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Tuesday, July 22, 2008 - Vol. 10, No. 173
Today's comment is by Bob Bauman, JD, Legal Counsel, and Senior Writer for The Sovereign Society.
"Tax havens are engaged in economic warfare against the United States and  honest, hardworking American taxpayers."
Economic warfare? Oh please. That's the Big Lie U.S. Sen. Carl Levin, (D-Mich) mouthed to the press last week.
You may know Senator Levin from his past anti-tax haven diatribes. But what many don't know is Levin's histrionic performance is more than a little ironic.
For starters, he chairs the same notorious Senate subcommittee that the late Senator Joseph R. McCarthy (R-Wisc) headed up over a half century ago. McCarthy became this subcommittee's chairman in 1953.
It was McCarthy's allegedly reckless use of this subcommittee in pursuing Communists in the U.S. government that gave rise to the term "McCarthyism."
To this day, McCarthyism is still defined as "the practice of making unfair allegations or using unfair investigative techniques, in many instances unsupported by proof or based on slight, doubtful, or irrelevant evidence." (Random House Unabridged Dictionary, 2006)
 Levinism — The New McCarthyism
Let me suggest a new odious term to describe the phony attacks on the world's legitimate tax havens: "Levinism." For an exact definition, especially as it pertains to tax havens, see McCarthyism above.
Last week Levinism, with all its bombastic hyperbole, was on display under the approving gaze of the Senator's carefully courted media attention. Once again, he chose targets that were straw men of his own creation: Those so-called unjust tax havens.
Same Argument, Different Day
This Levinism hearing is only one in a series that dates back several years. All of these hearings adhere to the same theatrical theme of wild accusations based on little proof.
Basically: Levin likes to say that the IRS supposedly loses US$100 billion a year because thousands of American tax payers use offshore tax havens and banks to hide their income and evade taxes.
(That mythical US$100 billion figure has never been proven, in spite of a four inch long footnote #1 in the subcommittees latest "report" that accompanied the hearing.)
Levin's star witness against tax havens surely lacks credibility. In fact, he didn't even show up at the hearing. Instead, Levin provided a videotaped testimony by Heinrich Kieber.
The videotape showed him as a silhouette against a white screen, as a shadowy crook with eyeglasses and a balding head. Kieber is said to be living under a new name in an undisclosed "witness protection program." He's wanted by Interpol and Liechtenstein police for grand theft and violation of bank secrecy laws.
The German secret police agency, the Federal Intelligence Service (BND), (equivalent of the U.S. Central Intelligence Agency), paid an illegal €5 million ($ 7.3 mil) bribe to Keiber, a disgruntled employee of LGT Bank in Liechtenstein.
And this is what Levinism passes off as a credible witness.
he Other "Star Witness" Is None Other Than UBS
The other star witness actually showed up — Mark Branson, chief financial officer of UBS's global wealth management.
He surprised the hearing by saying UBS, allegedly having been caught assisting tax evasion, regrets "any compliance failures that may have occurred." UBS's solution: They will no longer provide banking services to U.S. citizens.
He said the bank is also working to sell out its estimated 19,000 American clients to the IRS. The bank wants to help identify those involved in U.S. "tax fraud" — although under Swiss law failing to pay your taxes is not a crime. Also, UBS probably will be violating Swiss law if they rat on the clients they allegedly helped avoid taxes.
This Outlandish Statement Is Patently Absurd
But let's go back to Senator Levin's McCarthyite statement that "tax havens are engaged in economic warfare against the United States and honest, hardworking American taxpayers."
This is a patent and absurd lie. It's typical of Levinism at its demagogic worst.
Daniel J. Mitchell, senior Cato Institute fellow specializing in tax issues, has pointed out that competition from tax havens has reduced taxes worldwide and that the leading tax havens (for non-citizens) in the world are the United States and the United Kingdom.
A Moral Case for Tax Havens
Mitchell adds: "Finally, there is even a moral case for tax havens: They play a critical role in protecting people who are subject to religious, ethnic, sexual, political, or racial persecution. Most of the world's population lives in regimes that have inadequate human-rights protections, and people with assets often are targets of oppressive governments."
"The ability to put money in a tax haven offers important protections for these potential victims. Even the United Nations, in a 1998 report attacking tax havens, felt compelled to admit that, "For much of the twentieth century, governments around the world spied on their citizens to maintain political control. Political freedom can depend on the ability to hide purely personal information from a government."
