By U.S. Sen. Marco Rubio and U.S. Rep. Bill Posey
March 8, 2012
Last year, the Treasury Department proposed a new IRS mandate that will have disastrous consequences for Florida unless it is stopped from taking effect.
For more than 90 years, Congress has encouraged foreigners to invest their money in U.S. banks by exempting these deposits from taxes and reporting. This policy has led to hundreds of billions of foreign deposits in U.S. banks, particularly in Florida, creating good-paying jobs and credit for communities and small businesses. In fact, each $1 deposit results in $7 to $9 in sorely-needed economic activity.
Maintaining policies that encourage investment in our economy seems like a no-brainer at a time when unemployment is approximately 10 percent in Florida. Yet without consulting Congress, the administration is pushing a new mandate that would crush our pro-investment climate and cause billions of dollars to flee Florida’s economy.
As anyone with a bank account knows, deposits are easily transferrable, and any adverse development can result in wholesale capital flight. This is precisely what will happen if banks are required to report to the IRS interest earned by foreign investors. A study looking at a narrower proposal from 2002 estimated that at least $88 billion in capital would have left the United States for other nations. The latest proposal, far larger in scope, would be much more damaging to our economy.
Florida, already hard hit by the economic downturn, would be particularly affected given its extensive ties to the Caribbean and Latin America. There are an estimated $14 billion in foreign deposits in Florida’s state chartered banks, and much more in federally-chartered institutions. These funds are critical to our economy.
Read the full op-ed here.