What to Do About America’s Rich Who Use Offshore Tax Havens
After suggesting a couple of weeks ago that the stratospheric earnings of equity-fund managers ought to be considered income rather than capital gains and therefore taxed at 35 percent rather than 15 percent, I was deluged with emails telling me the plan wouldn’t work. It would just drive fund managers into offshore tax havens. No less than Jon Corzine, the former chief executive of Goldman Sachs, now governor of New Jersey, admitted recently in a television interview that many fund managers would take their money out of the country before they’d pay the 35 percent rate.
Corzine and my other critics may have a point. Congress’s Joint Committee on Taxation recently estimated that America’s super-rich already sock away more than $100 billion a year in offshore tax havens. So any attempt to get them to pay what they owe is doomed, right?
Maybe. But I’ve been thinking a lot about the immigration bill now pending before Congress – especially the conditions undocumented workers will have to meet if they want to become American citizens. One of them is to pay all the taxes they owe.
The new immigration bill may not make it through Congress, but that provision about paying taxes that are owed in order to be a citizen serves as a reminder that paying taxes is one of the major obligations of citizenship. After all, if we didn’t pay the taxes we owe, we wouldn’t have public schools, police and fire protection, national defense, homeland security, roads and bridges, Medicare and Social Security, and other things we need.
So when the super-rich use offshore tax havens to avoid paying what they owe in taxes, they’re reneging on their duties as citizens. It seems only fair to me that the consequence of that kind of tax avoidance ought to be loss of citizenship. If it’s more important to someone to avoid paying what they owe in taxes than to continue being an American, then let them keep their money. They can become a citizen of the Cayman Islands or Bermuda or wherever else they store their wealth, and come here on a visitor’s visa – if they can get one.
Robert Reich is Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. He has written ten books, including The Work of Nations, which has been translated into 22 languages; the best-sellers The Future of Success and Locked in the Cabinet, and his most recent book, Reason. His articles have appeared in the New Yorker, Atlantic Monthly, New York Times, Washington Post, and Wall Street Journal. Mr. Reich is co-founding editor of The American Prospect magazine.
Great idea Mr. Reich. While we’re at it let’s remind these folks that in the US we pay the least amount of taxes in the industrialized world. But then I remember that our lawmakers are for the most part part of the richboys club themselves and are hardly likely to make their ilk pay their fair share.
Their goal seems to completely eliminate the public. But then who will they look down on?
Here’s another idea - companies owned offshore could be barred from government contracts. I believe that’s what’s already happening at State level in your country.
If the rich don’t pay their share, both your country and mine will both resemble France in the time of the Third Republic.
Avoiding paying taxes is part of the American Dream, Reich knows this. The super rich play by the rules more or less, but you can get a job at one of their fronts. Al Capone would be so proud.
The stripping of citizenship is a great idea. But first, these bums should be jailed and all assets possible confiscated. In the end, they are guilty of tax evasion and looting the nation of its wealth: in other words, treason. If a nation-state is to have any meaning at all, treasonous economic attacks on its sovereignty and financial security should be regarded as seriously as treasonous political betrayals.
The rich pay most of the taxes, they always have, which should give today’s rich a certain feeling of pride, to acknowledge that they successfully leveraged the gift of past rich folks taxes into a gift to the next generation of rich folks, through the America that taxes buys, and within which great wealth can be achieved through a great society. That they would want to break that connection with the past and the future of rich people is sad. More importantly, its immoral and illegal. I would say confiscation or jail is appropriate, not merely loss of citizenship. Through the Reagan/Bush governmental philosophies, these people have created a kind of America they may no longer want to live in anyway, so loss of citizenship may be less consequential.
tj has it right, though I would add that Guantanamo could serve a useful purpose in this regard. We cannot expect them to tell us where all their assets are hidden unless they get a little “help” in remembering.
I am just joking of course, but it seems to me that depriving the US of needed tax dollars which could be used to provide medical care, nutrition, and other necessaries and thereby save lives can be just as harmful as a terrorist act.
