29 Republicans Criticise IRS Interest Reporting Measure In Letter To Bush

Tax-News.com, Washington

16 January 2003

Washington's Center for Freedom and Prosperity reports that more members of Congress have taken the opportunity of opposing the IRS's interest reporting regulation, while writing to congratulate President Bush on his economic growth package.

Rep. Pat Toomey of Pennsylvania, says the Center, was joined by 28 other members of the House of Representatives in a letter to President George W. Bush which expressed their strong opposition to a proposed IRS regulation (REG-133254-02) that would compel American banks to report the deposit interest paid to nonresident aliens.

The Members stated:

"This burdensome new proposal - a legacy of the previous Administration - is not needed to enforce U.S. tax law or combat illegal money laundering. It will only harm financial markets by driving capital out of the American economy. Indeed, the Chairman of the Federal Deposit Insurance Corporation recently warned that it could undermine the safety and soundness of our banking system by leading to a large loss of deposits.

"This regulation could severely undermine the pro-growth provision of your tax package. Some economists believe hundreds of billions of dollars will flee our economy and that gross domestic product will drop by 0.8 percent if the regulation is finalized. Even if the actual damage is just a fraction of these estimates, this is too high of a cost to pay for a regulation that would overturn - by bureaucratic edict - decades of government policy designed to attract capital to the U.S. economy.

"This regulation should be withdrawn."

Rep. Toomey, a member of the House's Financial Services Committee, was joined on the letter by nine fellow Committee members, including Judy Biggert, Melissa Hart, Don Manzullo, Bob Ney, Ron Paul, Edward Royce, John Shadegg, Pat Tiberi, and Dave Weldon.

Of special note, Rep. Weldon led the charge against the regulation when the Clinton Administration first proposed it. The IRS hoped that Mr. Weldon and some financial institutions would withdraw their opposition after the regulation was slightly modified last July. This did not happen. Rep. Weldon 's opposition to the new rule, combined with strong opposition from the Federal Deposit Insurance Corporation and the American Bankers Association, demonstrates that interested parties understand that any interest-reporting rule eventually would encompass clients from all nations and therefore cause a loss of deposits to America's financial sector. Even the Florida Bankers Association, the organization that the IRS hoped to buy off with the cosmetic revisions in July, has decided not to support the second version of the regulation.

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