This Week in Congress: Tax Reform Update

Congress is expected to start voting on amendments to the tax reform bill as early as Thursday. Here are some amendments that Campaign for Liberty members will find of interest:

1. An amendment imposing a carried interest tax, which has the support of a bipartisan group of Senators. Republicans Dan Sullivan of Alaska and Susan Collins of Maine are reported to be on the fence about the amendment. If they vote for it, then it could pass.

2. An amendment by Senator Rand Paul of Kentucky to repeal compliance with the Foreign Account Tax Compliance Act (FACTA). FACTA authorizes the collection of personal financial data of U.S. citizens living abroad by the IRS. Here is a letter co-signed by Campaign for Liberty on this issue:

March 21, 2017

The Honorable Paul Ryan
Speaker
U.S. House of Representatives
H-232
U.S. Capitol
Washington, DC 20515

The Honorable Mitch McConnell
Majority Leader
U.S. Senate
S-230
U.S. Capitol
Washington, DC 20510

The Honorable Kevin Brady
Chairman
Ways and Means Committee
U.S. House of Representatives
1011 Longworth House Office Building
Washington, DC 20515

The Honorable Orrin Hatch Chairman
Senate Finance Committee
U.S. Senate
104 Hart Office Building
Washington, DC 20510

Dear Speaker Ryan, Majority Leader McConnell, Rep. Brady, and Sen. Hatch:

As free-market and taxpayer protection organizations representing millions of Americans, we urge that repeal of the Foreign Account Tax Compliance Act (FATCA)—a plank in the 2016 Republican Party Platform—be included in any tax reform package sent to the White House.

Enacted in 2010 by a Democrat-controlled Congress and signed into law by President Obama, FATCA purports to catch rich tax cheats hiding their wealth overseas but instead has ensnared innocent Americans in an appallingly draconian scheme that true wealthy tax evaders can still easily avoid. It treats any American asset held abroad as tantamount to criminality, demanding reams of private financial data without the need for a warrant or a showing of probable cause.

Since FATCA's introduction, Americans living overseas have lost access to their banking and investment accounts as foreign financial institutions drop clients rightly perceived as toxic. This has not only impacted the welfare of the estimated nine million Americans who live and work abroad but hampers small businesses owned and operated by Americans attempting to compete internationally.

Not only are many Americans injured by FATCA innocent of any wrongdoing, but a large number were not even aware of their status as U.S. persons for tax purposes until informed by their institutions. Likewise, some Americans attempting to comply in good faith with FATCA and other complicated and excessive international financial reporting requirements, but who have understandably committed a minor mistake or oversight somewhere in the process, are facing unfair and vindictive penalties that can exceed even the size of their overseas holdings.

FATCA's compliance costs vastly outstrip its revenue gains for the United States. Although these costs are often borne by foreign institutions, the global economy would come to a grinding halt if every country operated in this manner. Unfortunately, it appears that FATCA's unilateral effort to strong-arm foreign financial institutions into acting as deputy tax collectors for the IRS, itself a massive insult to our global partners, has spawned copy-cat initiatives overseas. Other jurisdictions and international organizations like the OECD are now seeking to follow the U.S. example—their aggressive tax grabs modeled after FATCA are creating new burdens on American businesses and the global economy—and seeking to pressure higher tax rates in the U.S. Thus, a bad U.S. law directed against other countries now threatens to boomerang back on us at home.

Tax evasion is a serious crime, and we support vigorous means to combat and punish it consistent with constitutional standards. But penalizing the innocent along with the guilty is unacceptable and un-American. FATCA violates our most-cherished principles of due process, presumption of innocence, personal privacy, and national sovereignty. It does not accomplish its stated objectives but does inflict untold collateral harm at great cost.

FATCA repeal bills will soon be introduced in the House and Senate. We urge the leadership and committees of jurisdiction to include this vital correction of misguided enactment of the past administration by including it in any forthcoming tax bill.

Sincerely,

Andrew F. Quinlan
President
Center for Freedom and Prosperity

Grover Norquist
President
Americans for Tax Reform

Phil Kerpen
President
American Commitment

Iain Murray
Vice President
Competitive Enterprise Institute

Andrew Moylan
Executive Director
R Street Institute

Charles Sauer
President
The Market Institute

Jeffrey Mazzella
President
Center for Individual Freedom

Nigel Green and Jim Jatras
Co-Leaders
Campaign to Repeal FATCA

Pete Sepp
President
National Taxpayers Union

David Williams
President
Taxpayers Protection Alliance

George Landrith
President and CEO
Frontiers of Freedom

Jim Martin
Chairman
60 Plus Association

Wayne T. Brough
Chief Economist and VP for Research
FreedomWorks

Bob Bauman
Chairman
Sovereign Society Freedom Alliance

Andrew Langer
President
Institute for Liberty

Lew Uhler
President
The National Tax Limitation Committee

Chuck Muth
President
Citizen Outreach

Norman Singleton
President
Campaign for Liberty

Lisa B. Nelson
CEO
Jeffersonian Project

Tom Giovanetti
President
Institute for Policy Innovation

Rick Manning
President
Americans for Limited Government

Pamela Villarreal
Senior Fellow
National Center for Policy Analysis

Karen Kerrigan
President and CEO
Small Business and Entrepreneurship Council

Campaign for Liberty members should call their Senators and tell them to oppose raising taxes on carried interest and support Rand Paul’s amendment to end FACTA.

Finally, one proposal on the table is to attach a “trigger” to the tax that would automatically raise taxes if the bill’s tax cuts raised the deficit. Tax cuts that could be taken away at any time obviously hinders the invective to invest in new businesses and thus limits the tax cuts pro-growth effects, making an increase in the deficit a self-fulfilling prophecy.

The prospect of automatic tax increases also removes any incentive for Congress to stop spending. However, the main problem with the trigger is a moral one. The idea that Congress can give and take away tax cuts is rooted in the idea that all property belongs to the state and so any money not taxed is a gift from government that government can take away at will. This is the exact opposite of the truth as stated in the Declaration of Independence