For Immediate Release
Tuesday, November 6, 2001
202-285-0244
www.freedomandprosperity.org

CFP Warns Senate About Clinton-Era Bank Deposit Interest Regulation: IRS Should Not Help Foreign Governments Tax Income Earned in America

39 Groups Join Center in Call for Pro-Growth Tax Policy

The Center for Freedom and Prosperity, joined by 39 other major organizations, sent a letter to the U.S. Senate calling for the immediate withdrawal of a proposed IRS that would force American banks to report bank deposit interest paid to nonresident aliens. The letter, which urges lawmakers to adopt market-based tax policy, states, "this proposed regulation could drive hundreds of billions of dollars of capital out of the American economy – with no increase in revenue to the U.S. Treasury. This regulation was a bad idea before September 11; it is an even worse idea today."

Andrew Quinlan, President of the Center for Freedom and Prosperity, stated, "The Bush Administration should withdraw this Clinton-era regulation. U.S. banks and financial institutions benefit greatly from the deposits of nonresident aliens. These deposits, in turn, help every American by creating jobs, financing small business loans and improving the general welfare of all Americans."

Dan Mitchell, Senior Fellow at the Heritage Foundation, explained why the IRS regulation is bad tax policy and bad economic policy: "Only the United States government should have the right to tax income earned in America. Helping other governments tax U.S.-source income would drain capital from the U.S. economy, undermine American financial institutions, and interfere with international commerce."

The text of the letter is below and a link on our web page can be found at:
http://www.freedomandprosperity.org/ltr/senate11-01/senate11-01.shtml

The Center for Freedom and Prosperity is an Alexandria, Virginia-based, 501(c)(4) nonprofit, nonpartisan organization that lobbies Congress and the Administration on tax competition, financial privacy and fiscal sovereignty.

For additional comments:

Andrew Quinlan can be reached at 202-285-0244
Dan Mitchell can be reached at 202-608-6224

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November 1, 2001

Dear Senator:

The economy is performing below its potential. Workers are losing jobs, families are watching investments drop in value, and businesses are losing money. These developments require a response. Many proposals for new spending are irresponsible and would do nothing to stimulate long term recovery. Fortunately, there are a number of tax reforms that could help restore growth and boost job creation. A "stimulus" package based on the following principles would benefit America's workers, investors, and entrepreneurs by improving incentives to work, save, and invest:

All of the tax rate reductions currently scheduled for 2004 and 2006 should take effect immediately – and certainly no later than January 1, 2002. Investors, entrepreneurs, and small business owners should not be hamstrung by needlessly punitive tax rates.

Enhanced depreciation for business investment should be permanent. Temporary tax cuts have almost no effect on long-term behavior. Instead, they mostly encourage businesses to alter the timing of investments. On expiration, they provoke an investment slump.

The corporate alternative minimum tax should be repealed, especially since it imposes a higher tax burden on companies when their income falls.

Significant capital gains tax reduction should be part of the proposal. This extra layer of tax on productive investment undermines U.S. competitiveness in the global economy and also discourages risk-taking and entrepreneurship.

It also is important to block initiatives that would hinder economic recovery. One sensible action would be the immediate withdrawal of the IRS regulation proposed in the waning days of the last administration. Dealing with the reporting of bank deposit interest paid to nonresident aliens, this proposed regulation could drive hundreds of billions of dollars of capital out of the American economy – with no increase in revenue to the U.S. Treasury. This regulation was a bad idea before September 11; it is an even worse idea today.

Better tax policy will help the economy recover. That is why it is important to reduce the tax penalties on productive behavior. A stimulus package that reduces tax rates on workers, investors, and business will mean more jobs, higher incomes, and a stronger America.

Sincerely,

Edwin J. Feulner – The Heritage Foundation

M. Gene Aldridge – New Mexico Independence Research Institute, Inc.

Paul Beckner – Citizens for a Sound Economy

David Burton – Prosperity Institute

Jon Caldara – Independence Institute

Stephen Entin – Institute for Research on the Economics of Taxation

Robert Funk – 'American Shareholders Association

Michael Gilstrap – Tennessee Institute for Public Policy

Tom Giovanetti – Institute for Policy Innovation

John Goodman – National Center for Policy Analysis

Grant Gulibon – Commonwealth Foundation

Kevin Hassett – American Enterprise Institute

John Hood – John Locke Foundation

Gordon Jones – Association of Concerned Taxpayers

Jeff Judson – Texas Public Policy Foundation

David Keene – American Conservative Union

Jack Kemp – Empower America

Karen Kerrigan – Small Business Survival Committee

James Martin – 60 Plus

John McClaughry –Ethan Allen Institute

Edwin Moore – James Madison Institute

Steve Moore – Club for Growth

Ronald Nehring – 'Project for Californias Future

Grover Norquist – Americans for Tax Reform

Duane Parde – American Legislative Exchange Council

Mitchell Pearlstein – Center of the American Experiment

Andrew Quinlan – Center for Freedom and Prosperity

Don Racheter –Public Interest Institute

Richard Rahn – Discovery Institute

Lawrence W. Reed – Mackinac Center for Public Policy

Alan Reynolds – Cato Institute

Gary Robbins – Fiscal Associates

Terrence Scanlon – Capital Research Center

Tom Schatz – Council for Citizens Against Government Waste

Eric Schlecht – National Taxpayers Union

Forest Thigpen – Mississippi Policy Institute

Lew Uhler – National Tax Limitation Committee

Brian S. Wesbury – Griffin, Kubik, Stephens & Thompson, Inc

Paul Weyrich – Free Congress Foundation

Bob Williams – Evergreen Freedom Foundation

* Organizational affiliations are included for identification purposes only.

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