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Freedom and Prosperity
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202-285-0244

CF&P E-Mail Update,  January 6, 2004

Center for Freedom and Prosperity's E-mail Update

1) Washington Update

2) Eight Ways and Means Committee Members Oppose the IRS's Interest Reporting Regulation

3) Remembering a Legend: The Wall Street Journal's Robert Bartley

4) Kofi Annan, UN's Secretary General, Endorses International Tax Organization

5) Mitchell:  Radical U.N. tax target

6) Veronique de Rugy: Cato Scholar and CF&P Board Member Visits Bermuda . . . Defends Tax Competition

7) CF&P Archives: The Wall Street Journal -- Editorial: The Next Kyoto? (April 4, 2001)

8) Richard Rahn on the Decline of Private Foreign Investment in the U.S.

9) The Economist: A constitution in tatters

10) NYT: At I.R.S., a Systems Update Gone Awry

11) Video of AEI's Competition versus Cooperation in Global Tax Policy Conference ~ December 9, 2003

12) Dean's Vermont is a Tax Haven…well, sort of…at least for captive insurance companies

13) Milton Friedman and Many Others on the Consequences of Price Controls

14) JEC: Recent Economic Developments

15) CF&P Clips

 

1) Washington Update

I hope everyone had a great holiday season and I wish you a Happy New Year!

This week we will be meeting with our allies in Washington to finalize our agenda for the year.  Here are some of the main issues we will follow this year: 

  • OECD's "Harmful Tax Competition" Project;
  • EU's Savings Tax Directive;
  • Protecting financial privacy and fiscal sovereignty;
  • IRS's interest reporting regulation;
  • UN's International Tax Organization;
  • Lower tax rates on repatriated profits;
  • OECD's attack on global competition for business incorporation and ship registrations;
  • Reforming our uncompetitive worldwide tax system;
  • Corporate inversions;
  • Fiscal protectionism against foreign-based reinsurance companies.

This is only a partial list and we also expect to be more involved in domestic tax issues like tax reform. 

Today's update highlights the letter sent to Treasury Secretary Snow by eight influential Ways and Means Committee members in opposition to the IRS's interest reporting regulation.  This increases the Congressional opposition to more than 80 Members.  January also marks the third anniversary of the introduction of the first version of the proposed rule. We also have a tribute to a great man who passed away last month. Robert Bartley, former head of the Wall Street Journal's editorial page, was one of the most influential voices for sound economic polices in the 20th Century. He will be greatly missed.

The United Nations is at it again. Kofi Annan endorses an International Tax Organization (also referred to as a Global Tax Commission) and Dan Mitchell explains why it's a bad idea.  Veronique de Rugy visits Bermuda and discusses the virtues of tax competition and the failings of the EU's tax harmonization agenda. And our colleague Richard Rahn discusses the link between the current drop in the value of the U.S. dollar and the decline in private foreign investment.

Best regards, AQ

 

2) Eight Ways and Means Committee Members Oppose the IRS's Interest Reporting Regulation

[Excerpt from December 24th BNA article:]

Eight GOP members of the House Ways and Means Committee recently urged the Treasury Department to withdraw proposed regulations (REG-133254-02) that would require U.S. banks to report the deposit interest they pay to nonresident aliens from 16 countries.

"The regulation is not needed to enforce our tax laws, but it would impose high costs," the lawmakers said in a Dec. 8 letter to Treasury Secretary John Snow. They predicted the United States could lose substantial foreign investment if the rules are made final.

"Our banking system has attracted more than $1.75 trillion from overseas," the letter said. "This money is very important to job creation, and helps finance home mortgages, auto loans, and small business expansion."

Acknowledging that nonresident alien bank accounts are only a slice of that total, "any loss of capital is going to undermine the economy's performance," the lawmakers said.

"We also are concerned that the Internal Revenue Service is overstepping its proper role," they said, pointing out that Congress has sought to attract capital to the U.S. financial system by not taxing nonresident alien bank deposit interest and not requiring the reporting of this income.

"The IRS certainly has the right to propose changes in tax policy, but the agency should not use its rulemaking power to overturn existing law," the members said, asking that the regulation be permanently withdrawn.

The letter was signed by Reps. Michael "Mac" Collins (R-Ga.), Philip Crane (R-Ill.), Jennifer Dunn (R-Wash.), Philip English (R-Pa.), Mark Foley (R-Fla.), Wally Herger (R-Calif.), Ron Lewis (R-Ky.), and Jim Ramstad (R-Minn.). . . .

