Feeds:
Posts
Comments

Posts Tagged ‘Regulation’

There hasn’t been much good economic news in recent years, but one bright spot for the economy is that the United States is a haven for foreign investors and this has helped attract more than $10 trillion to American capital markets according to Commerce Department data.

These funds are hugely important for the health of the U.S. financial sector and are a critical source of funds for new job creation and other forms of investment.

This is a credit to the competitiveness of American banks and other financial institutions, but we also should give credit to politicians. For more than 90 years, Congress has approved and maintained laws to attract investment from overseas. As a general rule, foreigners are not taxed on interest they earn in America. Moreover, by not requiring it to be reported to the IRS, lawmakers on Capitol Hill have effectively blocked foreign governments from taxing this U.S.-source income.

This is why it is so disappointing and frustrating that the Internal Revenue Service is creating grave risks for the American economy by pushing a regulation that would drive a significant slice of this foreign capital to other nations. More specifically, the IRS wants banks to report how much interest they pay foreign depositors so that this information can be forwarded to overseas tax authorities.

Yes, you read correctly. The IRS is seeking to abuse its regulatory power to overturn existing law.

Not surprisingly, many members of Congress are rather upset by this rogue behavior.

Senator Rubio, for instance, just sent a letter to President Obama, slamming the IRS and urging the withdrawal of the regulation.

At a time when unemployment remains high and economic growth is lagging, forcing banks to report interest paid to nonresident aliens would encourage the flight of capital overseas to jurisdictions without onerous reporting requirements, place unnecessary burdens on the American economy, put our financial system at a fundamental competitive disadvantage, and would restrict access to capital when our economy can least afford it. …I respectfully ask that Regulation 146097-09 be permanently withdrawn from consideration. This regulation would have a highly detrimental effect on our economy at a time when pro-growth measures are sorely needed.

And here’s what the entire Florida House delegation (including all Democrats) had to say in a separate letter organized by Congressman Posey.

America’s financial institutions benefit greatly from deposits of foreigners in U.S. banks. These deposits help finance jobs and generate economic growth… For more than 90 years, the United States has recognized the importance of foreign deposits and has refrained from taxing the interest earned by them or requiring their reporting. Unfortunately, a rule proposed by the Internal Revenue Service would overturn this practice and likely result in the flight of hundreds of billions of dollars from U.S. financial institutions. …According to the Commerce Department, foreigners have $10.6 trillion passively invested in the U.S. economy, including nearly “$3.6 trillion reported by U.S. banks and securities brokers.” In addition, a 2004 study from the Mercatus Center at George Mason University estimated that “a scaled back version of the rule would drive $88 billion from American financial institutions,” and this version of the regulation will be far more damaging.

Both Texas Senators also have registered their opposition. Senators Hutchison and Cornyn wrote to the Obama Administration earlier this month.

We are very concerned that this proposed regulation will bring serious harm to the Texas economy, should it go into effect. …Forgoing the taxation of deposit interest paid to certain global investors is a long-standing tax policy that helps attract capital investment to the United States. For generations, these investors have placed their funds in institutions in Texas and across the United States because of the safety of our banks. Another reason that many of these investors deposit funds in American institutions is the instability in their home countries. …With less capital, community banks will be able to extend less credit to working families and small businesses. Ultimately, working families and small businesses will bear the brunt of this ill-advised rule. Given the ongoing fragility of our nation’s economy, we must not pursue policies that will send away job-creating capital.We ask you to withdraw the IRS’s proposed REG-14609-09. The United States should continue to encourage deposits from global investors, as our nation and our economy are best served by this policy.

Their dismay shouldn’t be too surprising since their state would be especially disadvantaged. Here are key passages from a story in the Houston Chronicle.

Texas bankers fear Mexican nationals will yank their deposits if the institutions are required to report to the Internal Revenue Service the interest income non-U.S. residents earn. …such a requirement would drive billions of dollars in deposits to other countries from banks in Texas and other parts the country, hindering the economic recovery, bankers argue. About a trillion dollars in deposits from foreign nationals are in U.S. bank accounts, according to some estimates. …The issue is of particular concern to some banks in South Texas, where many Mexican nationals have moved deposits because they don’t feel their money is safe in institutions in Mexico. …”This proposal has caused a wave of panic in Mexico,” said Lindsay Martin, an estate-planning lawyer with Oppenheimer Blend Harrison + Tate in San Antonio. He has received in recent weeks more than a dozen calls from Mexican nationals and U.S.-based financial planners with questions on the rule. …Jabier Rodriguez, chief executive of Pharr-based Lone Star National Bank, said not one Mexican national he has spoken to backs the rule. “Several of them have said if it were to happen, then there’s no reason for us to have our money here anymore,” he said. Many Mexican nationals worry that the data could end up in the wrong hands, jeopardizing their safety. If people in Mexico and some South American nations find out they have a million dollars in an FDIC-insured account in the United States, “their families could be kidnapped,” added Alex Sanchez, president of the Florida Bankers Association.

