.”
J. Bradley Jansen, Director, Center for Financial Privacy and Human Rights:
“It is no secret that tyrannical regimes in history have used bank and tax information for gross violations of human rights. The IRS simply cannot guarantee that information will not be shared with any country that will now or in the future abuse the information, and thus must rescind the proposal.”
Palmer Schoening, Director of Federal Affairs, American Family Business Institute:
“Pushing capital overseas will harm the family businesses which rely heavily on its availability. At a time when the economy is still struggling to recover and generate jobs, it is foolish to make it harder for family businesses to expand and add workers.”
Bill Wilson, President, Americans for Limited Government:
“The IRS is creating a mountain of paperwork to report interest income of foreign persons that is not even taxable under current law. There is simply no upside for a regulation that will have the same effect as a tax on such income, which is to drive foreign investment out of the U.S. What was the IRS thinking?”
Seton Motley, President, Less Government:
“We have spent the last sixty plus years ratcheting up the taxes and regulations on businesses. We then act surprised when they leave for other, more friendly countries in which to do business. President Obama’s answer to this government-induced problem is – more government. Preventing this latest reporting regulation from being effected is an important step towards returning to tax and regulatory sanity – and increased domestic employment.”
Text of Letter and List of Signers
February 20, 2012
Hon. Timothy F. Geithner
Secretary of the Treasury
1500 Pennsylvania Avenue, N.W.
Washington , D.C. 20220
Dear Secretary Geithner:
We are troubled by the Treasury Department’s failure to withdraw a rule that faces near universal opposition, provides no benefit to the U.S. , and threatens to drive billions in much needed foreign investment out of the economy. We are therefore writing again to express our opposition to the nonresident alien deposit interest reporting regulation (REG-146097-09), and ask that it be withdrawn.
As has been argued by both members of Congress and financial experts, the regulation will do considerable damage to the U.S. economy and its already fragile banking system. There is no requirement under existing tax treaties that this information be reported, nor any obligation to impose regulatory burdens for the purpose of enforcing other nations’ laws.
Moreover, the IRS has failed to conduct a cost-benefit analysis on the rule, presumably because there is no benefit and they are unwilling to address the considerable evidence regarding the regulation’s high costs.
At a time when lawmakers remain focused on increasing employment, it is imprudent for the IRS to consider regulations that would drive job-creating investment out of the country. We ask again that this regulation be withdrawn.
Andrew F. Quinlan ~ President, Center for Freedom and Prosperity Foundation
Grover Norquist ~ President, Americans for Tax Reform
Pete Sepp ~ Executive Vice President, National Taxpayers Union
Phil Kerpen ~ Vice President for Policy, Americans for Prosperity
R. Bruce Josten ~ Executive Vice President Government Affairs, U.S. Chamber of Commerce
J. Bradley Jansen ~ Director, Center for Financial Privacy and Human Rights
John Berlau ~ Director, Ctr. for Investors and Entrepreneurs, Competitive Enterprise Institute
Karen Kerrigan ~ President & CEO, Small Business & Entrepreneurship Council
Terrence Scanlon ~ President, Capital Research Center
Eli Lehrer ~ National Director and Vice President, The Heartland Institute
Erika Nolan ~ Executive Director, The Sovereign Society
Wayne Brough ~ Chief Economist and Vice President of Research, FreedomWorks
David Williams ~ President, Taxpayers Protection Alliance
Carrie Lukas ~ Managing Director, Independent Women’s Forum
Jim Martin ~ Chairman, 60 Plus Association
Tom Giovanetti ~ President, Institute for Policy Innovation
Lew Uhler ~ President, National Tax Limitation Committee
Thomas A. Schatz ~ President, Citizens Against Government Waste
Bill Wilson ~ President, Americans for Limited Government
Stephen J.. Entin ~ President and Executive Director, Institute for Research on the Economics of Taxation
Seton Motley ~ President, Less Government
Palmer Schoening ~ Director of Federal Affairs, American Family Business Institute
Mario H. Lopez ~ President, Hispanic Leadership Fund
Charles Sauer ~ President, Market Institute