[SOURCE: December 24, 2003, Bureau of National Affairs, By Alison Bennett, Interest Reporting: Eight Ways and Means Members Ask Snow To Withdraw Alien Interest Reporting Rules, visit www.bna.com for copy of full article]

December 17, 2003, LawAndTax-News.com, by Glen Shapiro, Six New Ways And Means Committee Members Object To IRS Information Reporting Plan
http://www.tax-news.com/asp/story/story.asp?storyname=14458

Link to Ways and Means Letter:
http://www.freedomandprosperity.org/ltr/crane-foley-irs/crane-foley-irs.shtml

Link to complete list of opposition to IRS regulation:
http://www.freedomandprosperity.org/against-irsreg.pdf

 

3) Remembering a Legend: The Wall Street Journal's Robert Bartley

Legendary Wall Street Journal editorial-page editor Robert Bartley passed away recently. The following is President Bush's statement on Mr. Bartley's passing:

    "Bob Bartley was a giant of journalism. His extraordinary contributions to America as an author, editor, and columnist helped shape our times. I was pleased to award him the Presidential Medal of Freedom, our highest civil honor, in recognition of his enormous impact on the intellectual and political life of our Nation. Laura joins me in sending condolences to Edith and his daughters, family, colleagues, and friends."

** On December 3, 2003, Robert L. Bartley was awarded the Presidential Medal of Freedom
http://www.medaloffreedom.com/RobertBartley.htm

The following are a few columns written on Mr. Bartley's extraordinary contributions to America:

December 11, 2003, WSJ Opinion Journal, by Peggy Noonan, Freedom's Best Friend: Bob Bartley was conservative when that took courage.
http://www.opinionjournal.com/columnists/pnoonan/?id=110004411

December 23, 2003, By Bruce Bartlett, Remembering Bob Bartley
http://www.townhall.com/columnists/brucebartlett/bb20031223.shtml

December 11, 2003, by Emmett Tyrrell, My friend Bob Bartley
http://www.townhall.com/columnists/emmetttyrrell/et20031211.shtml

December 22, 2003, The Weekly Standard, by Irving Kristol, Robert L. Bartley, 1937 – 2003; Remembering one of the most influential journalists of the 20th
http://www.weeklystandard.com/Content/Public/Articles/000/000/003/486ihhlr.asp?pg=2

December 10, 2003, Fox News, By David Asman, Tribute to Former WSJ Editor Robert Bartley 
http://www.foxnews.com/story/0,2933,105822,00.html

 

4) Kofi Annan, UN's Secretary General, Endorses International Tax Organization

From LawAndTax-News.com:

It has emerged that the United Nations is planning to launch its own International Tax Organisation, in a challenge to the powers of the Organisation for Economic Cooperation and Development (OECD).

According to reports, the move is a response to the perceived failure of other international bodies to effectively crack down on large scale tax evasion by multinational firms.

The new organisation, which is backed by UN secretary general, Kofi Annan, will be able to gather information from the UN's 191 member countries (as opposed to the OECD, which has just 30 members). It will also be involved in the development of new anti-evasion initiatives. [Link to article below:]

December 23, 2003, LawAndTax-News.com, by Robin Pilgrim, UN To Launch International Tax Organisation
http://www.tax-news.com/asp/story/story.asp?storyname=14534

 

5) Mitchell: Radical U.N. tax target

[Excerpt]

Many politicians seem to think the answer to every alleged problem is higher taxes. Howard Dean, for instance, has said he would repeal the Bush tax cuts -- even though this would boost the average family's tax burden by nearly $2,000.

This initiative sounds radical, and it is. But some proposals out there are even worse.

The United Nations, for instance, wants to create an International Tax Organization (ITO) empowered to interfere with national tax policies.

This crazy idea first surfaced two years ago in a report from the world body's "High-Level Panel on Financing for Development." Since then, the U.N. has been working to turn it into reality. For instance, U.N. General Secretary Kofi Annan recently called for creating a global tax commission. But no matter what it's called, an international bureaucracy with power over tax policy would be an assault on American sovereignty.

