Rand Paul Leads an Effort to Help the Very Wealthy Hide Money Offshore
Republicans are trying to help rich tax evaders continue to cheat the system. The House Subcommittee on Government Operations held a hearing on Wednesday to try to repeal the tax compliance and transparency law known as the Foreign Account Tax Compliance Act (FATCA).
In short, the move is an effort to allow the very wealthy to hide their money overseas, something FATCA has made it more difficult to do since its inception in 2010. The law requires foreign banks and financial institutions holding U.S. client accounts to report account information to the IRS, as U.S. banks do.
But what about the
super* wealthy who can afford to stash large amounts of cash in international bank accounts? Those are the only ones affected by FATCA, and Republicans continue to watch out for their interests. Rep. Mark Meadows (R-N.C.) and Sen. Rand Paul (R-Ky.) are leading the effort by introducing two new bills (H.R. 2054 and S. 869) to repeal the law. Paul, who testified at Wednesday’s hearing, and a group of expatriates even filed a lawsuit last year claiming FATCA constitutes an unconstitutional breach of privacy, as well as an illegal treaty. A Federal judge tossed out the case.
Before FATCA was put into effect, there were cases where international banks, such as UBS, didn’t comply with transparency standards already in place and did not disclose the taxable income of their U.S. clients. That led to UBS, the largest bank in Switzerland, having to pay a $780 million penalty when it admitted that it had helped tens of thousands of American clients evade U.S. taxes.
Meadows and Paul want the public to think FATCA has harmful and unintended consequences on Americans. They’ve even gone so far as to suggest the law is responsible for foreign banks turning away business with U.S. citizens to the point where some people have dropped their citizenship altogether.
If that sounds extreme and inaccurate, that’s because it is. FATCA imposes no new taxes on any individual, here or abroad. With or without the law, U.S. taxpayers with money in foreign banks would still owe taxes, as they did long before FATCA was implemented. And of the 9 million U.S. citizens living abroad, the number who denounce their citizenship each year is less than one-tenth of 1%, according to the U.S. State Department.
“The reality today is that Americans living abroad can get banking services in virtually any country,” Elise Bean, Washington Co-Director of the Levin Center at Wayne Law Wayne State University, wrote in her document for the hearing in support of FATCA. Not only are tens of thousands of international banks compliant with these transparency guidelines, but Americans can put assets in American banks that have overseas branches or use online banking.
And for those arguing that there’s a cost to Americans for this reporting compliance, that’s also untrue. Any costs associated with FATCA compliance are borne by foreign banks. And FATCA-like standards are being implemented by 100 other countries looking to crack down on their own homegrown scofflaws.
FATCA levels the playing field for U.S. banks. For years, American banks had to play by the rules of financial disclosure while foreign banks did not, giving them an advantage with clients looking to hide assets.
“With U.S. tax reform at the top of the Congressional agenda, a multitude of policy options are clamoring for attention,” Bean wrote. “Of all those policy options, repealing a law that stops dishonest taxpayers from hiding money abroad shouldn’t make the list. Especially since that money lost to tax evasion would have to be made up by honest taxpayers or cuts to critical public programs.”
* CORRECTION: * The foreign financial asset threshold for FACTA filing is $400,000 at yearend or $600,000 on any day, so “super wealthy” should have been reported as merely “wealthy.”