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CFP Weekly Update, February 2, 2002

Center for Freedom and Prosperity's Weekly Update

1) Washington Update

2) Sen. Inhofe and Rep. Gibbons Praise Tax Competition, Ask Treasury Sec. O'Neill to put last nail in the coffin of IRS's "information exchange" regulation

3) Mississippi Senator Thad Cochran Urges U.S. to Shift to Territorial Tax System

4) New Hampshire Senator Bob Smith Asks Sec. Paul O'Neill to Comment on the UN Tax Summit in Mexico Next Month, Raises other Important Questions

5) Three House Members Discuss the Benefits of Tax Competition

6) OECD Eats Crow…Again: Barbados Removed from Blacklist Without Signing Away Sovereignty

7) Moffit: Pension Poverty: European social insecurity makes the American crisis look mild

8) Mitchell:  Europe's tax hit on America

9) WTO & Territorial Tax Seminar, February 4, 2002

 

1) Washington Update

Thanks in part to the educational efforts by a growing coalition of free-market groups, members of Congress are becoming more involved in the battle to preserve tax competition. Numerous members of Congress are warning the Bush Administration about the perils of tax harmonization. Senator Inhofe, Senator Cochran, and Senator Smith, along with Representative Gibbons, Representative Barton, Representative Bonilla and Representative Kingston, all have written the Administration to register their opposition to the anti-competitive initiatives of the OECD and EU. These lawmakers also addressed critical issues such as the recent WTO ruling against the U.S., the proposed "information exchange" IRS regulation, the UN foray into tax harmonization and the general benefits of tax competition. Without exception, each Member of Congress praises the Bush Administration's stance against the siren song of Europe's-welfare states to harmonize taxes and destroy financial privacy.

We also include a superb column by Robert Moffit that explains the coming pension-driven economic disaster in Europe and our comments on the OECD removing Barbados from their Blacklist. Also, please see if you can make it to next Monday's seminar on moving toward a territorial tax system in response to the resent WTO decision.

 

2) Sen. Inhofe and Rep. Gibbons Praise Tax Competition, Ask Treasury Sec. O'Neill to put last nail in the coffin of IRS's "information exchange" regulation

Oklahoma Senator James Inhofe and Nevada Representative Jim Gibbons sent letters to Treasury Secretary Paul O'Neill urging him to officially withdraw IRS Regulation 126100-00, which would require the reporting of bank deposit interest paid to nonresident aliens.  Rep. Gibbons' also mentions the roadblocks tax harmonization may put on the way of crime fighting.

U.S. Senator Inhofe:

"Your hostility to these [OECD and EU] schemes is much appreciated, but your predecessor did not share your views. Not only did he support tax harmonization proposals such as 'information exchange,' he also presided over an IRS proposed regulation that would force U.S. banks to report the interest they pay to nonresident aliens. Issued just three days before Clinton left office, the proposal was designed to help other nations tax U.S.-source income. This is bad tax policy, but it also would impose heavy damage on the economy since several hundred billion dollars of deposits would flee to banks in other jurisdictions." Link below to full letter:
http://www.freedomandprosperity.org/ltr/inhofe2/inhofe2.shtml

U.S. Representative Gibbons comments on how tax harmonization may hinder crime prevention:

"As a member of the House Select Committee on Intelligence, I also worry that tax harmonization schemes may hinder the global fight against crime. The OECD, in particular, is threatening low-tax governments with financial protectionism unless they agree to become tax collectors for Europe's welfare states. This intemperate approach does not serve America's interests when we are seeking the maximum level of assistance in the worldwide battle against drug dealing, terrorism and other universally recognized crimes."  Link below to full letter:
http://www.freedomandprosperity.org/ltr/gibbons/gibbons.shtml

 

3) Mississippi Senator Thad Cochran Urges U.S. to Shift to Territorial Tax System

As a result of the recent World Trade Organization's (WTO) ruling that America's treatment of corporate income from exports (as governed by ETI – the Extraterritorial Income Exclusion Act) violates trade rules, Senator Thad Cochran advocates that the U.S. should take this opportunity to move toward a territorial tax system. Senator Cochran said:

"The latest challenge in this field is the World Trade Organization's recent ruling against our tax laws dealing with export income. This decision poses significant risks for our economy, particularly since it could lead to $4 billion of tariffs on U.S. exports, with agricultural products the most likely target.

"This would be unacceptable. It also would be a mistake to repeal our Extraterritorial Income Exclusion Act since that would impose a punitive tax increase on export-oriented companies. Instead, I urge you to support the shift to a territorial tax system. Not only would this satisfy the WTO, it would be pro-tax reform, pro-tax simplification, and pro-competitive."  Link below to full letter:
http://www.freedomandprosperity.org/ltr/cochran/cochran.shtml

 

4) New Hampshire Senator Bob Smith Asks Sec. Paul O'Neill to Comment on the UN Tax Summit in Mexico Next Month, Raises other Important Questions

U.S. Senator Smith:

"A United Nations conference in mid-March will be considering proposals to boost foreign aid, including tax harmonization proposals such as information exchange, an International Tax Organization, and global taxes on energy and/or financial transactions. Can you assure me that the United States will block these proposals, all of which would undermine America's competitive advantage in the global economy?"

Senator Smith also asked the following three question of the Secretary (questions summarized):

1) Do all nations have the right to determine their own domestic policies so long as they do not create a national security threat to other countries?

2) Do nations have the right to determine the tax treatment of income earned inside their borders?

