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January 10, 2003 The Honorable George W. Bush Dear Mr. President: We are writing to applaud your economic growth package. By eliminating the double-taxation of dividends and lowering marginal tax rates on productive behavior, your proposal will boost the economy and make America more competitive. This will mean better jobs and higher wages for American workers. Moreover, we believe your proposal is an important step toward fundamental tax reform. Your proposals to fix the tax code are based on common-sense principles such as taxing economic activity only one time, and taxing economic activity at low rates. The core elements of your tax package reflect these important goals. But we also want to take this opportunity to express our opposition to a proposed IRS regulation (REG-133254-02) that would compel American banks to report the deposit interest paid to nonresident aliens. This burdensome new proposal - a legacy of the previous Administration - is not needed to enforce U.S. tax law or combat illegal money laundering. It will only harm financial markets by driving capital out of the American economy. Indeed, the Chairman of the Federal Deposit Insurance Corporation recently warned that it could undermine the safety and soundness of our banking system by leading to a large loss of deposits. This regulation could severely undermine the pro-growth provision of your tax package. Some economists believe hundreds of billions of dollars will flee our economy and that gross domestic product will drop by 0.8 percent if the regulation is finalized. Even if the actual damage is just a fraction of these estimates, this is too high of a cost to pay for a regulation that would overturn - by bureaucratic edict - decades of government policy designed to attract capital to the U.S. economy. This regulation should be withdrawn. Sincerely, Pat Toomey |
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