Mr. HINOJOSA. Mr. Chair, I rise today in support of the Amendment offered by my esteemed colleague from Florida, Mr. POSEY (#25). His Amendment would ensure that the rule recently approved by the Internal Revenue Service requiring that interest payments on foreign deposits be reported to the IRS would not move forward. This is extremely important to the region which I represent, deep South Texas. Our community banks and local economies benefit from investments and deposits from non-residents, and would be harmed by the serious loss of capital caused by these depositors fleeing our communities. Many of these depositors have chosen to bank in the United States because of the stability of our financial institution system. If this ruling goes into effect, and these deposits evaporate, the capacity of these banks to invest in the local economies diminishes.
A Mercatus Center 2004 study of a similar rule projected that $88 billion of capital would exit United States banks if the rule were to take effect. At a time of extreme economic fragility, we need this capital to stay on our shores.
Additionally, many foreign depositors have chosen to bank in the United States for security reasons; their home countries may be politically unstable, and they fear that personal financial information released by the United States may fall into the wrong hands, making them a target.
Lastly, the Internal Revenue Service has exceeded its authority. Foreigners do not pay taxes on interest earned on deposits, so there is no reason for these deposits to be reported to the IRS. Congress intended to attract capital to the United States by allowing these deposits to go interest-free; to force these depositors to report will run contrary to this original intent.
I urge all my colleagues to support this Amendment that will prevent much-needed capital from fleeing the American economy.