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The Honorable George W. Bush Dear Mr. President, America's financial institutions benefit greatly from deposits of foreigners in U.S. banks. These deposits help finance jobs and generated economic growth mainly benefiting local communities, consumers, families, and small businesses. For more than 80 years, the United States has recognized the importance of foreign deposits and has refrained from taxing the interest earned by them or requiring their reporting. Unfortunately, a rule proposed by the Internal Revenue Service would overturn this practice and would likely result in the flight of hundreds of billions of dollars from U.S. financial institutions. A regulation proposed in the waning hours of the previous administration requires the reporting of bank deposit interest paid to foreign account holders so that this information can be made available to the countries of origin of the nonresident alien account holders. Mr. President we appreciate all that you have done to prevent the finalization of this proposed rule. We have several objections to this initiative, and strongly urge you to permanently withdraw the proposed regulation. Specifically: The regulation will cause serious irreparable harm to the U.S. economy. Because of the attractive tax and privacy laws of the United States, nonresident aliens are estimated to have deposited over $1 trillion in U.S. financial institutions. Should this regulation be finalized, economic and academic sources indicate that a substantial portion of that capital will be withdrawn from the U.S. economy. Some deposits have started leaving U.S. financial institutions already. During this time of economic concern, we urge that every effort be made to keep capital within the borders of the United States. The regulation flagrantly violates the intent of Congress. On several occasions, lawmakers have chosen to refrain from taxing the deposit interest paid to nonresident aliens. These actions were made for the explicit purpose of attracting and keeping capital in the U.S. economy. We feel the IRS is abusing its regulatory authority and doing so in a manner that is contrary to Congress' intent and the last eighty years of legislative history. The regulation will weaken the competitiveness of U.S. financial institutions. Should the proposed rule take affect, American companies will lose hundreds of billions of dollars in deposits to institutions in competing jurisdictions that maintain privacy protections. The purported goal of the regulation will not be achieved, but will instead disadvantage American businesses and communities. This proposal may be good news for high-tax governments, but it is contrary to American economic interest. The jobs of American workers and the competitiveness of U.S. companies should be our top priorities. This regulation works against both. It will put Americans out of work and it will force dollars out of U.S. financial institutions and into foreign financial institutions. It has now been longer than one year since the IRS proposed this rule. We urge that you withdraw this proposed regulation and send a clear message to existing and potential depositors that the U.S. encourages such deposits and believes America's best interest is served by maintaining current policy. Sincerely, Dave Weldon
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