An international tax organization, of course, would mean higher taxes and bigger government. Indeed, U.N. officials have been quite open about their intentions. The chairman of the U.N. panel that first endorsed creation of an ITO said it would "take a lead role in restraining tax competition." [Link to full article below:]

December 22, 2003, The Washington Times, By Daniel J. Mitchell, Radical U.N. tax target
http://www.washingtontimes.com/commentary/20031221-100040-3587r.htm

 

6) Veronique de Rugy: Cato Scholar and CF&P Board Member Visits Bermuda . . . Defends Tax Competition

[Excerpt]

In a speech to the Bermuda International Business Association last week, Cato Institute tax analyst Veronique de Rugy argued that the European Savings Directive is as much motivated by Europe's desire to end 'unfair' tax competition in low tax jurisdictions like Bermuda as by any crack-down on tax evasion.

Speaking at BIBA's annual general meeting luncheon, Ms de Rugy pointed out that: "The underlying assumption is that low tax countries are engaged in unfair tax competition with high tax nations. As such, the Savings Tax Directive is designed to create a tax cartel and is a significant threat to market-based policy and fiscal competition." [Link to full article below:]

December 16, 2003, Tax-News.com, by Amanda Banks, EU Savings Tax Directive Aimed At 'Unfair' Tax Competition Says CATO Analyst
http://www.tax-news.com/asp/story/story.asp?storyname=14442

December 12, 2003, Bermuda Sun, By Robin Holder, Bermuda competition too 'strong' for the E.U.
http://www.bermudasun.bm/archives/2003-12-12/03Business04/

December 11. 2003, The Royal Gazette, By Mairi Mallon, Stand up to US, Bermuda told
http://www.theroyalgazette.com/apps/pbcs.dll/article?AID=/20031211/BUSINESS/11211007 4

 

7) CF&P Archives:  The Wall Street Journal -- Editorial: The Next Kyoto? (April 6, 2001)

[The following editorial in opposition to information exchange and the anti-tax competition schemes of the EU and OECD was published when Robert L. Bartley was the editorial-page editor of the Wall Street Journal.]

[Excerpt]

It's an international agreement that will increase the power of government over the individual, is based on faulty numbers and hasn't got a chance unless the United States signs on. If President George W. Bush does the right thing and says no, he will earn the wrath of European socialists, but make life infinitely better for silent millions across Europe and elsewhere. Is this a description of the Kyoto Protocol on global warming before Mr. Bush put it out of its misery? No, something else just about as full of hot air: the current attempt by the European Union to make the U.S. agree to innocuous-sounding financial information exchange. Now that Mr. Bush has tasted what it's like to strike a blow for common sense, he might want to make a habit of it.

The EU's banking information exchange agreement was born in the Portuguese town of Feira at an EU summit last June. After years of trying unsuccessfully to convince Britain, Luxembourg, Austria and other (relatively) low-tax EU members to slap on a withholding tax on all savings, the EU happened on the information exchange concept.

The idea was to stop the citizens of high-taxers such as Germany and France from taking what little the state allowed them to keep and depositing it in accounts in places like London or the Grand Duchy. If Chancellor Gordon Brown would not gladly stop this practice with a tax, because it would kill the City of London's 3 billion pounds a year business in Eurobonds, would he then at least have his government collect information on foreigners saving there, and send it to their home countries?

April 6, 2001, The Wall Street Journal, Editorial: The Next Kyoto?
http://www.freedomandprosperity.org/Articles/wsj04-06-01/wsj04-06-01.shtml

 

8) Richard Rahn on the Decline of Private Foreign Investment in the U.S.

[Excerpt]

The current drop in the dollar's value owed primarily to a decline in private foreign investment, and not to a decline in foreign central bank demand for dollars. The decline in private foreign demand for dollars was partially fueled by a belief the dollar had become too expensive — a normal market response.

However, the U.S. government made a series of mistakes that have discouraged foreign investors. America now is viewed as unfriendly to foreign investors. Certain provisions of the Patriot Act and the Sarbanes-Oxley Act produce excessive and costly paperwork and unnecessary privacy intrusions. The president's tax bill reduced the tax on capital for U.S. taxpayers, but kept very high withholding rates on dividends for foreign investors, making them pay relatively more for helping our economy.

