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[Link to signed PDF copy]
March 11, 2003
The Honorable John Snow
Secretary
Department of the Treasury
1500 Pennsylvania Avenue
Washington, DC 20220
Dear Secretary Snow:
I trust you are enjoying the rough and tumble action as Secretary of the Treasury. You are doing a great job during these trying times.
Your leadership at the Department of the Treasury will be crucial to help the President's pro-growth tax package. I hope we will have many opportunities to work together in the coming years.
As part of your
efforts to help boost economic growth and job creation, I respectfully ask you to withdraw a Clinton-era Internal Revenue Service (IRS) regulation (REG-133254-02) that would require U.S. banks to report deposit
interest paid to nonresident aliens. This initiative is bad regulatory policy and it is bad economic policy.
It is bad regulatory policy because the IRS is supposed to enforce the law, not undermine the law.
For more than 80 years, Congress has chosen not to tax nonresident bank deposit interest. This long-standing policy exists to help bring capital to the U.S. economy, where it will be used to finance home mortgages,
car loans, and small business expansion. Yet the IRS now wants to collect information on nonresident alien bank deposit interest so foreign governments can tax the income. This is completely inconsistent with
legislative intent. Needless to say, the IRS should not be trying to undermine the democratic process through regulatory edict.
It is bad economic policy because foreigners have more than $1 trillion in U.S.
banks, and this money easily can shift to Zurich, Hong Kong, London, and the Caribbean if U.S. policy becomes inhospitable. We don't know how much money will leave U.S. banks if the regulation is implemented, but it
is worth noting that $40 billion of savings deposits fled the country in the first quarter of 2001 after the Clinton Administration first announced the regulation. Indeed, this probably explains why the Federal
Deposit Insurance Corporation and American Bankers Association are both opposed to the regulation.
Nonresident alien bank accounts provide affordable credit for American businesses and consumers. This means
jobs for American workers. The IRS should not be allowed to unilaterally change the law and hurt our economy. I urge you to permanently withdraw the proposed regulation. Please treat this letter in conformance with
all applicable rules and ethical guidelines.
With kind personal regards, I remain
Sincerely,
George Allen
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