Bob, you’re stealing my ideas.
There’s a basic asymmetry between those above and below the grid, respectively. Those below must live where they work, at or near subsistence. Those above are free to come and go with their wealth, corporate operations, etc. We need to even the playing field, expect the same of everyone: equal rights (and penalties) with regard to globalization.
If that doesn’t work, maybe work the other approach. Everyone — rich, poor, former middle-class, etc. is allowed to move his wealth/retirement/income into offshore tax-free, audit-free and law-footloose and fancy-free zones.
For the super-rich paying taxes is always voluntary. Warren Buffet said that in an interview with Bill Gates, and he gave an example of how he could do it and said that he chose not to. It is better to establish a realistic tax structure, for example with an optionally filed postcard return to specify how you want the money spent. After all the government usually already knows how much you made and how much you owe in taxes. Just check off the tax credits for education, medical expenses and interest and provide a choice to have your taxes go to administrative, educational, or military purposes.
When I worked for the US Dept of Labor the Reagan administration decided that too many Americans were not paying all the taxes they owed. So they changed IRS regulations, not to close corporate loopholes or tax capital gains as income, but to force restaurants to pay taxes on servers’ tips that they “knew” were going under-reported. At the time these tipped employees could legally be paid just 60% of the minimum wage - you and I were required to make up the rest of their pay ($2.30/hr) by tipping. It didn’t matter whether you worked at Ruth’s Chris or Dunkin’ Donuts, the employer had to pay taxes on 8% of his gross and pass the deductions along to the 1/2-MW wait staff. The Reagan regs were implemented to collect the taxes on the unreported tip income in excess of (the then-MW) $2.30 an hour.
In time Congress raised the Minimum Wage but grandfathered in, in a compromise with anti-labor Republicans, the old MW and the old 50% pay rate. This means that, today, the employer must pay $2.13 an hour and generally record, and have taxes paid on, $5.15 an hour, the current minimum wage. This is the Republican idea of tax reform - go after the lowest-paid workers. Taxing estates, capital gains and assessing penalties for tax shelters are just not in their rich-white-guy nature. And remember, tipping your waitress is not giving her a reward for service, but merely raising her pay to the minimum wage. Currently you pay $3.02/hr of her pay while the restaurant owner chips in a mere $2.13.
Robert Reich became my boss (Sec’y of Labor) during the Clinton years, and it was a pleasure to work for someone so intelligent, caring and thoughtful for a change. I didn’t, and still don’t, always agree with his policies, but at least they come from a concern for the American worker. (Reagan’s first SOL was a rich donor whose NJ construction company had been investigated in the past by my office for pay anomalies - the file disappeared from our office 2 days after his appointment.)
Why in the world would Reagan have assessed penalties on tax shelters? When he was the governor of California he was caught hiding his income in Nevada tax shelters. Reported by the San Francisco Chronicle.
Revoke and kick their asses out!
Great article and posts. Fat chance of getting those millionaires in Congress and the White House to pass them though.
Why in the world would Reagan have assessed penalties on tax shelters? When he was the governor of California he was caught hiding his income in Nevada tax shelters. Reported by the San Francisco Chronicle.
good point kathyodat. raygun also began the tax on unemployment checks. of course the rich never have that problem. and we only get for a short term. capitalism always been a lie.
I think that when any government begins to eliminate the peoples rights, uses the money of the people against their interests and begins to kill people wholsale as they plunder their resources……I BELIEVE IT IS A CITIZENS DUTY TO NOT PAY TAXES to such a government or administration. All those who pay taxes are materially compliciit in the warcrimes of the regime they support. You U.S. taxpayers are complicit in all the lies, if you didn’t vote for them but give them financial support for their crimes against humanity, you are complicit in those crimes! Don’t play stupid, these neocrooks are after oil and you know it.
Great idea,it makes sense,ergo it is doomed.
It’s about time someone shed light on the “Great Mumbler” All Reagan did was wag his head while lying or not recalling. He was one of the worst. No that’s Bush.
