Today's comment is by Bob Bauman, The Sovereign Society's Legal Counsel and a former Member of the United States House of Representatives from Maryland, 1973-1981.
Dear A-Letter Reader,
During the first part of this month I again spent several days in one of the world's leading tax havens - the Republic of Panama.
I was down in Panama for our annual Total Wealth Symposium. Most of the attendees there were concerned about the many attractions and services any tax haven worthy of its name offers. They were looking for the best iron-clad asset protection, financial privacy guaranteed by law, profitable investments and discrete private banking.
Tax Haven Treatment Here in the U.S.
Tax havens are again in the news in America since the Democrats took control of the U.S. Congress.
Already U.S. Senators such as Michigan's Carl Levin and North Dakota's Byron Dorgan have introduced radical new proposals. These left-wing politicians claim that every year over US$100 billion in taxes are illegally evaded by Americans who use offshore tax havens as a cover for their alleged tax crimes.
There is absolutely no proof to back up this bold assertion or the fantastic number used. But the lazy "news" media is still going right along with the big lie without question.
At the U.S. Senate hearings last week, it seemed that the senators did not even know what the definition of a "tax haven" is. Or as Bill Clinton once said, "It depends on what the definition of 'is' is."
The senators are considering bills that would officially label 40+ foreign nations as suspected tax havens and promoters of tax evasion. The potential blacklist includes such unlikely candidates as Switzerland and Bermuda. But interestingly, their list excludes the two leading tax havens in the world - the U.S. and the United Kingdom. Both tax their own citizens heavily, but are superb tax havens for foreigners.
What "Tax Haven" Really Means Anyway
My friend Dan Mitchell of the Cato Institute recently addressed the definition of a tax haven and wrote: "While there are alternative definitions, a tax haven is probably best defined as a jurisdiction that meets at least two criteria: First, it will have at least some tax and/or regulatory policies that are market friendly and those policies will be perceived to attract economic activity from other jurisdictions. Second, it chooses, in at least some cases and within its right as a sovereign entity, not to help foreign governments tax economic activity inside its borders."
Certainly places such as Panama meet those criteria.
Dan went on to point out: "So-called tax havens now are being persecuted. Politicians in high tax nations resent these jurisdictions because globalization has made it much more difficult to impose confiscatory tax rates. Indeed, tax rates have dropped dramatically since 1980, in part because havens have facilitated greater tax competition among nations. To fight against the liberalizing impact of globalization, politicians from high tax nations are working through international bureaucracies such as the Organization for Economic Cooperation and Development in a campaign against tax competition."
I would add that the Senate bills proposed are part of that malevolent campaign.
The Real Incentive Behind this Frivolous Attack
Of course, the leftist American pols who scream about tax havens claim they are doing so in order make all citizens, especially the so-called "rich," pay their fair share.
But in reality, these pols need more taxes to finance their big government political schemes. As proof of the potential market for vote buying in America, Gary Shilling, an economist in Springfield, N.J., figures that 52.6% of Americans, including dependents of direct recipients, "now receive significant income from government programs," the Christian Science Monitor reported.
Seven years ago, that number was 49.4%. And back in 1950, only a mere 28.3% of Americans relied on Washington. That really shows how government welfare has expanded over the last half century.
Investor's Business Daily puts all this in perspective: "The left delights in shrieking about how the rich beat down the poor, about how the wealthy benefit from the tax cuts at the expense of those at the bottom. But the top 5% of income earners pay 57.1% of all federal income taxes. At the same time, 45 million Americans, many of them in the lower income grouping, pay no taxes at all. Instead of the rich getting richer while the poor get poorer, the rich are paying a growing share of the tax burden while the poor's share shrinks."
Nearly two centuries ago, Alexis de Tocqueville predicted that in a democracy such as America, the nation will be headed towards oblivion as soon as the masses discover they can vote to transfer wealth from those better off to themselves.
Small wonder then, that Americans of even modest wealth seek offshore tax havens.
I say, enough is enough!
That's the way it looks from here,
BOB BAUMAN, Legal Counsel
P.S. One of my TSI bestsellers, "Where to Stash Your Cash," gives you legal offshore alternatives where you can safely house your assets far away from the clutches of the tax and spend politicians. Click here to learn how to take your assets offshore, before the politicians get their way.