China holds more than $1 trillion in U.S. government debt — and thanks to a decades-old tax treaty doesn’t have to pay tax to Uncle Sam on the income it derives from dividends from the interest on that debt.
Sen. Joni Ernst, Iowa Republican, wants the Treasury Department to report exactly how much that costs the U.S. in lost revenue.
“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,” Ms. Ernst said Tuesday as she awarded the trade deal terms her “Squeal award” for the month of June.
Ms. Ernst won election in 2014 in part on a campaign ad where she recalled her Iowa childhood castrating hogs, and vowed to make Washington squeal under the budget scalpel.
In this case, her target is the terms of trade with the Chinese government, which she says allows China to run a massive trade surplus with the U.S., while avoiding taxes on the dividend income from U.S. debt.
In a letter last week to Treasury Secretary Steven T. Mnuchin, the senator said China has reneged on agreements with President Trump to buy more U.S. products such as soybeans.
She said as those trade negotiations continue, both the U.S. and China deserve to know how much income Uncle Sam is forgoing because of the dividend tax matter. She said it would be good to know what other countries also are excused from paying.
“I would, therefore, request that the Treasury Department begin calculating and publicly posting the amount of interest paid to the top ten 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,” she wrote.