Reps Warn Foreign Capital Will Leave if IRS Regulation Is Not Withdrawn
Led by Rep. Mark Green (R-Wisconsin), a member of the House Banking and Financial Services Committee, 28 members of the U.S. House of Representatives wrote Treasury Secretary John Snow on March 18, urging him to "quickly withdraw" the Internal Revenue Service's proposed interest reporting regulation. The lawmakers warn the initiative "would have a very harmful effect on our economy and cause much-needed capital to leave the United States."
The regulation, first 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 from critics who fear many foreigners would withdraw their money from U.S. banks, harming the economy and undermining the global competitiveness of U.S. financial institutions.
The federal lawmakers' outreach to Snow was applauded by many.
"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," said Andrew Quinlan, president of the Center for Freedom and Prosperity. "These 28 Members of Congress understand that it would be a mistake to drive capital out of the U.S. economy."
Dan Mitchell, tax expert for The Heritage Foundation, agreed, noting, "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--18 Senators and 82 Congressmen from 39 states--two federal agencies, every major financial industry association, and 40 public policy organizations have denounced the proposed regulation.
Veronique de Rugy is a fiscal policy analyst for the Cato Institute. Her email address is firstname.lastname@example.org.
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