The Treasury Department also has not withdrawn the proposed, destructive foreign interest-reporting requirement, opposed by nearly all economists, even the administration's.  [Link to full article below:]

December 30, 2003, The Washington Times, By Richard W. Rahn, How far will the dollar fall?
http://www.washtimes.com/commentary/20031229-091559-8339r.htm

Other articles:

December 15, 2003, Ludwig von Mises Institute, by Richard C. B. Johnsson, The Fundamentals of a Falling Dollar
http://www.mises.org/fullstory.asp?control=1394

 

9) The Economist: A constitution in tatters

Years of negotiation over a proposed constitution for the European Union collapsed in failure at the weekend. Or, to put it another way, they ended in a victory for good sense

December 16, 2003, The Economist, A constitution in tatters
http://www.economist.com/agenda/displayStory.cfm?story_id=2295754

Other EU articles:

  December 28, 2003, The Washington Times, By Martin Walker, Wealth gap worries EU states
http://washingtontimes.com/world/20031227-085037-6600r.htm

December 11, 2003, SwissInfo, Blocher election complicates EU relations
http://www.swissinfo.org/sen/swissinfo.html?siteSect=111&sid=4538866

December 10, 2003, SwissInfo, Blocher victory overturns old order
http://www.swissinfo.org/sen/swissinfo.html?siteSect=111&sid=4534173

December 9, 2003, Tax-News.com, by Amanda Banks, UK Will Not Impose Direct Rule On Caymans Over EU Tax Directive
http://www.tax-news.com/asp/story/story.asp?storyname=14361

December 3, 2003, SwissInfo, Parliament mounts defence of banking secrecy
http://www.swissinfo.org/sen/swissinfo.html?siteSect=105&sid=4250670

 

10) NYT: At I.R.S., a Systems Update Gone Awry

[Excerpt]

After five years, a project to replace the Internal Revenue Service's aging file-keeping computer system with modern technology is so far behind schedule that the I.R.S. has told the prime contractor that unless it improves its performance by the end of the month, the government may have no choice but to fire it.

The project, which was expected to cost $8 billion when completed, has spent less than $1 billion so far, but it is already 40 percent over budget for what it has done, according to the I.R.S. Oversight Board, an independent watchdog body that Congress created in 1998. [Link to full article below:]

December 11, 2003, The New York Times, By David Cay Johnston, At I.R.S., a Systems Update Gone Awry
http://www.nytimes.com/2003/12/11/business/11irs.html?ex=1073365200&en=118d89b2c4d e323d&ei=5070

 

11) Video of AEI's Competition versus Cooperation in Global Tax Policy Conference ~ December 9, 2003

Dan Mitchell of the Heritage Foundation was a featured speaker.

Video -- http://www.aei.org/eventvideo676/
Presentations --
http://www.aei.org/event676/

 

12) Dean's Vermont is a Tax Haven…well, sort of…at least for captive insurance companies

[Excerpt]

Howard Dean is fond of criticizing politicians who provide tax breaks to "large corporate interests," and one of his favorite campaign lines is a blast at the Bush administration for doling out tax cuts to top executives of Enron Corp.

But during Dean's 11 years as Vermont governor, he enacted tax breaks that attracted to the state a "Who's Who" of corporate America -- including Enron -- to set up insurance businesses. Indeed, Dean said in 2001 that he wanted Vermont to "overtake Bermuda" as the "world's largest" haven for a segment of the insurance industry known as "captives," which refers to firms that help insure their parent companies.

With little notice then -- and barely any mention now in the Democratic presidential campaign -- Dean succeeded in turning Vermont into the kingdom of captives. Vermont has more of these companies than the other 49 states combined. As part of the enticement, Dean led efforts to cut state taxes of such companies, and he helped defeat a Clinton administration effort that would have eliminated $100 million worth of federal tax deductions given to the industry.

But while the nearly 500 captive insurance companies have been a windfall for Vermont -- providing 2 percent of the state's general funds from tax on the $7 billion worth of premiums that go through Vermont annually -- the industry also is highly controversial. Some analysts believe that while Vermont profits, other states lose corporate tax revenues because of the way a company's taxable income may be reduced if it uses captives. [Link to full article below:]

December 12, 2003, The Boston Globe, By Michael Kranish, For Dean, 'captive' insurance a Vt. boon
http://www.boston.com/news/politics/president/dean/articles/2003/12/12/for_dean_captiv e_insurance_a_vt_boon/

 

13) Milton Friedman and Many Others on the Consequences of Price Controls

Link to Open Letter to Congress on the Consequences of Pharmaceutical Importation Legislation and Price Controls (November 20, 2003)
http://www.techcentralstation.com/112003C.html

[Note: CF&P helped get the word out on this letter and recruited dozens of signers.]

