FATCA: A Ticking Time Bomb for the Economy

I thought it a good idea to repost a link to Peter W. Dunn’s article on American Thinker from last November:  http://www.americanthinker.com/2011/11/fatca_a_ticking_time_bomb_for_the_economy.html

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One thought on “FATCA: A Ticking Time Bomb for the Economy

  1. This time bomb started ticking on October 4, 1976 when President Ford signed the Tax Reform Act of 1976 which masively slashed the Foreign Earned Income Exclusion for US persons living abroad to $15,000 “off the bottom” and introduced stacking which subjected all income in excess of the FEIE to the higher marginal tax rate that would apply if there had been no FEIE. The sponsors in Congress of that legislation maintained that US persons abroad contributed nothing to selling US exports and served no useful purpose in living abroad. They had insisted that the FEIE be totaly abrolished but the $15,000 that remained was an agreed to compromise.

    The prior year, 1975 the US recorded the largest trade surplus in its history of trade surpluses for 95 of the prior 100 years. It was also the last US trade surplus ever recorded. There was a massive drop into the red of the US trade balance in 1976 and the US has never recorded even one trade surplus year since. Hundreds of thousands of Americans living abroad simply could not survive so they came home, abandoning many foreign markets to foreign competitors because the additional tax cost of US citizens abroad transformed them from profitable into loss markets. US companies with labor intensive engineering and construction contracts, particulary in the Middle East, were subjected to massive non-performance penalties and went bankrupt. Almost overnight the US, which had occupied first place in this market, almost completely disappeared as cometitors from other countries were now able to substantially underbid companies employing US citizens. And with the loss of that market the market for capital goods to implement these projects was also lost to sources in the foreign countries that soon dominated this market.

    The Cumulative trade deficit, starting in 1976, now exeeds $8.5 trillion, (and is growing by some $2.3 billion/day) which is of the order of magnitude of about 7 times greater than the total of US borrowings from China required to cover the fiscal funds shortage of the Federal Government.

    What FATCA has done is to accelerate this decline considerably by, among other things, making it so difficult for Americans living abroad to have bank accounts in the countries where they live as foreign banks are accelerating the closing down of such accounts. The extraterritorial reporting requirements to the IRS not only make it far too costly to them to maintain such accounts but requires that they violate the privacy laws, and in some cases even the constitutions of their countries, in providing confidential bank account informtion not only to a third party but to th tax authorities of a foreign country. So the difficulty of living and working abroad without a local bank account is tightning the noose around the necks of US citizens living abroad, leaving them little choice other than to return to the US (where many of them have never even lived before) or renounce the US citizenship. If you think that the US trade deficit of $740 billion in 2011 was high (it was 60% of the total trade deficits of the 139 countries of the world with trade deficits), just keep your eyes open as it continues to soar upward with these new measure which insure there will be vastly fewere US feet on the ground selling American exports.

    Exports are not “bought,” they have to be sold and that takes a vast army of persons to perform all of the tasks vital to success in the export market. US exporters, unable to deploy their own best-qualified US citizen personnel in this task, must depend on foreign mercenaries for these tasks who are not green card holders. Hiring experienced and qualified foreign persons for these tasks is akin to placing the fox in charge of the chicken house..

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