Americans for Tax Reform sent today the following letter to Senator Rubio (R-FL):
On behalf of Americans for Tax Reform, I am pleased to support S. 1506, a bill that would stop the Secretary of the Treasury from requiring banks to report interest paid to nonresident aliens.
It is imperative to the United States’ long-term growth and the stability of our banking system that we continue to attract large amounts of foreign deposits as these investments provide an important capital base for our country. These deposits require that we maintain the security and privacy of the foreign account holders, however.
By prohibiting the Treasury Department from requiring banks to report interest paid to nonresident aliens, S. 1506 will help maintain and increase the amount of foreign deposits in the United States. Despite the fact that interest collected on U.S bank and credit union accounts by nonresident aliens is not taxable, the Treasury is nonetheless proposing to report the interest paid to their accounts. Reporting these earnings would significantly decrease the privacy of foreign investors and would be a strong step towards taxing their returns.
Were banks to be forced to report this information, the U.S. would face a significant capital flight. A 2004 study by George Mason University suggests that over $88 billion would be divested out of the United States were the Treasury to begin requiring institutions to report this information. Additionally, it would put many investors in countries rife with corruption and inflation in danger by forcing them to withdraw their capital out of the U.S. and invest it domestically. In order to grow our economy and to maintain the stability of our financial system, we must work to keep and attract capital, not to scare it away.
I urge all senators to co-sponsor S. 1506.