At least twice last week, CNBC publicly backed countries that shelter the income of US citizens from US taxes, aka, tax havens, abusive tax shelters. According to CNBC's Larry Kudlow, these tax havens provide "tax competition."
Senator Carl Levin (D-MI) chaired hearings on these abusive tax havens. Between 40,000-45,000 US citizens have secret, numbered, Swiss bank accounts. That is, 40,000+ Americans do not pay their fair share.
They, and others using similar tax havens, deprive the US government of $100B per year.
That is $1 trillion in a decade, the estimated cost over the same period to the taxpayers of Universal Health care reforms President Obama will propose. So, in a real sense, these 40,000+ are stealing your healthcare.
Swiss banking laws make it a crime for anyone in Switzerland to reveal the names of the persons associated with those accounts. Although the Union Bank of Switzerland (UBS) has agreed to cease-and-desist from allowing US citizens to keep anything but regular banking (checking and savings) accounts, thus forcing these 40-45;000 to find other secret venues, UBS has admitted to fostering these abusive practices and agreed to pay a large fine.
But that fine is less than 1% of the uncollected taxes.
That's not so fine.
Nor is the United States powerless. First, we need to recognize this for what it is -- economic war against the United States by its own citizens in collaboration with a foreign government. What they slime their way out of paying, YOU pay, either in taxes or interest servicing the debt.
You pay in other ways, mostly in sapping the will of the country to take on universal healthcare because "we do not have the money", "it is too expensive." Those complaints wear thin in an era of enormous deficits brought on by the disastrous Bush policies, but they worked for 60 years. The fight is not over; they may win again.
Second, if this is indeed an attack against the US with perpetrators sheltered by a foreign government, we ought to react as we have in other wars. For example, during World War I, all German companies were forced to divest themselves completely of their US subsidiaries.
If Switzerland does not change its bank secrecy laws to permit the divulging of those 40,000 names, Swiss companies should be forced to divest their US subsidiaries. Here are a few giant Swiss companies that would be impacted: Novartis, Hoffmann-LaRoche, United Bank of Switzerland.
Third, we ought to impose severe punishments for those who are found to have accounts in countries with bank secrecy laws. Long jail terms and payment of back taxes with large penalties is a good place to start.
Anyone care to guess some of those among the 40,000? Dick Cheney seems to me a good guess. He was CEO of Halliburton, whose KBR subsidiary was a Swiss company; while Cheney was Halliburton's CEO they did big business with Saddam Hussein's Iraq and Iran. The Bush family--i.e., not necessarily George W himself-- is described Kevin Phillip's book as squarely among the traditional financial elite that had little qualms of whom it was they were financing between the two World Wars. I would guess they have had Swiss accounts for at least 3 generations.
What about Larry Kudlow himself? When he speaks about this, or other matters, ought we not have full disclosure? Why is he so passionate about these abusive tax havens? How can he claim to be a patriot, and at the same time applaud the bleeding of our Treasury by our own citizens protected by foreign governments?
What about Madoff? If he does not have accounts squirreled away in the world's secret banking countries, then his status as the evil genius of our time is in jeopardy.
Then, of course, the others--prominent politicians? Pillars of society? Financial elites? Are they likely to pontificate about their patriotism?
You can bank on it.
Will this prevent anything from being done about it?
Yes, unless you care about your health.
Proudhom
It should be noted that while tax evasion certainly exists as a result of the existence of so-called tax havens, not all uses of tax havens are abusive. They serve as an important protection against abusive governments.
The notable example here is Germany under Hitler. A significant number of Jews and other "undesirable" minorities (as deemed by the maniacal German regime) used Swiss and other tax havens to protect their wealth from theft by the German Government. Without doubt, tax havens allowed many to evade the holocaust.
While certainly the most extreme example, the German example is not an isolated case.
You can bet that a significant number of citizens of places like Cuba and Zimbabwe protect themselves by using "abusive tax havens". Can you blame them? History is rife with examples of governmental theft on a grand scale, whether it be nationalization of assets or outright confiscation.