3) Are European welfare states promoting tax harmonization policies that are inconsistent with conservative principles?

See link below for complete copy of letter:
http://www.freedomandprosperity.org/ltr/smith/smith.shtml

 

5) Three House Members Discuss the Benefits of Tax Competition

Texas Representatives Joe Barton and Henry Bonilla and Georgia Congressman Jack Kingston thank the Bush administration for standing up against the tax harmonization schemes of the OECD and the EU.  All three lawmakers praise the benefits of tax competition and its positive effect on the U.S. economy.

U.S. Representative Barton:

"The United States happens to be the world's largest beneficiary of tax competition. Our low tax rates – at least compared to other Western nations – have boosted job creation and capital formation. Needless to say, it would be senseless to support 'information exchange' and other forms of tax harmonization that would undermine our competitive advantage by allowing high-tax nations to tax income earned in America. . . . Nations should cooperate in many areas, particularly the fight against universally recognized crimes like drug smuggling and terrorism. But there are many areas where competition is more appropriate – and tax policy is one of those areas." Link below to full letter:
http://www.freedomandprosperity.org/ltr/barton/barton.shtml

U.S. Representative Bonilla:

"Nations should be free to determine their own tax and privacy laws, and if this attracts jobs and capital from high-tax jurisdictions, that is the reward for market-based policy. High-tax nations, instead of seeking to punish this success with fiscal protectionism, should learn the lessons of Reaganomics and enact their own tax rate reductions."  Link below to full letter:
http://www.freedomandprosperity.org/ltr/bonilla/bonilla.shtml

U.S. Representative Kingston:

"These international bureaucracies [OECD & EU] are representing the interests of Europe's welfare states, many of which are seeking 'information exchange' so they would have greater ability to tax income earned in America. . . . I encourage you to continue your defense of America's interests. Thanks to our pro-market policies – which will be enhanced as the President's tax cut is implemented, we should resist any efforts to create a tax cartel or a 'global network of tax police.'" Link below to full letter:
http://www.freedomandprosperity.org/ltr/kingston/kingston.shtml

 

6) OECD Eats Crow…Again: Barbados Removed from Blacklist Without Signing Away Sovereignty

"Washington (January 31, 2002) – The following is a statement from Andrew Quinlan, president of the Center for Freedom and Prosperity, on the announcement by the Organization for Economic Cooperation and Development (OECD) that Barbados will not appear on the OECD's forthcoming list of so-called 'uncooperative tax havens.'

"The OECD has suffered another setback.  It now admits that Barbados has no reason to be on any blacklist.  Last May, Treasury Secretary O'Neill pressured the OECD to moderate its strident tone and eliminate some of its more radical proposals, thereby rendering the OECD's 'harmful tax competition' project irrelevant. ….." Link to full CFP press statement:
http://www.freedomandprosperity.org/press/p01-31-02/p01-31-02.shtml

 

7) Moffit: Pension Poverty: European social insecurity makes the American crisis look mild

When we visit Hill offices, many staffers ask us why the EU and OECD are pushing tax harmonization schemes. A column by Heritage Foundation expert Robert Moffit gives part of the answer. His concise and enlightening column on the coming pension-driven economic disaster in Europe shows why statist politicians in Europe are so desperate to imprison capital.

[Excerpt from Barron's column]
"Much of Continental Europe -- particularly France and Italy -- is on a pension-driven collision course with economic disaster, one that threatens to engulf many of its citizens, as well as others within the economic orbit of the European Union. . . Europe's government-pension problems are similar to those confronting the United States. But Europe has them in spades . . . An analysis by PricewaterhouseCooper shows that, by 2050, France will have to tax workers' pay at 28% to keep its system solvent. The same goes for Germany. Italian workers will face a 46% tax rate. And that's just to prop up their pension systems; taxes for other important programs -- including health and defense, for example -- would come on top of these rates." Link to full article below:
http://www.freedomandprosperity.org/Articles/brn01-28-02/brn01-28-02.shtml

 

8) Mitchell: Europe's tax hit on America

". . . In the final analysis, however, the WTO decision is good news. Why? Because the WTO has given U.S. policy makers a reason to junk worldwide taxation of corporate income and instead implement a territorial tax system. A territorial system is based on the common-sense notion that a government should impose tax only on income earned inside its borders, which is in stark contrast to a system — like America has now — that imposes tax on income earned in other jurisdictions. Territorial taxation is good tax policy for several reasons: . . . "  Link to full column below:
http://www.freedomandprosperity.org/Articles/twt01-24-02/twt01-24-02.shtml

 

9) WTO & Territorial Tax Seminar, February 4, 2002

Making Lemonade out of European Union Lemons: Why Territorial Taxation for Corporate Income is the Best Response to the Recent WTO Ruling against America's ETI (formerly FSC) Legislation

With Daniel Mitchell, The Heritage Foundation; Kevin Hassett, American Enterprise Institute; Jim Rose, National Association of Manufacturers Tax and Budget Policy Committee; and, Mark A. A. Warner, Esq., Hughes Hubbard & Reed LLP

Monday, February 4th, 12:00-1:45, Capitol Hill Club (300 First Street, SE), Private Dining Rooms 3 & 4, Lunch will be served. Complete Invitation linked below:
http://www.freedomandprosperity.org/Papers/heritage2/heritage2.shtml

 

Best regards,

Andrew Quinlan
Center for Freedom and Prosperity
President
202-285-0244
208-728-9639 (efax)
quinlan@freedomandprosperity.org
www.freedomandprosperity.org

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