Press reports now state that the U.S. tax code is more than 77,000 pages and growing at a rapid rate. Obviously, no one individual or even teams of lawyers and accountants can fully understand all of this, including people at the Internal Revenue Service (IRS). When laws are too complex and increasingly subjective in their interpretation, it inevitably leads to corruption. All but the willfully blind now understand that the IRS has both become corrupt and incompetent.
On July 1, the IRS extended its reach to perhaps 100,000 foreign financial institutions and millions of other non‐Americans who receive or make payments to Americans. This global power grab was the logical extension of the effort to tax the worldwide income of all Americans, which requires the IRS to know about all payments to and from the United States and which financial institutions are involved in the transmittal and holding of accounts. The paperwork is unending and incomprehensible. (If you think I am overstating the case, download the new “W-8BREN-E” tax form from IRS.gov, which certain foreign recipients of U.S. payments are required to complete. Even tax lawyers tell me that it is nearly impossible to fill out the form without perjuring oneself, owing to the form’s endless ambiguity and lack of clarity.) This requirement is freezing many international bank payments, which will reduce foreign investment in the United States and add to systemic risk of the global financial system.