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Archive for October 19th, 2010

Senator John Kerry is enriched by tax havens. Former Democratic Senator (and professional slug) John Edwards got to use tax havens. Former President Bill Clinton got to benefit from tax havens. Connecticut’s Attorney General (and Senate candidate), Richard Blumenthal, saves money with tax havens.

Now we find out that a major Democratic donor and significant other to a Democratic Congresswoman from Maine, Donald Sussman, appears to be guilty of the horrible crime of…gasp…trying to lower his tax burden by using a tax haven. What makes this story interesting in part is the hypocrisy angle. Why is it leftists want all of us to pay more, but they get to utilize havens – or, in the case of folks like Geithner, Daschle, and Rangel, engage in outright evasion?

I’ve argued many times that tax havens are very beneficial for the world economy, so I certainly have no objection to what these Democrats are doing. I just wish they would let the rest of us in on some of the action.

But the other juicy part of the story is that there appears to be a legal catch-22 for Sussman and Congresswoman Pingree. In order for Sussman to be eligible for the big tax savings in the Virgin Islands, he needs to be a legal resident. But in order for Congresswoman Pingree to legally take rides on Sussman’s corporate jet, he needs to be living with her in Maine (technically, riding on his jet is only supposed to be legal if he’s a family member, but I guess shacking up counts in today’s society). Here’s are some amusing excerpts from the Weekly Standard.

As far as liberal financiers go, you don’t get much more powerful than S. Donald Sussman. Since 1989, the hedge-fund billionaire has pumped millions into the coffers of Democratic politicians and their political pet projects. …he’s been one of the top contributors to left-leaning 527 organizations during the 2010 election cycle. But while Sussman has long kept a behind-the-scenes profile, a recent ethics controversy in Maine has flung him into the center of a complicated dispute over state residency, tax dodging and congressional ethics – the implications of which extend all the way from the rocky coast of southern Maine to the offshore tax haven of the U.S. Virgin Islands. According to Sussman’s fiancée, Rep Chellie Pingree (D-ME), the philanthropist lives with her and has been a resident of Maine since 2009. But financial records and other documents indicate that Sussman has claimed full-time residency and extensive tax breaks in the U.S. Virgin Islands for years – and may be continuing to claim them. …Confusion over Sussman’s residency status has been dogging his fiancée’s congressional reelection bid for weeks. As the former president of an ethics watchdog group, Pingree caught flack in late September after she was found to be traveling on Sussman’s private jet – an activity prohibited by election rules, unless the aircraft owner is a family member. In response to Republican criticism over the incident, the congresswoman said that Sussman lives with her in Maine, which may qualify him as family. The House Ethics committee has since cleared her of any charges. …But this seems to conflict with records that suggest a company owned by Sussman is currently receiving financial benefits in the U.S. Virgin Islands. A decade ago, Sussman founded Trust Asset Management, LLP., in St. Thomas, and began paying himself income from his Connecticut-based hedge-fund firm through it. As recently as September, Trust Asset Management LLP., was listed as an active beneficiary of the Virgin Island’s tax breaks, known as the Economic Development Commission (EDC) benefits. U.S. Virgin Island tax attorneys said that in order to receive these benefits through the EDC, a company owner must be a “bona fide” resident of the territory – meaning that the individual needs to live in the area for more than six months out of the year. …Other information has added to the confusion over Sussman’s residency status. During an interview with the Virgin Islands Daily News in July, the hedge-fund owner reportedly told the paper that he has resided full-time in the territory since 2000. …Sussman’s Securities and Exchange Commission filings from September also list his address as the Virgin Islands, as do political contributions he made in 2009. The website for the Great Cruz Bay Homeowners Association in St. John names Sussman as the organization’s president. Over the past few years, the U.S. Virgin Islands have come under scrutiny for being a magnet for criminal tax evaders; individuals who want to take advantage of the territory’s 90 percent tax savings, but don’t want to make it their primary home.

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Time for some much-needed positive news. Ordinary taxpayers are slowly but surely figuring out that federal workers are overpaid and underworked. Here are some of the details from the story in the Washington Post.

More than half of Americans say they think that federal workers are overpaid for the work they do…according to a Washington Post poll. Half also say the men and women who keep the government running do not work as hard as employees at private companies. …In the new Post survey, 52 percent of Americans think that federal civil servants are paid too much, a view held by nearly two in three Republicans and about seven in 10 conservatives. Far fewer Democrats, independents, liberals and moderates hold this opinion. …Three-quarters of those surveyed say they think federal workers are paid more and get better benefits than their counterparts outside government, an increase of seven percentage points from a Post-ABC poll conducted in 1982.

And if you want to know why a bloated and overpaid government workforce is bad for the economy, this part of the story says it all.

…nearly half of Republicans would recommend a government job to a relative or close friend just graduating, compared with 70 percent of Democrats. “Why not?” asked Nirmal Sandhu, 56, the father of two college students, who emigrated from India to Long Island in 1987. “Working in the federal government is a good job. For my kids, I think it would be great.” …African Americans are far more sympathetic to civil servants than are whites, with three-quarters saying they would like to see a young person close to them pursue a career in government.

When people think that mooching off taxpayers and pushing paper for a bureaucracy is a worthy ambition, that is a sign that the nation’s social capital is eroding. And when people actually wind up in the bureaucracy, that is a sign that the nation’s labor force is being misallocated. In either case, long-term growth suffers.

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