Bankers Oppose IRS Regulation Of Foreign Investments

By Andrea Salazar

Representatives from financial institutions in Texas and Florida fear loss of investments if the IRS moves ahead with a proposed regulation requiring banks to report the deposit interest paid to foreign investors.

The Financial Institutions and Consumer Credit Subcommittee held a hearing on the recent IRS proposal. Currently, banks do not report the interest foreign investors earn from American banks, nor do foreign investors pay federal taxes on that interest.

At the hearing, Rep. Bill  Posey (R-FL) emphasized that the policy is not necessary to enforce U.S. tax laws and will harm the economy instead.

“Make no mistake about it, the proposed regulation will drive hundreds of billions of dollars out of America, and cause irreparable harm to an already fragile U.S. economy,” Posey said in a statement.

Alex Sanchez, president and CEO of the Florida Bankers Association, emphasized the threat the IRS regulation would impose on foreign investors from South America, whom he says are the majority of investors.

“People do not trust their institutions in their home countries,” Sanchez told the subcommittee. “They’re worried about an economic collapse where their currency will be worthless. That’s why they have their monies in the United States of America.” 

However, Rebecca Wilkins, senior counsel on Federal tax policy for Citizens for Tax Justice, supports the IRS measure as a way to curb tax evasion.

“We do not believe that the United States should be a tax haven for citizens of other countries who wish to evade their tax obligations to their home country,” Wilkins said in her testimony.

Posey, along with Rep. Gregory Meeks (D-N.Y.) have introduced legislation to block the IRS from forcing banks to release the deposit interest information of foreign investors. They also sent letters, with bipartisan support, to President Obama and Treasury Secretary Timothy Geithner asking them to withdraw the proposed regulation.

IRS Chief Emphasizes Commitment To Helping Small Businesses

By Justine Rellosa
Talk Radio News Service

On the eve of Tax Day, IRS Commissioner Douglas Shulman assured members of the House Committee on Small Business that his agency is working to lower the need for tax enforcement nationwide by helping educate individuals and business on compliance issues.

"The IRS's actions reflect our commitment to service, one of the IRS's most important goals as it goes about its mission of administering and enforcing the nation's tax laws," said Shulman.

He explained that the IRS has been moving swiftly during the past 15 months to implement new tax law provisions that are meant to help small businesses prosper.

"The Hiring Incentives to Restore Employment (HIRE) Act, which was signed into law last month, gives small businesses an important incentive to start hiring again and we're working to implement that quickly...We've already begun to mobilize and let small businesses know the new tax credit that's available to them to help buy health insurance for their employees," explained Shulman.

Under the HIRE Act, employers who hire unemployed individuals can qualify for a 6.2 percent payroll tax incentive and claim an additional general business tax credit.

Shulman said that the credit will particularly benefit small businesses and non-profits that employ low and moderate income workers.

It’s out! Democrats present budget

by Christina Lovato, University of New Mexico-Talk Radio News Service

This morning Congressional Democrats presented a budget they claim will make essential investments in the economic recovery and drastically reduce the deficit nearly in half by 2014.

Congressman John Spratt (D-NC) said the resolution will reduce the $1.8 trillion deficit to $586 billion by 2014.

“We’re going to take student loans and convert them into direct loans, saving $53 billion over a period of five years. We’re going to put money in the IRS, and HHS (Department of Health and Human Services) and other government agencies, and say, ‘We want to see stricter enforcement,’ because we believe program integrity initiatives like that can save as much as $50 billion.... Now that’s not a deficit that is satisfactory in and of itself but it is quite an accomplishment,” Spratt said.

Today Republicans are expected to issue their budget proposal, their second in two weeks.

“Apparently they are divided on this issue,” said House Majority Leader Steny Hoyer (D-MD). “We wanted multiple budgets as we normally do as well but we are not divided. We’re going to see a unity of purpose and unity of commitment on the Democratic side. I don’t mean unanimous but great unity.”