You were right, Jess - Reagan was one of the worst. Bush Jr is THE worst.
Today I was in a cooking class here in the south of France, and two of the participants were a British husband-wife team of investment consultants who for the past 25 years have made a small fortune catering to British ex pats looking for tax shelters. This couple arrived at the class in their Jaquar bearing Monaco plates — having moved there last year after 10 years in Malta. (both countries are tax shelter states_
The point? The rich of every country in all times have found ways to protect their wealth. Just take the case of Johnny Halliday in France today.
Depriving folks of citizenship is a very powerful tool but it would have extraordinary political capital costs. Recorded history in the western world does not support a successful result.
Nice try, Bob, but you know it will never fly.
Has anyone hypothesized about what the ultimate nature/structure of globalism will be?
The trend is for economic integration of countries with profoundly different political systems. This will tend to homogenize politics according to an authoritarian model as corporations curry favor with authoritarian governments to gain market access and favors a la Rupert Murdoch.
Since capital can move freely, the capitalists will seek to maximize profit by any means including bankrupting the US government and society. They’ll loot the US Treasury and run off to tax havens like Dubai a la Halliburton.
The US citizenry will be left helpless, voiceless and broken….
Something to keep in mind: many of those funds in the Cayman Islands are actually invested in the United States, Japan or EU ultimately. In the case of the US, there aren’t at present any special asset taxes for anonymous investments by foreign banks. Perhaps there should be.
Edward Wolff at NYU and Ralph Nader have both proposed the US adopt some limite asset taxation similar to what France and some other European countries do. The idea is that folks would pay a tax of say 1-2% on any asset holding over say $5 Million per family. Those that use offshore tax havens would forgo that exemption.
Offshore tax havens are a fact of life-and won’t go away easily-but we can restructure the tax code so they are abused nearly as much as they are now.
Did anyone ever think that by not paying taxes these people are actually helping your cause?
More money into the bloated arms of government, means more money for corrupt politicians to buy more weapons, more aircraft, more bloated military contracts, and more kickbacks to their corporate paymasters.
Does anyone really believe, ohh… if only there were more money for health care and the environment and all those lost puppies! Get real. America spends more than all other nations combined on the military. The CIA has a budget in excess to what the NIH doles out every year in research grants. US education system is the most inefficient system in the world, producing more lazy, unintellegent worker drones than any system in the world. What is more money going to really do?
Why slam the super-rich? If you could tell the government to screw off by not paying taxes wouldn’t you?
Ha ha ha haaa ha ha ah ha ha ha ha ha ha haaa h h h hah ha ha ha !!!!!!!!!!
And this guy was actually in the government?????
To the moderator of this thread. If you feel it necessary to bar my freedom to express my absolute contempt for such utter crud as this article in the manner I see fit ; you are most welcome to bar me. i would be very disappointed in “common Dreams” if you do but then again, more proof that even you guys truly only want to be part of the dance.
Did you notice my comment on Naders last posting?
How cool is this my first ever banning?? is that what it is called?
First off, if ANY of us should be paying taxes, it’s those who benfit the most from our system of gov’t. That is the rich and the ultra rich. Especially in the last 25 years, when this country REALLY started kissing their asses. The W Bush tax cuts are just one example.
To the poster above who says that the rich pay the majority of the taxes, I beg to differ. When they make 98% of the money but they only pay 48% of the taxes, that doesn’t sound like your statement adds up. In fact, I suspect that they actually pay LESS than their 48%, to be honest.
Could anyone please tell me the number of the law that actually compels ANYONE to file a 1040 form or pay a tax on your wages? I’ve been looking for that info, lately, and I’ve been given all kinds of cases that imply it, I’ve been given the tax code, which is NOT a law passed by congress, and I’ve been given the 16th Amendment, which there is a question as to it’s actual ratification, and doesn’t actually compel you to file or pay. But I have not been given the actual law number that tells me that you have to file a 1040 or pay a tax on your wages. So in that respect, NONE of us should be paying it.
