The Home-passed “huge, stunning” tax invoice is an incredible achievement and an enormous sparkplug for progress. The invoice extends all of the Trump tax cuts of 2017, thus heading off a $4 trillion tax INCREASE subsequent yr. It expands well being financial savings accounts, consists of expensing of main capital and analysis expenditures by companies, permits more cash for varsity selection, and consists of “no tax on ideas” and no tax on time beyond regulation pay.
However there have been additionally just a few unhealthy tax coverage adjustments. One of many worst is the three.5% tax on noncommercial “remittances” — funds usually made by foreigners from U.S. monetary establishments to events exterior the US. Actually, we have to tighten guidelines to guarantee that cash saved within the U.S. doesn’t discover its manner into the fingers of legal syndicates, drug cartels or different unhealthy actors.
A tax on the authorized transactions isn’t the answer. This measure will solely drive extra monetary transactions underground.
The tax may drastically discourage foreigners from investing in the US. And that disincentive will undermine the Trump financial aim of attracting trillions of {dollars} of abroad funds to be invested and create jobs right here in America.
Yearly, about $800 billion of remittance funds are constituted of U.S. monetary establishments to foreigners on trillions of {dollars} of funding capital parked right here. Most of that cash goes to Mexico, with El Salvador and Vietnam main beneficiaries.
For America to retain our standing because the hub of the monetary world, world buyers have to know that {dollars} invested in U.S. monetary establishments won’t be topic to intrusive authorities regulation and taxation, and that their monetary privateness will likely be protected.
The excellent news is that the Senate model of the tax invoice eliminates this tax on monetary establishments and overseas buyers within the U.S. The Home ought to conform to this revision.
However each the Home and Senate payments create a brand new tax on remittances made by hardworking immigrants who come from poor nations after which ship a refund dwelling to family members who desperately want funds. The cash goes straight into the fingers of the folks in poor nations with none corrupt “nongovernmental group” middlemen serving to themselves to a share of the cash.
Taxing these funds is unfair on condition that the immigrants have already paid earnings and payroll taxes on these earnings.
If Congress wants income to offset the “huge, stunning” tax cuts, they might elevate greater than this unfair tax does by imposing an excise tax on the close to $1 trillion of college endowments — an enormous stockpile of cash that has by no means been taxed in any respect. It makes much more sense to tax this endowment cash as soon as than remittance cash twice.
Immigrants make substantial contributions to the U.S. economic system whereas additionally serving to elevate the dwelling requirements in growing economies. These advantages are within the clear nationwide curiosity of the US — and each will likely be jeopardized by this shortsighted tax measure. The Senate ought to ditch it instantly.
Stephen Moore is a cofounder of Unleash Prosperity and a former senior financial adviser to Donald Trump.
