The IRS wants to require banks to report to foreign governments, interest paid on accounts belonging to foreigners. The IRS does not plan to tax the foreigners, but simply to report the paid interest to foreign governments. It puts foreign tax law above U.S. tax law (a move only the Obama administration would risk). Senator Marco Rubio along with Kay Baily Hutchison and John Cornyn have introduced legislation to stop the initiative. Here’s why:
Foreigners invest lots of money in the American economy, more than $10 trillion according to Commerce Department data. This money boosts our financial markets and creates untold numbers of jobs. We don’t know how much of the capital will leave if the regulation is implemented, but even the loss of a couple of hundred billion dollars would be bad news considering the weak recovery and shaky financial sector.
As a decent human being, I’m also angry that Obama’s IRS is undermining the human rights of foreigners who use the American financial system as a safe haven. Countless people protect their assets in America because of corruption, expropriation, instability, persecution, discrimination, and crime in their home countries. The only silver lining is that these people will simply move their money to safer jurisdictions, such as Panama, the Cayman Islands, Hong Kong, or Switzerland, if the regulation is implemented. That’s great news for them, but bad news for the U.S. economy.
IRS to Put Foreign Law Over U.S. Law (video)