Not to mention, all the things that Mr Reich mention ed are actually paid for by other taxes, and not by income tax at all. All the income tax we pay every year, nearly a trillion dollars a year, is only used to pay interest on the debt. Not ONE PENNY has anything to do with actually running the country. Gas taxes pay for the roads and bridges, property taxes pay for schools, etc, and local and state sales taxes pay for other upkeep needs. Income tax is nothing but an extortion payment.
On one level, I’m angered by these people and their lack of citizenship. On the other, I think that None of us SHOULD be paying it at all. I’m not sure which part ticks me off more.
When China pulls the plug it won’t matter how much fiat money they’re trying to hide; they’ll be broke just like the rest of us unless they’ve invested in hard assets that have been paid for by fiat money prior to the collapse.
Only the people can make them pay.
The most interesting feature in the tax structure is that we never address who benefits most from the taxes that we pay. The rich complain that taxation is a redistribution of wealth and they are correct. But while the assertion in the press is that we are sending out tax dollars to support that lazy and luxurious life of welfare recipients, it is the corporate welfare junkies that consume, by far, the largest portion of our taxes. Whether it is my tax dollars going to fund the war machinery of Lockheed Martin, or funding the French advertising campaign of the Gallo wine family, it is the rich who reap the benefits of taxation.
Even when we consider the “obvious” necessities of funding fire fighters and police, we don’t consider who has the most to lose without these public employees. Attempts to rectify economic wrongs by the people have met with armed resistance FUNDED BY THE PEOPLE. Quite simply, when armed troops were sent in to break strikes (whether by doing the work, or battling the workers), it was their own employers they were assaulting: The working class who carries the greatest burden of the American tax system.
We agree, quite readily, to fund these forces for order and protection, but fail to consider that they protect the rich in unequal proportion. After all, the rich have the most to lose. Consider that no one considers dismantling the fire department while public education–the means to have a more intelligent population that will be more equipped to intelligently assess public policy–is under CONSTANT assault. In Indiana, we have had schools shut down because they couldn’t afford to pay the gas for the school busses. We protect property, but we do not enrich our citizens. Jefferson suggested that the only reason public debt was justified was for the purpose of public education, but it was his fellow Virginian who carried the day with his concern that the rich be insulated from the “whimsy” of the vast majority of American citizens, clamoring for education. Our spiraling public debt is in the service of war and war machinery while the media debate still focuses on the woes of the welfare state (which would be accurate if only they would admit who the true welfare queens of America are: Good morning, Haliburton!).
My point is that it is only the rich who receive tax breaks from government and it is primarily the rich who benefit from the collection of taxes. The social safety net is woven loosely enough to let all but the elephants fall through it. An honest assessment of the tax system, those who pay, and those who benefit, are the critical first step to finding some way to introduce justice to the system.
I am all for the rich “paying their share”, especially tax and spend rich liberals. That is why I strongly oppose any attempt to “fix” the Alternative Minimum Tax. If you want others to pay high taxes, YOU should pay high taxes too.
If you want a real education on the methods the wealthy use to avoid taxes read the book “Perfectly Legal” by David Johnson. One of the methods employed is the revoking of citizenship. You are only allowed a limited time to live in this country but is not enforced.
A few thoughts:
Why are capital gains taxed at 15% but my savings interest at a local bank taxed at 25% when I calculate my income taxes?
Why is your gross income taxed on both income and Social Security which adds up to a tax of 33% close to the top tax rate for the wealthy who get a
6.2% tax break on income above $97,500? SS taxes paid should be deducted from you income before income taxes are calculated.
Isn’t interest on the debt a massive form of wealth transference to the people who own the debt said to the 20% of government spending.
What’s the difference between “tax and spend” Democrats and “borrow and spend” Republicans. Remember anything borrowed is future taxes plus interest.