Tax havens are free and independent jurisdictions in most cases. These countries are freely making their successful way in this world of global economics by offering low or no taxes on foreigners who do business there. Unlike the United States, where Levinism has made certain financial privacy dead and gone, tax havens guarantee financial privacy by law.
Unfortunately, money grubbing crooks such as Levin's darling witness, Herr Heinrich Kieber, sometimes violate those laws.
As a matter of fact, tax havens and global tax competition are positive goods that should not be curtailed, but rather expanded. I say that if individual Americans are violating tax laws let the IRS prosecute them as they have thousands before.
But let us put an end to reckless Levinism that spreads outright lies about tax havens. Group guilt is not only illogical prejudice, but in America it has always been unconstitutional
BOB BAUMAN, Legal Counsel
P.S. I'll say this again. No matter what Levin says, it's absolutely LEGAL for you to use offshore havens for your personal finances. But you still must pay taxes to the U.S. government. Once you do that, all the Levins in the world can whine about tax havens until they're blue in the face — and you're still well within your rights. This November, our international team of experts will be in Cancun, Mexico to explain exactly how this is done, so you can take advantage of higher returns, stronger financial privacy, more solvent banks, and above all asset protection far away from the United States. Get all the details here.
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Something Stinks...and for Once It's Not Stocks
Global stocks posted their first weekly rally since early June for the week ending July 18th. Last week, the Dow gained 3.6%.
That sounds great, but something is wrong here. Normally, the credit markets would confirm a strong stock market rally. Usually all the credit indices would rise because investors would raise their risk parameters and buy high-yield bonds and other risky fixed-income securities.
But that's not happening. This rally has not been confirmed by tightening credit spreads across most investment-grade credit markets. As I said yesterday, that's partially why I believe this rally is a dead-cat bounce. Also, high yield or junk bond yields widened, not narrowed, last week.
And finally, look at the LIBOR or the London Inter-Bank Borrowing Rate. The LIBOR didn't change last week. That suggests banks are still nervous about lending to each other. Worse, long-term mortgage rates widened to 6.44% last week from 6.25% a week earlier. That's another dose of bad news for the housing industry.
If stocks continue to power ahead this week, be sure to follow credit spreads. If credit markets widen further, it will be a bearish omen for the market and the economy.
Until spreads begin to narrow again, remain extremely cautious.
ERIC ROSEMAN, Investment Director
P.S. See my blog right now for the full story on this development.
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Expect a Bureaucratic Nightmare when You Renew
Your Driver's License Next Time
If you have an outstanding violation in any other state — even an unpaid speeding ticket from decades ago — you won't get your new license next time you go to renew. It's all thanks to an obscure provision the Congressional kleptocrats snuck into the military spending bill in 2005.
Among other things, this bill creates a massive database by linking state driving databases together, so your state Motor Vehicles Department must check your driving record in all 50 states before you can renew.
Jim Walsh, a resident of the state of Washington, found that out the hard way. He couldn't renew his license because computer records from Massachusetts revealed a 20-year-old unpaid speeding ticket. In fact, Jim had paid the ticket, but he couldn't produce a canceled check from 1988.
Here's what he's had to go through to get the problem resolved.
First, Jim called the Massachusetts Registry of Motor Vehicles (MRMV) to see if their records indicated that he had NOT paid the ticket. After waiting for 90 minutes on hold, a rude clerk confirmed that unfortunate "fact." The clerk would not accept a second payment. He would have to send in another check to the county court that issued the ticket.
Next, Jim contacted the appropriate county court in Massachusetts. A clerk helpfully provided instructions on how to pay the ticket a second time. After receiving Jim's duplicate payment, the county court sent a payment confirmation to the MRMV.
Now it was time to call the MRMV again. After another extended period on hold, another rude clerk told Jim that the payment confirmation didn't match the required Department of Homeland Security format. To have the payment acknowledged in the required format, Jim would have to produce a court order issued by county judge where the ticket was issued.
So he had to call the county clerk again. They told him it would be no problem to request a judge to issue the court order. However, Jim would need to make a personal appearance before a judge to request the court order. Since Massachusetts is 2,500 miles from Washington, he would have to pay several hundred dollars in travel expenses.
When Liberty Magazine published this article about Jim, he still hadn't been able to renew his driver's license. The court clerk in Massachusetts suggested that it might be possible for Jim to hire a local attorney in lieu of a court order to satisfy the MRMV. But there are no guarantees.
If you have any out-standing tickets, make sure you pay them before you try to renew your license the next time. And get proof that your tickets were paid, so you can avoid a similar nightmare.
MARK NESTMANN,
Privacy Expert & President of The Nestmann Group
www.nestmann.com
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