Friday, February 26, 2010
The Center for Freedom and Prosperity (CF&P), joined by a number of US taxpayer groups and academics with free market leanings, has written to all members of Congress warning about the potentially adverse impact of "anti investment" provisions a tax bill introduced by Senate Majority Leader Harry Reid.
The letter highlights the inclusion of provisions taken from the Foreign Account Tax Compliance Act, which impose a 30% withholding tax on the American investments of foreign financial institutions unless they agree reporting requirements with the Treasury Department that the CF&P considers are "onerous and intrusive."
"The Foreign Account Tax Compliance Act contained in Senator Reid's so-called jobs bill would result in the loss of jobs as investors would shift funds outside of the United States," said CF&P President Andrew Quinlan.
"This bill is a threat to fiscal sovereignty, both in
the United States and around the world" added Dan Mitchell of the Cato
Institute. "Governments should have no right to impose laws and
regulations outside their borders, and this effort to impose bad
American policy on foreign banks will invite bad consequences and open
the door for foreign governments to do the same to us."
Additionally, the letter points out that these provisions create significant threats to fiscal sovereignty and financial privacy. " European governments and bureaucrats are increasingly meddling in the affairs of American companies, so setting a precedent for further interference seems particularly foolish," the CF&P states.
"These provisions will make it more expensive to invest and do business in the United States," the group states. "Making it more expensive to invest in the United States will divert global capital to other nations. This will reduce growth and jobs creation in America."
"Furthermore, the reporting requirements are a threat to fiscal
sovereignty. By attempting to impose American laws on foreign companies
acting outside of the United States, we open the door for similarly
misguided efforts on the part of foreign governments and international
bureaucracies," the letter adds.
However, given that the Senate bill differs from the
version of the legislation passed by the House of Representatives, the
CF&P believes that it is not too late for such "anti growth
provisions" to be removed from the final bill.
The Hiring Incentives to Restore Employment (HIRE) Act
passed the Senate on February 23 by a vote of 70 to 28. Among its tax
cutting provisions include a new jobs payroll tax exemption, and an
extension of expanded Section 179 expensing allowing businesses to
write off more of their expenditures in 2010.
Besides the more stringent reporting requirements, the
bill is also offset by a provision which codifies the economic
substance doctrine used by courts to determine whether transactions are
used purely to avoid tax, and through modifications to the USD1.01 per
gallon cellulosic biofuel producer credit.