For those who want more information about this critical issue, here’s a video explaining why the IRS’s unlawful regulation is very bad for the American economy.

Advertisements

Read Full Post »

I’m an over-protective parent. Even now, with my kids ranging between 18 and 23, I will try to herd them together while skiing so I can follow them down the slopes and watch for potential injuries. And I never got them a jungle gym when they were young, even though I somehow managed to survive childhood with one in my backyard.

But at least I recognize what I’m doing. And I certainly would never consider imposing my mother-hen impulses on the overall population.

I’m not surprised to discover, however, that bureaucrats in New York wanted to go way overboard with regulations to ban just about anything with even tiny risks of injury. This list included things such as archery and rock climbing, which might cause me to fret, but also things such as (I’m not joking) kickball and tag.

With those standards, you may as well require kids to be enclosed in bubble wrap every morning.

The only good news is that people found out about the state’s regulatory overreach and the government was forced to cancel the rules after widespread mockery.

Here are some excerpts from a story by NBC in New York.

Day camp games like tag, wiffle ball, Red Rover and kickball are no longer at risk in New York after state health officials yanked a proposal that threatened the future of those mainstays of child’s play.

Towns, villages and other camp operators had begun revamping upcoming indoor summer programs after the Department of Health sent out a long list of familiar games and activities it said presented a “significant risk of injury” and needed to be regulated more closely.

…On Tuesday, Richie, a Republican whose district includes three mostly rural north-central New York counties, said she was pleased by the reversal.

“At a time when our nation’s No. 1 health concern is childhood obesity, I am very happy to see that someone in state government saw we should not be adding new burdensome regulations by classifying tag, Red Rover and Wiffle Ball as dangerous activities,” she said. “I am glad New York’s children can continue to steal the bacon and play flag football and enjoy other traditional rites of summer.”

The proposal would have revised the definition of a summer day camp to include potentially risky organized indoor group activities like archery and rock climbing — as well as things like kickball, tag and Wiffle Ball.

Ritchie said that would have required camps in many smaller towns and villages to add staff such as nurses and pay $200 for a state permit. Other critics argued the regulation was a hysterical approach that stood to take all the fun out of summer.

Read Full Post »

I’m not a big fan of the IRS, but usually I blame politicians for America’s corrupt, unfair, and punitive tax system. Sometimes, though, the tax bureaucrats run amok and earn their reputation as America’s most despised bureaucracy.

Here’s an example. Earlier this year, the Internal Revenue Service proposed a regulation that would force American banks to become deputy tax collectors for foreign governments. Specifically, they would be required to report any interest they pay to accounts held by nonresident aliens (a term used for foreigners who live abroad).

The IRS issued this proposal, even though Congress repeatedly has voted not to tax this income because of an understandable desire to attract job-creating capital to the U.S. economy. In other words, the IRS is acting like a rogue bureaucracy, seeking to overturn laws enacted through the democratic process.

But that’s just the tip of the iceberg. The IRS’s interest-reporting regulation also threatens the stability of the American banking system, makes America less attractive for foreign investors, and weakens the human rights of people who live under corrupt and tyrannical governments.

This Center for Freedom and Prosperity video outlines five specific reason why the IRS regulation is bad news and should be withdrawn.

I’m not sure what upsets me most. As a believer in honest and lawful government, it is outrageous that the IRS is abusing the regulatory process to pursue an ideological agenda that is contrary to 90 years of congressional law. But I guess we shouldn’t be surprised to see this kind of policy from the IRS with Obama in the White House. After all, this Administration already is using the EPA in a dubious scheme to impose costly global warming rules even though Congress decided not to approve Obama’s misguided legislation.

As an economist, however, I worry about the impact on the U.S. banking sector and the risks for the overall economy. 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.

In pushing this regulation, the IRS even disregarded rule-making procedures adopted during the Clinton Administration. But all this is explained in the video, so let’s close this post with a link to a somewhat naughty – but very appropriate – joke about the IRS.

Read Full Post »

Sam Kazman of the Competitive Enterprise Institute has a withering critique of dumb government policies that have taken away our freedom to buy low-cost and effective washing machines and instead forced us to buy expensive machines that don’t do a good job of cleaning our clothes.

I guess we shouldn’t be surprised that politicians are undermining our quality of life. These are the same jackasses, after all, that are in the process of requiring us to use crummy light bulbs. And they’ve already coerced us into ridiculous “low-flow” toilets that don’t work very well if you happen to…um…deposit something that reminds you of Washington.