While it is certain that tax havens are abused by some, not all their functions and uses are abusive.
The largest beneficiaries of a clampdown on "abusive" tax havens will be oppressive, and indeed, abusive regimes. A world without tax havens will be a more dangerous world for many.
David Clay Johnston's book Perfectly Legal; the covert campaign to rig our tax system to benefit the super rich - and cheat everyone else.
Abrams: No one has healthcare now, no one, so that $1trillion figure isn't scare-mongering by any means.
Give me a break. If those crazy rich people who are running the world economy (vs the mechanic who isn't) are doing anything illegal, by all means recover and prosecute. If not, get off your high horse.
Second, you are correct that the tax rates are historically low in the US. Now, MORE than 50% of all taxpayers pay 0% federal income tax at MOST, while many of this same 50+% actually pay negative federal income tax when the Earned Income Tax Credit (EITC) checks they receive BACK from the government are calculated in. Now, THAT is PATRIOTIC..... In fact, the EITC program costs more on an annual basis than Social Security. Obama's tax plan will further skew this percentage.
Third, although this article is red meat for the "fair share" set, you fail to mention, and like the real name of UBS, you may be unaware that the US is the only industrialized, developed country on the planet that taxes its citizens on WORLDWIDE INCOME FROM ALL SOURCES. In fact, the US is virtually THE ONLY country on the planet that does this. Thus, Swiss or other offshore bank accounts, secret or not, are non-issues for citizens of virtually every other country as their home governments don't tax them on income earned outside their home countries. This tax policy also puts US expatriots at a competitive disadvantage in the global environment.
Fourth, look for many, many Democrats on that list of 40,000 people which invariably will not become public.........John Kerry, Kennedy(s).............
preclude the tax havens for the ones that can afford to park their money in off-shore banks.
The middle class pays most of the taxes, per IRS Website of 2003, where it stated that the rich
only paid 1/5 of the total taxes collected. Needless to say it did not get unnoticed that the list of
tax cheats turned over to the US Government in February 2008 did not get published like other countries had done. This lets me conclude that our congress is very much involved in it. Don't look for a publication of the names for the UBS either. Middle class pays the taxes, they don't have enough to pay for valuable advice, can't write off anything, can't give to their own charities, etc.
Fair tax would be great but since congress makes the laws, it won't ever happen.
In 1980, the individual income tax share paid by the top 1 percent of income earners was 17 percent. By 2004, the tax share for this same group had more than doubled, to 37 percent. THUS in 2004 the top 1% paid 37% of ALL Federal Income Taxes.
The share of income tax paid by the top 5 percent and top 10 percent of income earners has also increased during the same time period. In 1980, the share of income tax paid by the top 5 percent was 35 percent. In 2004, the share paid by this group had increased to 58 percent. THUS in 2004 the top 5% paid 58% of ALL Federal Income Taxes.
For the same years, the top 10 percent of income earners paid 48 percent and 71 percent, respectively, of income tax. THUS, in 2004 the top 10% paid 71% of ALL Federal Income Taxes.
It is factually impossible, as you assert, for the middle class to have paid 50% of Federal Income Taxes in 2003.
The average pre-tax income of the top 10% of Federal Income Tax payers in 2003 was $269,500. These people paid 69.6% of all Federal Income Tax.
See for yourself from the CONGRESSIONAL BUDGET OFFICE http://www.cbo.gov/ftpdocs/77xx/doc7718/EffectiveTaxRates.pdf
Whereas the top 10 percent of income earners earned 39 percent of the pretax income, they paid 71 percent of individual income taxes.
This year, a record 44 million tax returns – one-third of all returns filed – will have no income tax liability because of the available credits and deductions in the tax code. This is a 50 percent increase in the number of zero-tax filers in just four years. In addition to these zero-tax filers is 14 million individuals or households who do not earn enough to file a tax return. Overall, some 58 million taxable households are outside of the income tax system.
These findings raise some serious questions about the future of the U.S. income tax system. Are any future tax cuts, or even tax reforms, possible when the lion’s share of the tax burden is increasingly borne by a shrinking pool of taxpayers who – at least on paper – appear to be "upper-income"?
