Thursday, August 9, 2012

Massive Tax Evasion: Blame Politicians & Banks

John Boehner and the Republicans are constantly saying, "We don't have a revenue problem, we have a spending problem."

That is patently false, and they all know this. We have a huge revenue problem for two reasons: an unfair tax code and massive tax evasion.

The tax laws were written by the rich - specifically for the rich. The politicians in congress wrote all the tax loopholes that allow rich people to legally dodge taxes; the rest of us have our federal income taxes automatically deducted from our paychecks.

Remember Charlie Rangel? Mitt Romney isn't the only politician dodging taxes. For decades corporations and the top 1% have been dodging evading avoiding taxes all along. (They say "avoiding" taxes is legal and "evading" taxes is illegal. Mitt Romney "dodges" taxes and the military draft.)

One big tax advantage for the wealthy was the invention of the capital gains tax back in 1921 when the top marginal tax rates were much higher, allowing the rich among us to pay a lower tax rate than everyone else did on regular income --- investment income as opposed to hourly wages or weekly salaries. Today taxes for the rich and large corporations are now historically low, and tax evasion is at record highs.

The bottom 99% doesn't use foreign bank accounts, and neither do small mom-and-pop businesses. The top 1% and large corporations make up the bulk of those who evade income taxes.

Luxembourg is one of many tax havens, and Apple funnels more than a billion dollars worth of iTunes sales through that tiny country to avoid paying higher taxes.

The Cayman Islands requires a hard copy of the ownership and directorship of every account. It's American tax laws that Congress writes that allows American corporations to defer taxation by reinvesting overseas. With 217,000 registered offices located in one building in Delaware, international financial transactions tend to locate the domicile of the corporation in the jurisdiction with the most effective corporate legislation... like Luxembourg and the Cayman Islands.

People like Mitt Romney may be hiding his tax returns because he just doesn't want to verify what we already laws that are favorable to the rich were lobbied for by the rich. The bottom 99% can't afford to hire lobbyists to bribe people in congress.

These overseas "tax strategies" that Romney and others use are nothing new — and, no doubt, Apple has taken full advantage of tax rules that legally allow them to. The Senate’s Permanent Subcommittee on Investigations in 2008 estimated that at least $5 trillion to $7 trillion was sheltered in offshore jurisdictions like the British Virgin Islands, the Cayman Islands, Luxembourg, Switzerland, Gibraltar, Bermuda and the Bahamas. These jurisdictions have little or no income tax.

Now some of the world’s largest wealth-management firms are saying "Go away!" ahead of Washington’s implementation of the Foreign Account Tax Compliance Act, known as Fatca, which seeks to prevent tax evasion by Americans with offshore accounts. (Maybe that's another reason Romney closed his Swiss account, but where did he move that money? It's like a shell game for the super-rich.)

Some rich Americans are even evading taxes through the Holy Land.

Democrats are in full assault mode against Mitt Romney for his fancy accounting tricks, which include Swiss bank accounts and financial instruments in places like the Cayman Islands. But he's got a champion in South Carolina Republican Senator Lindsey Graham. The Republican senator says Mitt Romney is welcome to avoid paying taxes, as long as it's legal. (In other words, so long as we make it legal for Romney to do so.)

So don't blame the IRS, Congress writes the tax laws. The IRS just enforces them (or tries to with a limited budget that's been cut by Congress). But how can Romney have millions in an IRA account? Does Romney have ties to another private equity guy (Doug Shulman) who happens to be the current Commissioner of the Internal Revenue Service?

And tax evasion is not just rampant among the wealthy in the U.S., globally, the super rich hold $32 trillion in offshore tax havens.

Tax evasion is a national pastime afflicting southern Europe too, and is also blamed for helping to sink the Greek economy.

France and Germany have launched a series of raids on the offices and homes of bank officials and their wealthy customers in an ongoing inquiry aimed at cracking down on those who evade taxes by using Swiss banks. Tax evasion is also eating into the Italian GDP. More than a quarter of the Italian economy eludes taxation.

But despite efforts to crack down on international tax evasion, the practice is still rampant around the world.

Almost three years after UBS, Switzerland’s biggest bank, paid a tiny $780 million fine for helping Americans evade taxes and agreed to hand over the names of more than 4,500 American account holders, the Swiss banking industry refuses to exit the business of tax evasion.

Human traffickers, illegal arms dealers, and drug kingpins use the offshore banking system to launder money and evade taxes too.

Prosecutors from the United States Attorney’s Office in Manhattan indicted Wegelin & Company, Switzerland’s oldest bank, accusing it and three of its employees of helping American taxpayers hide money.

Democratic senators proposed a tax evasion bill that would target expatriates like Facebook co-founder Eduardo Saverin.

It's bad enough that every year $1 trillion in personal income is not taxed at all for Social Security or Medicare, but we also have billions of dollars every year lost to tax evasion in the U.S.

Yet congress refuses to fund the IRS for more tax auditors. Instead, the GOP is saying that 50% of the workforce (who earns less than $25,000 a year) should "put more skin in the game". And the GOP always says that raising taxes only increases tax evasion. I guess they have a point. The tax laws were always written for rich people to dodge taxes.

Mitt Romney and the Republicans also want the banks less regulated.

So who does the IRS have left to go after? A 92-year-old retired school teacher owing $25,000 in back taxes.

The Heat is On for Over-paid and Under-taxed CEOs

1 comment:

  1. Mitt Romney Started Bain Capital With Money From Families Tied To Death Squads

    A well-documented article about how Bain investors were the ruling classes who were deploying the death squads to beat back guerrillas and reformers during El Salvador's civil war. Most of these investors are now in Miami and still with Bain, and are good friends of Romney.