China has loaned the United States more than $1 trillion to help cover the federal government’s spiraling national debt, all the while making huge profits in the process, because of an obscure provision of a landmark 1984 tax deal.
“What is not as transparent is how much China profits from our red ink, both in terms of dividends paid on the interest off of Treasury bonds and a special loophole that exempts those profits from taxation,” Ernst told Mnuchin.
“If its government-owned industries were treated the same as a U.S. citizen or small business, China would be required to pay taxes on the interest earned on the Treasury bonds that our government sells as a way to borrow money,” she explained.
“Due to a decades-old trade deal, however, China pays no tax on U.S. Treasuries, which allows it to make off with billions of dollars that would otherwise be owed to the U.S.,” she said.
Ernst encouraged Mnuchin to “begin calculating and publicly posting the amount of interest paid to the top 10 major foreign holders of U.S. Treasury securities, as well as the cost of foregone tax revenues resulting from any exemptions granted by trade deals or other agreements with those nations.”
“Think about that: We are borrowing money from China to pay China for lending us money and sweetening the bargain with a tax loophole that literally goes all the way to China,” Ernst said in a separate statement emailed to The Epoch Times regarding the issue.
“The agreement will contribute to a long-run expansion of economic relations between the two countries by providing clear rules as to the tax consequences of investing or working in the other country,” Reagan told the Senate.
“It reduces the tax which residents of one country must pay to the other on certain types of income, such as dividends, interest, and royalties and provides limited exemptions for visiting teachers, researchers, and students.
“The agreement also assures non-discriminatory taxation in the host country, and, provides a mechanism for cooperation between the tax authorities to try to resolve any potential problems of double taxation.”
The problem today, according to Ernst, is that China profits off its loans to finance the U.S. deficit with tax dollars paid by U.S. taxpayers, who presently have no way of knowing how much those profits are.
A big portion of the $50 billion would be produced by Iowa farmers, a fact that is particularly significant for Ernst, who is seeking election in November to her second term in the Senate.
“The cost of this loophole is vitally important to U.S. taxpayers who are stuck with the bill, as well as U.S. trade negotiators, who might want to remind China of the billions of dollars that could be put at risk if our deals are not adhered to by both sides,” Ernst told Mnuchin.
The CCP was named recipient of the June 2020 Squeal Award “for not keeping their end of the deal while benefiting from a tax break bonanza potentially worth billions of dollars every year,” she said.
The award represents Ernst’s promise to Iowa voters when she was first elected to the Senate in 2014 to shine so much light on waste, fraud, and abuse in the federal government that it makes the beneficiaries squeal.