During 2006, 43.4 million tax returns, representing 91 million individuals, will face a zero or negative tax liability. That's out of a total of 136 million federal tax returns that will be filed. Adding to this figure the 15 million households and individuals who file no tax return at all, roughly 121 million Americans—or 41 percent of the U.S. population—will be completely outside the federal income tax system in 2006. This total includes those who pay no tax, and those who pay some tax upfront and are later refunded the full amount of the tax paid or more.
On to your substantive points, and they are quite substantive, but I fail to see the relevance. The law is what the law is. Those that go to secret banking countries and use abusive tax havens are breaking the law.
Yes, the US is the only country that taxes its citizens on their worldwide income. Why shouldn't we? Everyone enjoys the protections and benefits of being a US citizen, and taxes pay for those benefits. Moreover, so what? Regardless of whether it is a good idea or not, it IS the law. People do not get to choose which laws they obey---like George W deciding which military regulations he would obey when he hid from Vietnam in the air national guard.
Your comments about those not paying federal income tax are, again, irrelevant to this question but also misleading. A large fraction of those pay FICA and medicare taxes. So, these people do not escape taxes.
Your last point, that many Dems will also be on that list, is exactly correct and the point I was trying to make at the end--too many people w too much power will not want this corrected which is why, if people want to do something good for their health, they need to become vocal and persistant.
1) I agree that the law is the law, and should be obeyed. Nothing I said contradicts this. My comparative discussion provides illumination on the issue of WHY US taxpayers evade tax with offshore vehicles, it doesn't condone the practice. As the CBO figures, and others clearly shows over the last 30+years, the percentage of total tax paid by the wealthiest 10% has grown several fold. The higher the burden shouldered by this group, the larger the incentive for them to evade. Example: in the 1990's when the Russian tax rate was 90%, there was 10% compliance....
2) This trend is continuing, if not accelerating with the Obama tax plan (I was a delegate for Obama), and has now reached a point where more than 50% of US taxpayers pay 0% FIT at most, yet constitute a democratic majority in crafting tax policy. It is dangerous when 71% of tax revenues come from 10% of the population, and in my view is unsustainable. As your article shows, wealth is increasingly mobile and it and the people who own it can leave.
3) "Yes, the US is the only country that taxes its citizens on their worldwide income. Why shouldn't we?" Well, first off, NO OTHER COUNTRY does. No other OECD or developed country taxes it's citizens on worldwide income from all sources. If we didn't do this, offshore accounts be they secret, or not secret would be a non-issue as they are for virtually every other citizen from every other country on the planet. Secondly, this puts American expatriates at a competitive disadvantage against expatriates from virtually every other country-especially in low, or no tax jurisdictions. IE if an american works in a 0% tax expatriate country, a national from any other country will keep 100% of his income, while the American will need to pay tax on the same amount, netting the American less income dollar for dollar, and necessitating an offsetting increase in pay by the employer to put the American and the other national on the same footing. Thus, an employer can hire a French national for 100, but needs to pay the American 120 to get the Franch and American the same net. Assuming equal skills, etc. Who would you hire? This is a stupid policy in that it has been empirically shown that American expatriates drive American exports. Not to mention that it is good policy to have American expatriates engaged wherever possible, globally.
They got to run businesses in this country with the most educated work force in the world thanks to decades of GI Bill funding and lots of public spending on education through at least the 1980s. And public spending on interstate highways, the Internet, and US military support for drilling, refining and shipping cheap oil from all over the world to keep energy prices lower than any other developed country.
They wanted low taxes so they could make money, they got it, we ran up huge deficits mostly because of military spending and now they don't want to pay taxes when the country needs some. That is very patriotic!
I say, get their money back here, pay their back taxes, and then take away their citizenship. They don't want and responsibilities for it so badly. Let them see what it is like living in other countries, where there are no taxes, no government services, and they don't have their US dollars to live the high life off of!
I remember reading that he was not allowed to do something on Wall Street as a punishment.