For Immediate Release
Tuesday, January 7, 2003
Coalition for Tax Competition Praises Bush Tax Reform Plan; But Warns Proposed IRS Interest Reporting Rule Could Undermine President's Policies
January 7, 2003, Washington, DC -- President Bush's growth package earned strong praise from members of the Coalition for Tax Competition. Members, consisting of more than 30 of the country's largest and most influential free-market groups, were particularly pleased with the proposal to eliminate the double-taxation of dividends, but also
commended other supply-side reforms such as making the 2004 and 2006 tax rate reductions effective immediately and reducing the tax penalty on small business investment.
But members of the Coalition warned that the pro-growth impact of the President's tax plan will be grievously damaged if the Treasury Department pushes through an Internal Revenue Service (IRS)
regulation that would require U.S. banks to report deposit interest paid to non-resident aliens. According to Andrew F. Quinlan, President of the Center for Freedom and Prosperity, "The President's tax plan is
crafted to improve the tax code by attracting jobs and capital to the U.S. economy. The Coalition looks forward to working with the President to enact his visionary program. We are concerned, however, that the
benefits of the President's plan will be offset by capital flight if the Administration does not withdraw the proposed IRS interest reporting regulation."
The proposed IRS rule (REG-133254-02) would force U.S. banks to inform the IRS about any bank deposit interest paid to people from other countries. The IRS then would pass that information on to
foreign tax authorities so that they could impose tax on the interest paid to those accounts – even though the income was earned in America. The regulation is being pushed by the Treasury Department and the IRS even
though the they admit that this information is not needed to enforce U.S. tax law and is being requested solely for the benefit of other governments.
Daniel Mitchell, Senior Fellow at the Heritage Foundation, stated "Among all developed nations, the United States currently has the harshest tax treatment of dividends. The Bush tax reform plan
is a bold proposal that will bring America from last place to first place in this critical measure of competitiveness. And if the White House complements this policy by pulling the plug on the IRS regulation, 2003
will be a very good year for taxpayers."
Veronique de Rugy of the Cato Institute also praised the growth package: "Lower tax rates and the elimination of double-taxation are essential features of pro-growth tax reform. Assuming they are
not offset by the IRS interest-reporting regulation, America should benefit from an influx of jobs and capital."
Grover G. Norquist, President of Americans for Tax Reform, said, "The White House has proposed an excellent tax plan that will increase growth and prosperity. But to get the maximum economic
benefit, the efforts of the IRS on behalf of bureaucrats in Europe to require that the interest earned by nonresident aliens on their US-based deposits be reported to the governments of their home countries must be
resisted and ultimately thwarted."
Stephen J. Entin, President of Institute for Research on the Economics of Taxation, stated "The President's effort to cut taxes to spur economic growth is very welcome. However, he must not permit
pending Treasury regulations, which could subject foreign depositors in US financial institutions to very high taxes in their home countries, to undercut that effort by scaring away foreign investors."
For additional comments:
Andrew Quinlan can be reached at 202-285-0244, email@example.com
Dan Mitchell can be reached at 202-608-6224, firstname.lastname@example.org
Veronique de Rugy can be reached at 202-218-4601, email@example.com
See CFP's dedicated web page on the IRS's Interest Reporting Regulation" for additional information: http://www.freedomandprosperity.org/update/irsreg/irsreg.shtml