Bipartisan Legislation Introduced to Prevent the Flight of Billions of Dollars in Foreign Bank Deposits Out of U.S. Economy
Today bipartisan legislation was filed by U.S. Representatives Bill Posey (R-FL) and Gregory Meeks (D-NY) to prevent the flight of billions of dollars in foreign bank deposits from U.S. banks. The IRS recently proposed overturning a nearly 100 year old policy, without direction from Congress, with a regulation requiring all U.S. banks to report annually on the amount of interest paid to non-resident alien individual deposits. By law, these non-resident aliens do not pay taxes on this interest, and the rule creates legitimate concerns that once personal bank account information is collected it could be shared with countries with less scrupulous government agencies.
“If you’re an investor from a country with massive human rights violations or a corrupt regime, chances are you want your personal bank account information held in confidence,” said Representative Bill Posey, a member of the House Financial Services Committee. “By imposing this new reporting requirement, those depositors will think twice about where they invest their money and cause many to invest elsewhere at a cost of billions of dollars to our economy. This is the wrong time to encourage individuals to withdraw billions from U.S. banks.”
“At a time when our economy is experiencing a nascent recovery, the last thing we want to do is discourage foreign investment in the United States. We must protect America’s reputation as the best place in the world to invest and do business,” said Representative Gregory Meeks, also a member of the House Financial Services Committee.
For more than 90 years, the U.S. has had in place a policy of encouraging foreigners to deposit their money in U.S. banks so that money could be used to provide capital to the U.S. marketplace. The IRS first proposed this interest reporting regulation in 2001 but it was strongly opposed by a bipartisan coalition of more than 100 Members of Congress, leading the IRS to withdraw it during the Bush Administration. The interest payments are not subject to U.S. tax, so this additional reporting requirement for banks will not further any U.S. financial interest in collecting revenues from foreign depositors, but it will lead to billions of dollars of capital flight from the United States at a time when the economy struggles to recover.