I’ve been fighting for more than 10 years to stop an IRS regulation that would force American banks to put foreign tax law above US tax law.
Sadly, I recently lost that battle when Treasury Secretary Tim Geithner finalized the third version of the regulation (it was first proposed by Clinton, and then a second version was put forth by the Bush White House).
In previous posts, I explained why this regulation represents bad tax policy and undermines the rule of law. I also have explained that it will hurt the American economy and why it endangers the human rights of people living under tyrannical and thuggish regimes.
But such concerns don’t matter to the tax cheat who is serving as the Treasury Secretary.
Richard Rahn is not happy about this outcome, either, and here is some of what he wrote in the Washington Times.
Over the past several years, Treasury Secretary Timothy F. Geithner was warned by many private economists and members of Congress of the adverse consequences of a proposed rule that would force U.S. banks to be uncompensated tax collectors for foreign governments. On April 17, Mr. Geithner issued the rule anyway. …To put it simply, the Obama Treasury Department and Internal Revenue Service (IRS) are forcing U.S. banks to report to foreign governments that often are corrupt or worse on lawful deposits their citizens hold in U.S. banks, thus putting those citizens’ lives at risk. As the former governor of Oklahoma and now president of the American Bankers Association, Frank Keating, wrote: “While the IRS minimizes potential security issues, nonresident aliens are unlikely to feel reassured by promises that their information won’t fall into the wrong hands. These pledges could be met with apprehension when countries with questionable human rights records remain on the recipient list. This rule gives nonresident aliens every incentive to pick up and move their deposits elsewhere.” …Looking at the actions and words of Mr. Geithner, you can conclude that he is consciously trying to destroy the U.S. economy, he lacks a sufficient number of brain cells and nerve connections for the job, or his ego and desire to pander to his boss and well-known economic illiterates has caused him to be willfully negligent over and over again. The latter is probably closest to the truth.
What makes this new regulation so disturbing is that it is a gross abuse of the regulatory process. For more than 90 years, Congress has maintained a policy of seeking to attract capital to the American financial system. Lawmakers repeatedly have looked at this issue of “nonresident alien” deposits, and they always have decided that America should be a safe haven for foreigners who want a good place to deposit money.
Yet the IRS, which is supposed to issue regulations that enforce existing law, proposed a regulation that overturns the law. And Geithner approved it. No vote from Congress. No legislation from the White House. No need to bother with the rule of law or democracy (and people wonder why there is rhetoric about a gangster government!).
I cover some of the key points in this video about the proposal.
You may be wondering why the Obama Administration is in favor of such a bad idea. Well, there’s no great mystery. Politicians get very upset if people have the freedom to shift economic activity to jurisdictions with better tax law. This process, known as tax competition, creates pressure for better tax policy.
Statists from all around the world have united in a campaign to undermine tax competition and expand the power of governments to impose bad tax policy. Obama and his team are simply doing their part to advance this dystopic vision.
The implementation of this IRS regulation means we’ve suffered an unfortunate defeat in this battle. So if we care about promoting good policy and restraining the greed of the political class, we need to redouble our efforts.
[…] There are several reasons why America’s ranking is going down. To cite just a few: The arbitrary rewrites of Obamacare. The Operation Chokepoint fiasco. IRS regulations that overturn existing law. […]
[…] There are several reasons why America’s ranking is going down. To cite just a few: The arbitrary rewrites of Obamacare. The Operation Chokepoint fiasco. IRS regulations that overturn existing law. […]
[…] There are several reasons why America’s ranking is going down. To cite just a few: The arbitrary rewrites of Obamacare. The Operation Chokepoint fiasco. IRS regulations that overturn existing law. […]
[…] There are several reasons why America’s ranking is going down. To cite just a few: The arbitrary rewrites of Obamacare. The Operation Chokepoint fiasco. IRS regulations that overturn existing law. […]
[…] But there are regulations with fewer pages (and fewer words) that are far more expensive to the overall economy. The IRS, for instance, imposed a regulation to force American banks to put foreign tax law above U.S. tax law regarding the reporting of bank deposit interest paid to nonresident foreigners with U.S. accounts. That regulation was less than five pages long, but could drive millions of dollars from the American financial system. […]
[…] Administration already is pushing policies to satisfy the OECD’s statist regime. The IRS recently pushed through a regulation that says American banks have to put foreign tax law above U.S. tax […]
[…] already is pushing policies to satisfy the OECD’s statist regime. The IRS recently pushed through a regulation that says American banks have to put foreign tax law above U.S. tax […]
[…] award, including the Supreme Court’s Obamacare decision, the IRS’s lawless decision to make American banks act as tax collectors for foreign governments, Japan’s higher VAT tax, the California vote for a class-warfare tax […]
[…] Was it the lawless decision by the Internal Revenue Service to impose a horrible regulation that forces American banks to put foreign law above U.S. law? This was a very bad development in the battle for tax competition, financial privacy, and fiscal […]
[…] Another example is the recent IRS regulation that forces American banks to put foreign law above U.S. law. […]
[…] Geithner also should be remembered for pushing through an IRS regulation that forces American banks to put foreign tax law above U.S. tax […]
The US banks will now “suffer” the same kind of rules that banks in foreign countries will soon shall comply (alla FATCA). Touche?
[…] The IRS making banks put foreign tax law above US tax law. […]
[…] What are you thinking? Now our Federal government, which is firmly rooted in California economic principals has struck another severe blow to our economy and our country. Timothy Geithner has put foreign banking laws ahead of the laws of our own country. Check it out. […]
[…] Was it the lawless decision by the Internal Revenue Service to impose a horrible regulation that forces American banks to put foreign law above U.S. law? This was a very bad development in the battle for tax competition, financial privacy, and fiscal […]
[…] The IRS making banks put foreign tax law above US tax law. […]
Time to go Credit Union. Don’t know if they can escape this, but it is worth a try
[…] Was it the lawless decision by the Internal Revenue Service to impose a horrible regulation that forces American banks to put foreign law above U.S. law? This was a very bad development in the battle for tax competition, financial privacy, and fiscal […]
[…] The IRS making banks put foreign tax law above US tax law. […]
[…] The IRS making banks put foreign tax law above US tax law. […]
[…] The IRS making banks put foreign tax law above US tax law. […]
[…] The IRS making banks put foreign tax law above US tax law. […]
[…] The IRS making banks put foreign tax law above US tax law. […]
[…] the United States less attractive to international investors and I think it is a gross mistake to enact policies that will hurt American workers by driving capital out of the economy. Rate this:Share this:PrintEmailFacebookTwitterMoredeliciousDiggFarkLinkedInRedditStumbleUponLike […]
[…] The IRS making banks put foreign tax law above US tax law. […]
[…] The IRS making banks put foreign tax law above US tax law. […]
Bitcoins are coming! …or something like bitcoins …people will find a way to store value where greedy govts. can’t touch. Where once were gold coins hidden in walls, so shall there be flash drives with encrypted files.