Contact Information:

Center for
Freedom and Prosperity
 P.O. Box 10882
Alexandria, Virginia
22310-9998
202-285-0244

CF&P Press Release,  March 22, 2004

Center for Freedom and Prosperity

For Immediate Release
Monday, March 22, 2004
202-285-0244
www.freedomandprosperity.org

28 Congressmen Warn that Economic Recovery Could Be
Jeopardized If Clinton-Era IRS Regulation is Not Withdrawn

March 22, 2004 (Washington, DC) Led by House Banking and Financial Services Committee member Mark Green, 28 Members of the U.S. House of Representatives wrote Treasury Secretary John Snow urging him to "quickly withdraw" the IRS's interest reporting regulation. The lawmakers specifically note that the initiative "would have a very harmful effect on our economy and cause much-needed capital to leave the United States."

The proposed regulation, which initially was proposed during the final days of the Clinton Administration and then cosmetically modified in 2002, would require banks to report interest paid to nonresident aliens -- even though this information is not needed to enforce U.S. law.  The IRS initiative has generated considerable opposition since many foreigners would withdraw their money from American banks, thus raising concerns that it would harm America's economy and undermine the competitiveness of U.S. financial institutions.

"The Center for Freedom and Prosperity and the Coalition for Tax Competition applaud the leadership of Rep. Mark Green and congratulate the members of Congress who have joined with him in fighting for America's economy. These 28 Members of Congress understand that it would be a mistake to drive capital out of the U.S. economy," commented Andrew Quinlan, president of the Center for Freedom and Prosperity.

Dan Mitchell of the Heritage Foundation also commented, noting that, "The IRS interest-reporting regulation was a bad idea when first proposed during the final days of the Clinton Administration and it is a bad idea today. It is anti-tax reform, anti-competitive, and it will hurt the U.S. economy. Secretary Snow should uphold the law and require that the ideologically motivated bureaucrats at the IRS withdraw this misguided proposal."

One-hundred lawmakers, including 18 Senators and 82 Congressmen from 39 states, two federal agencies (FDIC and Office of Advocacy of the SBA), every major financial industry association, and 40 Public Policy organizations have all denounced the proposed IRS regulation. 
http://www.freedomandprosperity.org/against-irsreg.pdf

List of the 28 Members:

Mark Green, Roscoe Bartlett, John Sullivan, Mark Kennedy, Ron Paul, Lee Terry, Jeff Miller, Butch Otter, Gary Miller, Tom Reynolds, Walter Jones, Joe Pitts, Todd Akin, Scott Garrett, Roger Wicker, Jim DeMint, Mark Foley, Pat Toomey, John Shadegg, Pete Sessions, Chris Cannon, Phil Crane, Nathan Deal, John Culberson, J. Gresham Barrett, Sue Myrick, David Vitter, and Chris Chocola.

Link to Rep. Mark Green's Joint Congressional Letter:
http://www.freedomandprosperity.org/ltr/green-irs/green-irs.shtml

Excerpts from letter:

Bad Economic Policy

"Congress decided long ago that taxing foreign-owned capital deposited in U.S. banks was bad policy. Instead, lawmakers allowed foreigners to bring their money here, tax-free. As a result, American financial institutions have about $2.3 trillion in foreign funds. These funds work their way through the economy as loans for cars, homes, and business expansion eventually creating jobs and enhancing economic growth."

"This new rule fortunately would apply only to a portion of this capital, but it nonetheless is bad economic policy since it will discourage and more than likely reverse the flow of capital to America. Indeed, more than $40 billion on an annualized basis was withdrawn from foreign-owned U.S. savings accounts in the first quarter of 2001, in large part because the regulation was first announced on January 17 of that year. We don't know how much capital will leave if the regulation is implemented. Suffice to say that any loss of funds is going to hurt our capital markets and make it harder for consumers and businesses to access credit. The regulation also will undermine the safety and soundness of our banking sector, a point that already has been raised by the Chairman of the Federal Deposit Insurance Corporation."

Bad Regulatory Policy

"The IRS initiative also is bad regulatory policy. For more than 80 years, Congress has made a deliberate effort to create policy and approve laws to attract capital to the U.S. economy. It is rather disturbing, therefore, to see the IRS attempt to overturn the democratic process with bureaucratic edict."