Here’s an excerpt from Sam’s column, but read the whole piece since he also discusses how the Senate wants to make a bad situation even worse, and he also reveals how corrupt big businesses favor these mandates so they can eliminate low-cost options.

…for decades the top-loading laundry machine was the most affordable and dependable. Now it’s ruined—and Americans have politics to thank.

…The culprit is the federal government’s obsession with energy efficiency. Efficiency standards for washing machines aren’t as well-known as those for light bulbs, which will effectively prohibit 100-watt incandescent bulbs next year. Nor are they the butt of jokes as low-flow toilets are. But in their quiet destruction of a highly affordable, perfectly satisfactory appliance, washer standards demonstrate the harmfulness of the ever-growing body of efficiency mandates.

The federal government first issued energy standards for washers in the early 1990s. When the Department of Energy ratcheted them up a decade later, it was the beginning of the end for top-loaders.

…Front-loaders meet federal standards more easily than top-loaders. Because they don’t fully immerse their laundry loads, they use less hot water and therefore less energy. But, as Americans are increasingly learning, front-loaders are expensive, often have mold problems, and don’t let you toss in a wayward sock after they’ve started.

When the Department of Energy began raising the standard, it promised that “consumers will have the same range of clothes washers as they have today,” and cleaning ability wouldn’t be changed. That’s not how it turned out.

…even though these newer types of washers cost about twice as much as conventional top-loaders, overall they didn’t clean as well as the 1996 models.

…We know that politics can be dirty. Who’d have guessed how literal a truth this is?

Hat tip to Advice Goddess.

Read Full Post »

Regular readers of this blog already know (see here, here, and here) that I’m not a big fan of the new “CFL” light bulbs that we will be forced to use in a couple of years.

In a more entertaining fashion, here’s a video from a few years ago, featuring a Republican Congressman railing against the new bulbs.

Repealing the idiotic mandate for these inferior bulbs should be a gimme for the new Republican majority. Somehow, though, I predict they’ll screw up and leave the requirement in place.

Read Full Post »

Since I believe in federalism and decentralization, I tend to be somewhat tolerant of stupid decisions by local governments – particularly when those choices are made thousands of miles away and I don’t have to deal with the consequences.

With this in mind, I find it rather amusing that San Francisco is now plagued by sewer smells as a result of mandates for low-flow toilets. The article doesn’t explain what rules the city imposed, but I assume they are even worse than the federal rules (if you want a good laugh about the federal law, this Dave Barry column is worth reading).

Reading the excerpt below, part of me hopes for a dry summer and that the city’s politicians all live near AT&T Park.

San Francisco’s big push for low-flow toilets has turned into a multimillion-dollar plumbing stink. Skimping on toilet water has resulted in more sludge backing up inside the sewer pipes, said Tyrone Jue, spokesman for the city Public Utilities Commission. That has created a rotten-egg stench near AT&T Park and elsewhere, especially during the dry summer months. The city has already spent $100 million over the past five years to upgrade its sewer system and sewage plants, in part to combat the odor problem. Now officials are stocking up on a $14 million, three-year supply of highly concentrated sodium hypochlorite – better known as bleach – to act as an odor eater and to disinfect the city’s treated water before it’s dumped into the bay. It will also be used to sanitize drinking water.

Read Full Post »

I’ve already commented here and here on the government forcing us to use inferior lightbulbs.

The bad news is becoming worse news. Here’s a story from England that was linked on Instapundit, showing how big business (which conspired with the politicians to get rid of high-quality incandescent bulbs) will now reap a windfall selling the new CFL bulbs at much higher prices. Here’s an excerpt from the Daily Mail.

The price of energy-saving light bulbs will treble as the final supplies of traditional bulbs dry up, industry experts have warned. The Government has ordered energy companies to scrap the subsidies that have kept the price of eco-bulbs artificially low for the last few years. At the same time, manufacturers are increasing wholesale prices to take advantage of the European ban on ‘energy guzzling’ old-style bulbs. Retailers also claim bulbs that currently cost only 33p are expected to sell for more than £1 within three months. Some will cost £3 or more. The move comes as Britain is gearing up to phase out the last incandescent light bulbs in an effort to meet climate change targets. The EU has already banned shops from buying stocks of 100watt bulbs and stopped them stocking up on any type of frosted incandescent bulbs.

The only silver lining to this dark cloud is that (at least I don’t think) CFLs are not subsidized in the United States. So while it is likely that prices will increase once there no longer is competition from incandescent bulbs, hopefully American consumers will not face the same big price hikes as their British cousins.

Read Full Post »

Older Posts »

%d bloggers like this: