13 GOP Freshmen Ask Treasury Secretary
Snow to Permanently Withdraw IRS's
Interest Reporting Regulation

Texas Republican Congressman Jeb Hensarling and 12 other GOP first-term Members of the House of Representatives sent a letter to Treasury Secretary John Snow expressing their "strong opposition to an IRS regulation (REG-133254-02) to require the reporting of deposit interest paid to foreigners who invest their money in U.S. banks."

List of the 13 Members:

Jeb Hensarling (R-TX), Katherine Harris (R-FL), John Carter (R-TX), Tom Feeney (R-FL), Chris Chocola (R-IN), Tim Murphy (R-PA), Bob Beauprez (R-CO), Jon Porter (R-NV), Tom Cole (R-OK), Trent Franks (R-AZ), Michael Burgess (R-TX), Rob Bishop (R-UT), and Stevan Pearce (R-NM)

Link: http://www.freedomandprosperity.org/ltr/hensarling-irs/hensarling-irs.shtml

PDF Version: http://www.freedomandprosperity.org/ltr/hensarling-irs/hensarling-irs.pdf

Excerpts from letter:

Harms America's Competitiveness

"This proposal contravenes existing law and would harm the competitiveness of American financial institutions. Capital will flee the U.S. economy if the regulation is implemented, and millions of American borrowers – including homebuyers and small businesses – could be adversely affected."

IRS Did Not Perform A Cost-Benefit Analysis

"Unfortunately, we do not have an official estimate of the amount of deposits that might flee because the IRS did not perform a cost-benefit analysis."

Undermines the Safety and Soundness of the Financial Services Industry

"We also know that both the American Bankers Association and the Federal Deposit Insurance Corporation think the threat of capital flight is real. Both have warned that the proposed regulation could undermine the safety and soundness of the financial services industry."

IRS Flaunts Congressional Intent

For more than 80 years, lawmakers have sought to attract these deposits to the U.S. banking system. This is why Congress decided not to tax this income or require it to be reported. Yet the IRS unilaterally wants to replace this outcome of the democratic process with a bureaucratic edict.

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Text to full letter:

May 1, 2003

The Honorable John Snow
Secretary of the Treasury
Department of Treasury
1500 Pennsylvania Avenue
Washington, DC 20220

Dear Secretary Snow,

We want to express our strong opposition to an IRS regulation (REG-133254-02) to require the reporting of deposit interest paid to foreigners who invest their money in U.S. banks. This proposal contravenes existing law and would harm the competitiveness of American financial institutions. Capital will flee the U.S. economy if the regulation is implemented, and millions of American borrowers – including homebuyers and small businesses – could be adversely affected.

Unfortunately, we do not have an official estimate of the amount of deposits that might flee because the IRS did not perform a cost-benefit analysis. But we do know that more than $40 billion of savings deposits (on an annualized basis) left the U.S. banking system in the first quarter of 2001, almost surely in response to the original version of the regulation, which the Clinton Administration proposed on January 17, 2001. We also know that both the American Bankers Association and the Federal Deposit Insurance Corporation think the threat of capital flight is real. Both have warned that the proposed regulation could undermine the safety and soundness of the financial services industry.

We also are very concerned that the IRS is abusing the regulatory process by blatantly ignoring the will of Congress. For more than 80 years, lawmakers have sought to attract these deposits to the U.S. banking system. This is why Congress decided not to tax this income or require it to be reported. Yet the IRS unilaterally wants to replace this outcome of the democratic process with a bureaucratic edict.

We hope that this misguided regulation will be permanently withdrawn. We also look forward to an explanation of why the IRS did not perform the required cost-benefit analysis for this regulation.

Sincerely,

Jeb Hensarling
Katherine Harris
John Carter
Tom Feeney
Chris Chocola
Tim Murphy
Bob Beauprez
Jon Porter
Tom Cole
Trent Franks
Michael Burgess
Rob Bishop
Stevan Pearce

Cc: Vice President Richard Cheney
Stephen Friedman, Director of National Economic Council
Josh Bolten, Deputy Chief of Staff for Policy to the President

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