Bad Tax Policy

"Last but not least, the regulation is bad tax policy. As you well know, the president is trying to slowly but surely reform our tax code by eliminating different forms of double-taxation. The IRS is undermining this effort by seeking to help foreign governments double-tax the interest paid to nonresident aliens who have invested in the U.S. economy."

Link to Letter:
http://www.freedomandprosperity.org/ltr/green-irs/green-irs.shtml

PDF version of the Letter:
http://www.freedomandprosperity.org/ltr/green-irs/green-irs.pdf

Visit CF&P's dedicated web page for additional information and a complete list of the opposition to the proposed regulation.
http://www.freedomandprosperity.org/update/irsreg/irsreg.shtml

List of opposition:
http://www.freedomandprosperity.org/against-irsreg.pdf

--------------------------------------------------------------------------------
Letter text below:

March 18, 2004

The Honorable John Snow
Secretary
U.S. Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220

Dear Secretary Snow:

We are writing to express our strong objection to the Internal Revenue Service's (IRS) Regulation (REG-133254-02) that, if implemented, would have a very harmful effect on our economy and cause much-needed capital to leave the United States.  The latest version of this proposed rule would compel U.S. banks to report the deposit interest they pay to selected nonresident aliens. This is bad economic policy, bad regulatory policy, and bad tax policy. Originally proposed by the Clinton administration, this policy does nothing to aid in job creation or economic growth, and is a direct threat to America's long-term economic interests.   

Congress decided long ago that taxing foreign-owned capital deposited in U.S. banks was bad policy. Instead, lawmakers allowed foreigners to bring their money here, tax-free. As a result, American financial institutions have about $2.3 trillion in foreign funds. These funds work their way through the economy as loans for cars, homes, and business expansion eventually creating jobs and enhancing economic growth.   

This new rule fortunately would apply only to a portion of this capital, but it nonetheless is bad economic policy since it will discourage and more than likely reverse the flow of capital to America. Indeed, more than $40 billion on an annualized basis was withdrawn from foreign-owned U.S. savings accounts in the first quarter of 2001, in large part because the regulation was first announced on January 17 of that year. We don't know how much capital will leave if the regulation is implemented. Suffice to say that any loss of funds is going to hurt our capital markets and make it harder for consumers and businesses to access credit. The regulation also will undermine the safety and soundness of our banking sector, a point that already has been raised by the Chairman of the Federal Deposit Insurance Corporation.

The IRS initiative also is bad regulatory policy. For more than 80 years, Congress has made a deliberate effort to create policy and approve laws to attract capital to the U.S. economy. It is rather disturbing, therefore, to see the IRS attempt to overturn the democratic process with bureaucratic edict.

Last but not least, the regulation is bad tax policy. As you well know, the president is trying to slowly but surely reform our tax code by eliminating different forms of double-taxation. The IRS is undermining this effort by seeking to help foreign governments double-tax the interest paid to nonresident aliens who have invested in the U.S. economy.

We hope you will quickly withdraw this misguided regulation. The IRS should not be allowed to overturn the law, especially when the result will hurt America's economy.

Sincerely,

Mark Green, Roscoe Bartlett, John Sullivan, Mark Kennedy, Ron Paul, Lee Terry, Jeff Miller, Butch Otter, Gary Miller, Tom Reynolds, Walter Jones, Joe Pitts, Todd Akin, Scott Garrett, Roger Wicker, Jim DeMint, Mark Foley, Pat Toomey, John Shadegg, Pete Sessions, Chris Cannon, Phil Crane, Nathan Deal, John Culberson, J. Gresham Barrett, Sue Myrick, David Vitter, and Chris Chocola.

 

Cc:Vice President Richard Cheney
CEA Chairman Greg Mankiw
NEC Chairman Steve Friedman
 

 

Return Home

[Home] [Issues] [Tax Competition] [European Union] [IRS NRA Reg] [Corporate Inversions] [QI] [UN Tax Grab] [CF&P Publications] [Press Releases] [E-Mail Updates] [Strategic Memos] [CF&P Foundation] [Foundation Studies] [Coalition for Tax Comp.] [Sign Up for Free Update] [CF&P At-A-Glance] [Contact CF&P] [Grassroots] [Get Involved] [Useful Links] [Search] [Contribute to CF&P]