Destructive ‘fat cat’ tax law a complete flop. It’s time to repeal it.

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On Wednesday, the House Subcommittee on Government Operations of the Committee on Oversight and Government Reform will hold a hearing on the unintended consequences of the Foreign Account Tax Compliance Act, or FATCA. Featuring witnesses representing the nine million Americans living abroad, the hearing will dramatize how this ill-conceived edict has turned law-abiding, middle-class citizens into virtual financial lepers.

In the name of tracking down “fat cat” tax cheats, FATCA imposes an indiscriminate information dragnet requiring, under threat of sanctions, all non-U.S. financial institutions (banks, credit unions, insurance companies, investment and pension funds, etc.) to report data on all specified U.S. accounts to the Internal Revenue Service. No probable cause of criminal activity or even suspicion is required.

Foreign banks have responded by dumping American clients, making it impossible for them to conduct everyday transactions to lead normal lives. FATCA is a primary factor fueling the record rate of Americans abroad renouncing their U.S. citizenship.

Witnesses called by the Democratic minority are expected to defend the Obama-era FATCA law by pointing to offshore tax evasion — a problem that no one denies. But that doesn’t mean FATCA is the right remedy. Talking about tax evasion to justify FATCA is comparable to “defending” America’s catastrophic experiment with the prohibition of alcohol by reciting the litany of the ravages caused by Demon Rum.

There is no reason to think FATCA is an effective enforcement tool. The IRS is getting better at policing evasion for reasons having nothing to do with FATCA. According to Professor William Byrnes of Texas A&M University School of Law, the vast bulk of IRS recoveries “would have been generated without FATCA” via “normal investigatory techniques such as whistleblowing, prisoners dilemma, congressional hearings, and John Doe summons enforcement.”

Byrnes attributes the actual net recovery attributable to FATCA at a mere $100-200 million per year, far less than the approximately $800 million it was scored at upon enactment in 2010. Worse, projects Byrnes, the recovery trend is downward, and FATCA (excepting penalties) could “soon cost more money than it brings in.”

Byrnes may even be overestimating FATCA’s effectiveness in light of the IRS’s own standards. Generally, the agency claims to recover $7 for every enforcement dollar spent.

But for FATCA and related programs, sorting through the sheer “mountain of data,” the vast bulk of it irrelevant, almost reverses the recovery bang for the enforcement buck, according to W. Gavin Ekins, a research economist at the nonpartisan Tax Foundation: “Actually finding a dollar of tax evasion may cost us $5 of actually sifting through the data and compliance costs.” Compared to normal IRS programs that’s a 35-1 dysfunction quotient.

Among the hardships witnesses will testify to are crushing IRS penalties for filing errors and huge costs for accounting and legal services, even when no tax was owed. The Tax Foundation estimates that in 2016 FATCA paperwork cost individuals almost 4.5 million hours and over $165 million, a figure comparable to Byrnes’ estimate of FATCA-generated revenues.

Worse still is the massive compliance costs placed on the entire global financial system — money that comes out of the pockets of customers and depositors. Even a small bank can expect to spend millions of dollars looking for American “indicia” among thousands of accounts.

According to available data, bigger ones spend much more. For example, according to the Wall Street Journal, Canada’s “Big Five” banks collectively had paid out the equivalent of $693.5 million in primary compliance by 2014. Bank of Nova Scotia alone had spent $100 million as of 2013.

Estimates of total global compliance spending rely on aggregating what is known about per-institution costs. One such projection assesses FATCA’s cumulative cost at between $58 billion and $170 billion. An estimate by the Swiss-American Chamber of Commerce comes in at a stunning $1-2 trillion.

It’s thus no mystery why big accounting, law and software firms are thrilled with FATCA and are keen to insist that “FATCA is here to stay!” But corporate welfare for compliance vendors who are the real fat cats in this saga is no reason to keep a bad law.

In early April Rep. Mark Meadows (R-N.C.) and Sen. Rand Paul (R-Ky.) introduced companion bills to repeal FATCA in accordance with the 2016 GOP Platform. In addition, Paul and Meadows recently wrote to Treasury Secretary Steven Mnuchin and OMB Director Mick Mulvaney urging executive actions to minimize FATCA’s damaging impact pending its removal from the statute books.

Working with the Campaign to Repeal FATCAgrassroots taxpayer and free market groups, such as Americans for Tax Reform and National Taxpayers Union, support repeal.

The Meadows-Paul FATCA repeal bill is ready to be added onto any suitable tax measure arising in the House. As my co-leader in the Campaign to Repeal FATCA, deVere Group CEO Nigel Green, has written, it’s time for the GOP White House and Congress “to honor the party’s pledge to get rid of this senseless, invasive, dictatorial and costly burden.” An early nod from the White House would be a welcome signal.

James George Jatras is a former U.S. diplomat for the State Department and a foreign policy adviser to the Senate GOP leadership. He is Co-Leader of the Campaign to Repeal FATCA.