November 19, 2002
The Honorable Paul H. O'Neill
Secretary of the Treasury
Washington, DC 20220
Dear Mr. Secretary:
I am writing to express my deep concern with the Internal Revenue
Service's decision to move forward with regulations that would drive much-needed investment funds out of our economy.
In particular, I am referring to proposed regulation 133254-02, which would mandate the U.S. offices of certain financial institutions report to the IRS the interest payments they make to nonresident aliens.
My concern is that these regulations appear to impose large, visible costs on our economy with no corresponding benefits. If finalized and enforced, these proposed regulations could drive the savings of foreigners
out of bank accounts in the United States and into bank accounts in other nations that better protect financial privacy. Such an exodus of savings would almost certainly lead to higher interest rates and lower
availability of bank loans for Americans. Startup businesses, mortgages borrowers, college students, and other who depend on bank lending would all be hurt.
The current scaled-back proposed regulations,
which apply only to nonresident aliens in fifteen European countries, would be somewhat less damaging to our economy than the original proposal. But even this could cause serious damage to our economy with little or
no apparent benefit.
I would be happy to discuss this matter in further detail with you. In particular, if there are benefits to this proposal that are not readily apparent, I would welcome any
information you could provide that would document them.
Orrin G. Hatch
United States Senate