On February 11, 2016, Claudine and I discussed the hidden truth behind FATCA, aka Section 501 of the HIRE Act of 2010 with Jim Jatras of repealfatca.com. And it was an eye-opener.
FATCA, according to Mr. Jatras, was the red-headed step-brainchild of a Villanova law professor who submitted the bill to Congress. FATCA was "sitting on a shelf" waiting to be put into any bill that required a spending offset — pretty much any spending bill — and it just happened to be the HIRE Act that FATCA was dusted off for.
Then, remarkably without any debate about the compliance costs offloaded to foreign banks and US persons, FATCA was inserted into the HIRE Act of 2010. Because…
Free: $800 million dollars!
FATCA was expected to bring in $800 million of revenue to offset $17 billion of the HIRE Act. Note: $800 million is about how much the federal government spends in 2 1/2 hours. And for this 2 1/2 hours of spending, FATCA imposes a worldwide compliance structure that imposes upon the sovereignty of every other country around the world.
FATCA Compliance costs are estimated to be $2 billion a year to $10 billion a year. No one really knows exactly how much, as many banks are trying to hide these costs and aren't especially proud of having to knuckle-under to the IRS.
The worst law of all time?
It is difficult to imagine a law that raises such little revenue at such an incredible cost. That $800 million in revenue is what a supporter of FATCA claimed it would raise. Its actual reality-based figure is perhaps lower, and could be negative.
When asked if this was the worst law of all time, Mr. Jatras said FATCA is probably second place to the Volstead Act, the terrible law that borne the ill-fated attempted at alcohol prohibition.
"We could knock FATCA over with a feather, we just need a feather"
The key to getting FATCA repealed, Mr. Jatras explained, is there needs to be some organization — and some real money behind that organization. Some banks have paid $100 million of FATCA compliance. If they just put 10% of this into lobbying efforts, instead of pouring even more money into additional compliance costs, FATCA would be gone in months. But as it is now, FATCA opposition is too scattered. Mr. Jatras expressed his disappointment in big players like Wall Street and domestic US banks, which will have FATCA compliance cost offloaded on to them, for being negligent in allowing this bill to pass instead of fighting against it.
***Update March, 2017: Mr. Jatras is part of a group that is working to repeal FATCA and will be testifying in front of Congress in April to fight this law. Read more here***
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