 

14) JEC: Recent Economic Developments

The economy soared last quarter, with gross domestic product (GDP) increasing at the fastest pace in almost 20 years. Labor productivity – output per hour – also showed a remarkable gain. Economic strength continues to build as consumer spending remains robust, the housing market remains active, and companies are beginning to hire, invest, and restock their inventories. Forecasters see continued job gains and strong growth ahead. [Link to full report below:]

Link to Congress' Joint Economic Committee's most recent report on the U.S. economy (December 18, 2003).
http://jec.senate.gov/_files/Dec17RED.pdf

 

15) CF&P Clips

January 1, 2004, The New York Times, By David Cay Johnston, The Very Rich, It Now Appears, Give Their Share and Even More
http://www.nytimes.com/2004/01/01/business/01tax.html

December 31, 2003, Vancouver Sun, By Neal Hall, How money is laundered: Criminals with lots of cash use various ways to make it look legitimate
http://www.canada.com/vancouver/vancouversun/story.asp?id=443D6269-7178-4C37-9134 -223FE04A7FFE

December 30, 2003, BBC News, Chinese businessman executed:  A man has been executed in southern China after being found guilty of amassing a fortune while his state-owned investment company went bankrupt
http://news.bbc.co.uk/2/hi/asia-pacific/3356619.stm

December 29, 2003, LewRockwell.com, by Charley Reese, Don't Throw Away Liberty
http://www.lewrockwell.com/reese/reese26.html

December, 29, 2003, SiliconValley.com, By Steve Johnson, U.S. to require photos, fingerprints of visitors
http://www.siliconvalley.com/mld/siliconvalley/7590088.htm

December 18, 2003, Tax-News.com, by Amanda Banks, Bahamas Commits To Information Sharing Agreement With United States
http://www.tax-news.com/asp/story/story.asp?storyname=14475

December 17 2003, Independent Online (South Africa), Big Brother keeping tabs on wandering Britons
http://www.iol.co.za/index.php?click_id=24&art_id=qw1071636482295B216&set_id=1

December 17, 2003, Column by Walter E. Williams, Getting back our liberties
http://www.townhall.com/columnists/walterwilliams/ww20031217.shtml

December 16, 2003, The Washington Times, By Richard W. Rahn, Trading up with neighborhoods
http://www.washingtontimes.com/commentary/20031215-093659-6741r.htm

December 11, 2003, The New Zealand Herald, By Paul Panckhurst, Richina Pacific is off to Bermuda, leaving bad memories
http://www.nzherald.co.nz/business/businessstorydisplay.cfm?storyID=3538775

December 12, 2003, Reuters, U.S. banks extend lead as biggest offshore users-BIS
http://www.forbes.com/home_asia/newswire/2003/12/07/rtr1172127.html

December 11, 2003, Financial Times, By Martin Dickson, COMPANIES: UK: Money laundering: time for joined-up thinking
http://www.freedomandprosperity.org/Articles/ft12-11-03/ft12-11-03.shtml

December 9, 2003, The Royal Gazette, By Stephen Breen, Anguilla questions UK's commitment to modernisation of OT constitutions
http://www.theroyalgazette.com/apps/pbcs.dll/article?AID=/20031209/NEWS/112090043

December 3, 2003, Reuters, By Jonathan Nicholson, U.S. to use bank blacklisting power aggressively
http://www.forbes.com/markets/newswire/2003/12/03/rtr1168290.html

December 4, 2003, The Telegraph, By Ambrose Evans-Pritchard, Brussels considers imposing currency controls
http://www.money.telegraph.co.uk/money/main.jhtml?xml=/money/2003/12/04/cneu04.xml& menuId=242&sSheet=/money/2003/12/04/ixfrontcity.html

December 4, 2003, Tax-News.com, by Ulrika Lomas, France Considers Tax Amnesty To Halt Capital Flight
http://www.tax-news.com/asp/story/story.asp?storyname=14316

September 21, 2003, The Sacramento Bee, By Sam Stanton and Emily Bazar, Security collides with civil liberties: Debate intensifies over war on terrorism
http://www.sacbee.com/content/news/projects/liberty/story/7457444p-8400138c.html

 

Best regards,

Andrew Quinlan
Center for Freedom and Prosperity
President
202-285-0244
quinlan@freedomandprosperity.org
www.freedomandprosperity.org

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