The Costliest Regulation You’ve Never Heard Of
A proposed regulation could cost the U.S. banking system hundreds of billions of dollars, in turn costing our economy billions of dollars, and achieving no discernible benefits for banks, depositors, taxpayers, or the U.S. economy.
One of the costliest regulations to come down the pike of late has nearly managed to escape detection. Earlier this year, the Treasury Department published its “Guidance on Reporting Interest Paid to Nonresident Aliens,” which would require banks to report to the Internal Revenue Service the amount of interest they pay to non-resident aliens with a U.S. bank account. While the Treasury and the regulatory apparatus insist that the cost and inconvenience of adhering to this law are next to nothing, the reality is that this rule could cost the U.S. banking system hundreds of billions of dollars in lost deposits. In turn, this will cost our overall economy billions of dollars, while achieving no discernible benefits for banks, depositors, taxpayers, or the U.S. economy.
The Encroaching Regulatory State
Foreigners have never paid taxes to the U.S. Treasury on their interest earned in U.S. banks and would continue being exempt under the new regulation. The sole requirement would be that the banks report the interest paid to these account holders to the IRS, primarily to conform to international regulations that call for more transparency by financial institutions.