Brad Ashwell: Who has money in Florida's banks?
Published: Tuesday, May 1, 2012 at 1:31 p.m.
Last Modified: Tuesday, May 1, 2012 at 1:31 p.m.
Believe it or not, the U.S. government doesn’t currently know the identity of foreign citizens who have money in U.S. banks. Thankfully, that is about to change.
Thursday, the Treasury Department finalized a rule requiring U.S. banks to report information to the I.R.S. on deposit accounts held by nonresident aliens, as they have been required to do for U.S. citizen, resident and Canadian accounts. This is long overdue.
The U.S. Senate estimates tax haven abuses cost the I.R.S. some $100 billion annually. As budget deficits soared after the financial crisis, the U.S. rightfully ramped up efforts to catch Americans evading taxes through secret offshore bank accounts. Uncle Sam has demanded that foreign banks and governments hand over the names of U.S. citizens who have bank accounts in their countries in order to catch these tax-cheats and recover the lost tax revenue. Understandably, other governments have begun to demand the same from us; that we should share the names of their citizens who have accounts in the U.S.
The problem is that the U.S. government doesn’t collect information about deposit accounts held by foreigners within the U.S. because we don’t tax them, making us a kind of tax haven for foreigners. Naturally, not having the information, it is very difficult for us to share with foreign governments.
Following a long consultation period, Treasury adopted the regulation this week which will simply provide the I.R.S. with this necessary data: not to tax the accounts, merely to have the information should we need to share it with a foreign government—giving us the leverage needed to request the same from our diplomatic peers. Surprisingly, this relatively straightforward proposal has garnered vocal opposition from Florida politicians.
Sen. Marco Rubio (R-FL) blasted the new rule as “disastrous” and claimed that of the roughly $14 billion of foreign deposits held in Floridian banks, it would “encourage billions of dollars to flee Florida’s economy.”
Rep. Bill Posey (R-FL) went further, claiming the regulation would “cause irreparable harm to the U.S. economy.”
As a long-time Floridian, who cares significantly about the state and nation’s economy, I can safely tell you that the sky is not falling. Quite the contrary.
Foreigners deposit money in the U.S. for a variety of reasons: Foreign companies doing business in America, foreigners supporting children as they attend American universities, foreigners paying taxes on real-estate and other U.S. assets, or simply foreigners wishing to take advantage of the stability of the American financial system. That is the bulk of the foreign money deposited in the U.S., and none of that money is going to go anywhere.
A small amount of money will flee, no doubt, but it will be money that should not be propping up U.S. banks: money that is specifically tax evading in other countries, or that is the proceeds of crime such as drug smuggling, human trafficking, etc.
Rather, the information generated by this new regulation will strengthen the Floridian and American economies.
While tax dodging in Greece, Italy and elsewhere exacerbates the European debt crisis, further destabilizing the Europe, we have a vested interest, as Europe’s largest trading partner; in helping our Mediterranean friends curtail tax evasion and stabilize their economies.
Moreover, if we are going to have any chance persuading foreign countries, like Switzerland, to provide us with information on U.S. tax-cheats, we need to be able to reciprocate the favor. The new regulation will put us in that position.
Finally, Florida banks should not be handling criminal proceeds, the money that we believe will flee, especially given the state’s problems with drug cartels and violent, organized crime. Florida banks should be doing everything they can to get rid of the money financing crime.
Despite the “Chicken Little” cries of the Florida Bankers Association, Sen. Rubio and Rep. Posey, the Treasury Department made a big step toward stabilizing and strengthening the Floridian, American and global financial systems.
Brad Ashwell is legislative advocate for the Florida Public Interest Research Group
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