” Consider that no one considers dismantling the fire department while public education–the means to have a more intelligent population that will be more equipped to intelligently assess public policy–is under CONSTANT assault. In Indiana, we have had schools shut down because they couldn’t afford to pay the gas for the school busses. We protect property, but we do not enrich our citizens. Jefferson suggested that the only reason public debt was justified was for the purpose of public education, but it was his fellow Virginian who carried the day with his concern that the rich be insulated from the “whimsy” of the vast majority of American citizens, clamoring for education.”
You make an excellent point. Unfortunately, forced, government-controlled public education has never been about elevating the lower-born, but about creating a reliable source of low-paid labor and insatiable consumers:
“On June 24, 1996, in Franklin County Ohio Common Pleas Court, the attorney for the American Federation of Teachers, speaking against Ohio’s proposed parent-choice initiative, called parents “inconsequential conduits.” The Columbus Dispatch quoted Dennie Widener, parent of three, as saying, “I can’t believe we have to fight for an education. I’m a flunky and that’s what they are trying to make my kid.” Although his income was well below the poverty line, Mr. Widener was armed with comparative school information that convinced him his own children were being deliberately dumbed down. In public kindergarten his youngest daughter had only learned the alphabet, but he was fully aware that “at private school they were reading in kindergarten.”"
Public education is just one of many tools designed to ensure the continuation of the social status quo. Check out John Taylor Gatto’s book, “The Underground History of American Education.”
http://www.johntaylorgatto.com/index.htm
Public education is not about teaching the kids, it is about having a captive audience for whatever the latest indoctrination (be it conservative or liberal, Creation Science or the Religion of Global Warming) fad is, and it is about lifetime jobs for the teachers. The kids can go hang. Anyone who doubts this should ask themselves why the VAST majority of black parents in places like DC or Milwaulkee are so supportive of vouchers. They know the score.
The super-rich own congress and the president. Good luck getting anything changed.
Poor folks may not be able to hide their money offshore to avoid paying taxes, but we can definitely pool our resources help each other out and find ways around having taxable income. Plant your own veggies, don’t buy at the grocery store.. that’s one way to avoid paying sales taxes on your food. Buy less gas, pay less gas tax.
The bottom line is that no one is going to help us.. unless we help ourselves. Taxes are a way to further disenfranchise the ‘useless eaters’ while the wealthy shift wealth into their own coffers (their wealth is the fruit of OUR labor). The rich have their loopholes, and the rest of us have to find our own.. subvert or go around the system.
This is another great idea presented by Mr. Reich. His theories on economics are brilliant. His articles appeal to social justice. He is a true American patriot. Robert Reich for President!
clan_keith makes an interesting point, and one with which I am in some agreement. It is true that public education has long been a source of industrial workers, teaching us such meaningful tasks as how to be on time and be obedient.
I would not assume, however, that the scrapping of the public school system in favor of private school is the proper solution. I would, in fact, suggest that, until very recently, public schools have done a fine job of providing a decent education. Perhaps not a brilliant education, but one that made a great many of our citizens capable of going on to pursue degrees in higher education which might put right some of the indoctrination received at a younger age. I believe that the degrading of our schools over the last 2+ decades has been part of a two-fold policy. The first end is to dumb down the American public and make it a corporate friendly environment. That is an essay that I assume no one wants to read, at this point, so I will forego it. The second is that making the public education system such a disaster is likely to drive more people to believe that privatization is the answer to our problems. Privatizing education, however, would increase the likelihood that our children would have to have subject themselves to religious indoctrination in order to receive the best available education. Also, it is likely that companies such as Lockheed Martin would enter the arena and you can well imagine that their education would also carry just the slightest bias toward certain geopolitical perspectives. The poorest would be left completely behind, rather than just incredibly far behind, as they are now. The price of education in the best private schools would rise so that a voucher would never cover the price of tuition. It would, instead, be the price of the original tuition PLUS the voucher, leaving the poor still unable to access the same education as the wealthy.
