Congressmen Urge Snow To Withdraw Interest Reporting Regulation

by Mike Godfrey, Tax-News.com, Washington

25 March 2004

Led by House Banking and Financial Services Committee member Mark Green, 28 Members of the US House of Representatives have written to Treasury Secretary John Snow urging him to "quickly withdraw" the IRS's interest reporting regulation.

The regulation, which was initially 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.

The IRS initiative has generated considerable opposition sparked by fears that many foreigners would withdraw their money from American banks, thus harming America's economy and undermining the competitiveness of US financial institutions.

“This is bad economic policy, bad regulatory policy, and bad tax policy,” the letter stated, adding, “this policy does nothing to aid in job creation or economic growth, and is a direct threat to America's long-term economic interests.”

It continued: “Suffice to say that any loss of funds is going to hurt our capital markets and make it harder for consumers and businesses to access credit. The regulation also will undermine the safety and soundness of our banking sector, a point that already has been raised by the Chairman of the Federal Deposit Insurance Corporation.”

The signatories observed that it is “disturbing… to see the IRS attempt to overturn the democratic process with bureaucratic edict.”

The House members have won the support of many free market lobby groups such as the Center for Freedom and Prosperity, whose president Andrew Quinlan said he applauded “the leadership of Rep. Mark Green and (we) congratulate the members of Congress who have joined with him in fighting for America's economy.”

These 28 Members of Congress understand that it would be a mistake to drive capital out of the US economy," he added.

According to the Center for Freedom and Prosperity, one hundred lawmakers, including 18 Senators and 82 Congressmen from 39 states, two federal agencies (FDIC and Office of Advocacy of the SBA), every major financial industry association, and 40 Public Policy organizations have all denounced the proposed IRS regulation.

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