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February 4, 2002

The Honorable Paul O'Neill
Secretary of the Treasury
Department of Treasury
1500 Pennsylvania Avenue
Washington, DC 20220

Dear Secretary O'Neill,

 Tax competition between nations is a liberalizing force in the world economy, one that forces policy-makers to be more fiscally responsible lest they drive economic activity to competing jurisdictions with lower tax burdens. We see this process work at the state level and we see how it helps control fiscal excess at the international level, as well.

This is why I am glad to see that you have resisted the so-called "harmful tax competition" initiative being pushed by the Organization for Economic Cooperation and Development (OECD). I urge you to be equally skeptical toward the European Union's proposed Savings Tax Directive. As a low-tax country by industrial world standards, the United States has little if anything to gain by participating in a tax cartel designed to help high-tax nations. Indeed, our economy would likely suffer serious harm from participation in this initiative since the rules that the OECD has put forth would commit our nation to effectively eliminate the favorable tax and privacy laws that attract so much capital to the U.S. economy.

 Governments, like private businesses, should be subjected to the discipline of market competition. Indeed, I look forward to working with you to implement tax rate reductions and other tax reforms that will reduce the cost and taxation of capitol and make America even more attractive to the world's investors and entrepreneurs. Thank you for your attention to this important issue.

Sincerely,

Rick Santorum
United States Senate

RJS/ps

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