PRIVATE FOREIGN SAVINGS TAX-LOOPHOLE ELIMINATION ACT

A Bill

To amend the Internal Revenue Service Code in order to eliminate the tax-loophole for private foreign savings.

SECTION 1. SHORT TITLE

This Act may be cited as the “Private Foreign Savings Tax-Loophole Elimination Act”

SECTION 2: FINDINGS

The Congress finds as follows:

(1) Since the time that Congress enacted the private foreign savings tax-loophole in 1984, the trade deficit of the United States has risen and become chronic.

(2) The balance of trade is determined by flows of financial savings. Countries that experience a net inflow of savings have trade deficits and those that experience a net outflow of savings have trade surpluses. This is because such flows are necessary to be able to import. Market forces tend normally to correct trade imbalances by changing the relative prices of imported and exported goods, but there is no correction if the flow of savings persists. The private foreign savings tax-loophole attracts private foreign savings and, along with the continuing foreign-government reserves tax-loophole, has contributed to the chronic trade deficit that the United States has experienced since 1984.