As Barack Obama becomes the lamest of lame ducks, you can count on him to take every opportunity to aim a parting shot at what’s left of the American economy and the U.S. Constitution. In recent weeks he has abused his executive authority on guns, overtime pay, gender-bending bathroom rules on states and parents, and U.S. “boots on the ground” in Libya, Yemen and Syria.
Unsurprisingly, the GOP leadership in Congress is utterly ineffective in blocking him.
Even worse, on some matters top Congressional Republicans have shown their readiness to carry Obama’s water for him. The best-known examples are the 2014 $1.1 trillion “Cromnibus” abomination (which funded Obama’s illegal actions on immigration) and approval of “Obamatrade” authority last year to expedite horrible deals like TTIP (the “Transatlantic Trade and Investment Partnership” with the European Union) and TPP (the “Trans-Pacific Partnership”), which Donald Trump rightly has called “insanity.”
Now there’s yet another monstrosity waiting in the wings. Obama and Treasury Secretary Jack Lew are trying to shoehorn the United States into a global financial reporting scheme that would trash American sovereignty, suck money out of the U.S. economy, and violate constitutional principles, such as respecting the Senate’s advice and consent to treaties and requiring warrants for searches of personal data.
Unfortunately, the Republican leadership in the Senate is lining up to help Obama and Lew do it.
At issue are seven obscure tax treaties being held up by Senators Rand Paul (R-KY) and Mike Lee (R-UT). Foreign Relations Committee Chairman Bob Corker (R-TN) is trying to pry loose Paul’s and Lee’s “hold” on the treaties and to rubber stamp them without fixing data reporting standards that violate the 4th Amendment to the U.S. Constitution. The two Senators are happy to quit blocking the pacts, which are otherwise acceptable, if they are amended to remedy that defect.
A Dear Colleague letter signed by Corker – but clearly drafted by Lew’s Treasury Department – claims to debunk Paul’s and Lee’s objections in what amounts to a rehash of Obama administration talking points. For example, the letter (evidently prompted by my recent commentary opposing the treaties) claims blocking them won’t prevent operation of a little-known 2010 law called the “Foreign Account Tax Compliance Act” (FATCA), which the Obama administration has sought to implement using a series of unauthorized and unratified “intergovernmental agreements.” With all due respect to Chairman Corker, this claim is inaccurate. For example, Article 5(1) of the relevant agreement with Switzerland says in so many words that FATCA requests ‘shall not be made prior to the entry into force’ of a treaty the two Senators have a hold on. If that’s not blocking, what is?
From the standpoint of American jobs and foreign investment in the U.S., there is even more at stake. Since the “Panama Papers” story broke, foreign officials have accused the United States of acting as a tax haven as well as permitting states like Delaware, Nevada and Wyoming not to disclose “beneficial ownership” of corporations. There have been calls to blacklist the United States, and even to apply sanctions against us.
Barack Obama has invited these attacks on America by his administration’s practice over the past five years of subjecting our trading partners to one-sided, costly and humiliating FATCA demands under threat of financial sanctions. They have capitulated, in part because Obama – as noted above, with no legal authority – has promised foreign governments the U.S. would provide reciprocal data under the FATCA agreements he refuses to submit to the Senate as treaties. Now he expects Congress to make good on his imprudent and legally deficient pledges.
It’s important to keep in mind the seven tax treaties are themselves innocuous and even desirable from the standpoint of avoiding double taxation for Americans doing business overseas. But contrary to Chairman Corker’s letter, ratifying them without fixing their constitutional defects facilitates their use as vehicles for data reporting under the legally dubious FATCA “intergovernmental agreements,” many of which also require “reciprocal reporting” from domestic U.S. institutions to foreign governments. This would hit U.S. banks, credit unions, insurance companies, mutual funds, etc. with costs comparable to those FATCA imposes on foreign institutions, which run into the millions per financial institution (for example, Canada’s Bank of Nova Scotia alone already had spent $100 million as of 2013). Imposing the same burdens here in the U.S. would mean billions of dollars extracted from American consumers and taxpayers, spurring massive capital flight from the United States and lost jobs. That’s why U.S. credit unions have written to the Congressional leadership to oppose domestic expansion of FATCA, which would “increase regulatory burdens on American credit unions and banks without resulting in a single dollar of new tax revenue to the Treasury.”
Finally, the seven treaties are a stalking horse for another item on Obama’s and Lew’s political bucket list: a so-called “Protocol amending the Multilateral Convention on Mutual Administrative Assistance in Tax Matters” that would lock in a FATCA-like international “common reporting standard” as treaty obligation. The result would be essentially FATCA gone global—sometimes called GATCA – which in would be set for a global tax under United Nations auspices, pressure on the U.S. to raise our domestic tax rates and subjecting our country to the oversight of bureaucrats at the Organization for Economic Cooperation and Development and other international organizations.
Republican leaders should not provide ex post facto authority for Obama’s and Lew’s reciprocal FATCA and GATCA schemes, which would also hand embattled IRS Commissioner John Koskinen sweeping new regulatory powers. It comes as no surprise that President Obama seeks to impose these burdens on America as his parting gift. What is deplorable is that any Republican leader would help him do it. Instead of promoting Obama’s global regime, it’s time for Senate Republicans to put America first. They should join Senators Paul and Lee in ensuring these treaties are not ratified until Obama leaves office, and get ready to send President Donald Trump a FATCA repeal bill early next year if President Obama succeeds. (For more from the author of “Why Is the Senate GOP Leadership Helping Obama Pass Job-Killing Treaties?” please click HERE)