Spratt says the budget introduced by Rep. Paul Ryan (R-WI) and other representatives is “awfully hard to get down because it calls for some huge, substantial cuts.”  

House Education and Labor Committee Chair Rep. George Miller (D-CA) said he is “excited” to see that this budget along with the economic stimulus package, for the first time, will provide more resources for early childhood education all the way up to college education.

“This budget with respect to education responds to what every business leader who has come to this Capitol, has demanded from this Congress, and that is to improve the American education system so that when we emerge out of this economic crisis we will be stronger, we will be better educated and we will be more competitive in the globalized economy that confronts us from now throughout our entire future,” Miller said. 

The budget stresses the need for a clean energy economy. Congressman Ben Ray Lujan (D-NM) says the proposed budget will create energy independence and job creation. 

 “The Democratic budget builds on a significant funding and tax incentive for the Recovery Act by increasing our critical investment in renewable energy and energy efficiency by some 18% for 2010.... We need to do this to limit our dependence on foreign oil,” Lujan said. 

Tax gap reform will stop tax increases

"Some taxpayers shortchange the American people by nearly $300 billion, which is roughly $950 for every man, woman, and child in America," said Senator Tom Carper (D-Del.) at a roundtable discussion to find ways to cut the tax gap. With the financial crisis continuing to drive stocks down and the impending bailout bail threatening America's national debt levels, he said, it has become more important than ever to ensure taxes are being paid and to collect additional revenue without having to raise taxes in the next administration. The tax gap has not been examined since 2001, when more than $290 billion was not collected.

The discussion panel included the Inspector General, members of the U.S. Government Accountability Office, the National Taxpayer Advocate from the Internal Revenue Service, and members of the U.S. Treasury Department. Each panelist discussed seven ideal proposals to close the tax gap. These included the encouragement of more frequent, voluntary estimated tax payments by small businesses, the withholding of payments to noncompliant federal contractors, requiring information reporting by financial institutions about non-interest bearing accounts, reversing matching against state and local tax data, allowing voluntary withholding agreements among independent contractors and service recipients, eliminating the exception to 1099 information reporting for closely held corporations, and improvement of the IRS's data collection infrastructure. Carper has not specifically advocated any one of these proposals and believes that "no single approach, alone, will work." Carper encouraged the participants of the discussion to "think outside the box for new solutions."

Debts and deadbeats

Over 1.6 million businesses owe more than $58 billion to Uncle Sam, according to Senator Carl Levin (D-Mich.) at a hearing before the Committee on Homeland Security and Governmental Affairs on unpaid payroll tax abuse. A study by the Government Accountability Office (GAO) concluded that more than half this debt is now uncollectible.

According to Levin, delinquent businesses not only stash away taxes they owe the government but also steal funds withheld from employee paychecks. Levin pointed out that this widespread failure to remit payroll taxes is a felony and a disgrace. Levin said that in 1998, the GAO found unpaid payroll taxes totalled $49 billion but now it has increased to $58 billion. Levin attributed the cause for this increased tax debt partyly to ineffective Internal Revenue Service (IRS) payroll collection efforts.

Levin focused on three of the hosts of problems identified by the GAO. Levin said that GAO’s report disclosed that 70% of all unpaid payroll taxes owed by businesses are due to repeat offenders. Levin also cited the IRS’ failure to make effective use of available enforcement tools and “deadtime in the queue” where cases are left unproductive until a revenue officer is assigned to them and enforcement action is taken.

Senator Norm Coleman (R-Minn.), ranking member of the Permanent Subcommittee on Investigations, referred to those who fail to pay payroll taxes as “deadbeats” and said they are not only breaching their employees’ trust but shortchanging honest American taxpayers. Coleman said that the IRS estimated $44 billion has been transferred from general tax revenues to Social Security and Medicare. Coleman pointed out that the billions of dollars could have been invested in crucial areas such as healthcare, homeland security and education. Coleman also said that tax-cheats are shifting the tax burden onto honest Americans and are gaining an unfair advantage over honest businesses.