The last, and perhaps most important, point I would make is this: To assume that government has a motive to indoctrinate students or dumb them down for its own ends is to fail to understand our government ENTIRELY. Now, the government does these things because they are paid well to do so by various backers and “friends”. The slant we see in public education is in the service of Haliburton, General Electric, Monsanto, and so on. Suppose that education was privatized. This would simply given the responsibility of educating our children DIRECTLY to the corporate forces that now control education only INDIRECTLY. It would prevent action through the courts when a student felt that they were being denied the right to free expression, because only public institutions are required to respect religious and social freedoms. We would, in fact, be delivering our children into the hands of those who MOST want to train them to be obedient, unquestioning members of the working/military fodder class.
You might believe that small, local schools will dominate the market, but I would refer you to the face of business across America. How many chains do you see in your neighborhood? Your city? Your state? Why would education be any different? When corporate America sees money to be made and ideology to be hammered in, do you think it will sit idly by for the good of future generations? One might look to buyouts in various industries to see the future fate of private schools in the absence of the public mainstream. The choices will only get worse for the poorer classes. They will get worse for us all. While I admit it unlikely that education in the public sphere will EVER be what it SHOULD be, I submit that it will be a short road to Wal-Mart elementary schools should we travel down the road of privatization.
Unknown-Arts, you make excellent points with regards to the privatization of American schools. Privatization coupled with compulsion would be a formula ripe for an education system driven by profit rather than quality. What I find most objectionable about our current system is the element of compulsion. Consider: the government currently determines at what age our children must enter school, what schools they must attend, how many hours per day they must attend, what they will be taught and by whom. Ask a teacher why their students are not performing, and they will likely tell you that the primary reason is a lack of parental participation. Yet the current system is designed to completely exclude parents from the process!
Not only are students forced to sit in silence for hours at a time while subjected to curricula that may or may not be relevant to their future plans, they are also inundated with “homework” that they must complete during their time away from school, leaving little or no time for individual or family pursuits. If this type of education is designed to prepare students for the “real world,” I would submit that very few adults would remain in a job that was not only boring and militaristic in its treatment of employees, but also required us to continue working long after the end of the work day. Is it any wonder that schools have turned to imaginary psychological disorders such as ADHD to explain why otherwise ordinary children are unable to endure the level of control and immobility that students are subjected to (the system isn’t defective, the kids are!). Drop by your local elementary school at the beginning of the day. It shocks the senses to see the trays of medicine cups and the children lined up at the door to receive their daily dose of behavior-altering drugs. When my daughter’s third grade teacher recommended that I put her on Ritalin (she talked too much), I knew that there was something very, very wrong with a system that I was not only legally compelled to submit my child to, but forced to support with my tax dollars.
I don’t see compulsory education in the U.S. going away any time soon. The education system has become a thoroughly entrenched institution, a big, bottomless pit where the solution to its poor performance is always more money and more control over students (i.e., we can do it better than parents). Like you, I don’t believe that the privatization of public education is the best answer. What I do see, and do support, are more and more parents taking back control over their children’s education, through school choice, voucher systems and home schooling.
Speaking of schools, I think we should first get the federal government OUT of public schools and then let local schools take charge. This federalization and unification of public schools has completely stifled innovation and creativity. I heard a Teacher’s Union rep complain that the teachers should have a charter school, after years of complaining about charter schools. Of course they should have had one years ago. Change comes from experimentation and word of mouth, not from government bureaucrats at any level. Whatever benefits are gotten out of the Department of Education are vastly outweighed by its costs.
Remember the response after Sputnik? What do we hear today? Not enough engineers, science and math people are coming out of our schools! They tried 45 years ago to make it better and it didn’t work. Time to turn it back to cities, counties and states.
And think of the budget savings.
The impact of offshore tax havens is harmful to the underdeveloped world too. The rich in the developed world use it to evade taxes they should be paying. Global frameworks could be adopted, according to John Christensen a former economic hit man, for taxing multinationals on the basis of where they actually create their profits. Policies such as these could be implemented in a relatively short period of time. This would be beneficial to both developing and developed countries. Poverty could be seriously tackled if these changes are made.
It’s time the rich were held accountable for the taxes they should be paying.