When the Republican-controlled Congress moves forward with drafting comprehensive tax reform legislation to put on President Donald Trump’s desk, one item ought to be high on the list of provisions but probably isn’t yet — repealing the Foreign Account Tax Compliance Act (FATCA).
Almost unknown inside the United States, FATCA has been wreaking havoc with global financial markets and making life hell for eight million or more Americans living abroad. Enacted in 2010 by a Democrat-controlled Congress and signed into law by President Barack Obama, FATCA was touted as a weapon against “fat cat” tax evaders stashing funds offshore.
But not one syllable of the law targets actual tax evasion activity. Instead, FATCA imposes an indiscriminate information dragnet requiring all non-U.S. financial institutions (banks, credit unions, insurance companies, investment and pension funds, etc.) in every country to report data on all specified U.S. accounts to the IRS. If any country refuses to comply, FATCA provides for its financial sector to be hit with crippling penalties.
Because of the complex and expensive compliance mandates FATCA imposes, many non-U.S. firms reject or drop expatriate Americans’ accounts, won’t hire Americans, or refuse to do business with them. Law-abiding, middle-class expats are treated as virtual financial lepers. FATCA is a primary factor fueling the record rate of Americans renouncing their U.S. citizenship.
These aren’t just numbers; they’re real people: “Giving up my U.S. citizenship was one of the most painful things I ever did in my life, but I felt I had no choice,” writes Donna-Lane Nelson. “Banking alternatives were being closed to me which meant I would have had no bank account, no credit card, no debit card. I am a retiree on a very limited budget. It is impossible to live without a bank.”
Recently, my firm, deVere Group, conducted a survey of 2,500 Americans residing in Asia. Thirty-eight percent of them report people not wanting to conduct business with them. Over half indicate problems with access to simple banking services, like a checking account to pay living expenses. Nearly one-fifth say they would reluctantly consider giving up their U.S. passports.
Extrapolated to the total number of expats, that amounts to over a million and a half Americans faced with that heart-wrenching prospect. No wonder some two-thirds of our respondents urgently want FATCA repealed.
So does the Republican National Committee. With strong support from then-RNC Chairman and current White House Chief of Staff Reince Priebus, the 2016 Republican Platform called for FATCA’s repeal for its “warrantless seizure of personal financial information without reasonable suspicion or probable cause” and its undermining of the “ability of overseas Americans to lead normal lives.”
The way the Obama administration chose to implement FATCA made a bad law even worse. Armed with the threat of financial sanctions, the Treasury Department concocted a set of statutorily unauthorized “intergovernmental agreements” to force our trading partners to abrogate their privacy laws and effectively turn their domestic tax services into branch offices of the IRS.
A lonely profile in courage is Kamla Persad-Bissessar, the opposition leader of Trinidad and Tobago, who in January wrote to then-President-elect Donald Trump with the expectation that Republicans intend to keep their campaign pledges. I am confident she will get a positive answer once Trump’s team is in place at the Office of Management and Budget (OMB) and Treasury.
While Obama was in the White House, prospects for getting rid of FATCA were slim. With total GOP control and strong platform support, consigning this monstrosity to the obscurity it deserves should be a no-brainer. Still, because so much of the harm FATCA inflicts falls outside the U.S., it isn’t a high-visibility item in Washington.
That is why I recently committed my own money to creating the Washington-based “Campaign to Repeal FATCA” to raise the profile of what my co-leader of the campaign and former Senate GOP leadership staffer Jim Jatras calls “the worst law most Americans have never heard of.”
Fortunately, Sen. Rand Paul (R-Ky.) and Rep. Mark Meadows (R-N.C.) have signaled their intent to re-introduce their repeal bills from earlier Congresses.
“FATCA is a textbook example of a bad law that doesn’t achieve its stated purpose but does manage to unleash a host of unanticipated destructive consequences,” Sen. Paul stated.
Rep. Former Congressman Mick Mulvaney (R-SC), now OMB Director, co-sponsored Meadows’ repeal bill.
Tax evasion is a serious problem and should be strictly policed and harshly punished. But FATCA — the Obamacare of global finance — is not the way to do it. Savaging the innocent along with the guilty stains America’s treasured core values of liberty and due process.
Once FATCA repeal legislation is reintroduced, it should be incorporated into any larger tax bill moving toward enactment. It’s time for the Trump administration and the bicameral GOP leadership to honor the party’s pledge to get rid of this senseless, invasive, dictatorial, and costly burden.