With so many scandals percolating, there are lots of good cartoons being produced.
It manages to weave together both the costly Obamacare boondoggle with the reprehensible politicization of the IRS.
So BOHICA, my friends.
Posted in Government Thuggery, Health Care, Health Reform, Humor, IRS, Political Humor, Tea Party, tagged Government-run healthcare, Humor, IRS, Obamacare, Political Humor, Tea Party on May 17, 2013 | 3 Comments »
With so many scandals percolating, there are lots of good cartoons being produced.
It manages to weave together both the costly Obamacare boondoggle with the reprehensible politicization of the IRS.
So BOHICA, my friends.
When I was a little kid, my sports idol was Mickey Mantle.
When I went to college, Herschel Walker was my guy.
Now, I may have to add Evan Mathis to that distinguished list.
Who is Evan Mathis, you ask?
Well, he’s an offensive lineman for the Philadelphia Eagles who played in college for the Crimson Tide of Alabama.
Since I’m a Georgia Bulldog, I wouldn’t normally hold someone from ‘Bama in high esteem – especially since I haven’t stopped sulking since the SEC Championship Game. but when someone does something that merits high praise, I’m willing to be ecumenical.
And Evan Mathis passes that test, as explained by NBC Sports.
Already the least popular of the federal governmental agencies, the IRS has taken a significant hit in recent days amid news confirming longstanding beliefs that the U.S. tax department exercised its discretion to conduct audits and generally give folks a hard time with politics in mind. Like most if not all Americans, Eagles offensive lineman Evan Mathis doesn’t like it. Unlike most if not all Americans, Mathis has opted to make his views known, in an entertaining way. Mathis posted on Instagram a photo of himself in the universal standing pee position by an IRS sign, with the message “Audit this.”
So what message was Mathis trying to send? It’s unclear, but there are many reasons why the IRS deserves scorn.
No wonder I thanked President Obama for unleashing this new scandal and reminding many new people that they should listen to those “voices” who warn about unchecked power in Washington.
P.S. I’m not sure how I’ll react when the IRS resorts to the novel tax-collection tactic that’s being tried in Pakistan.
P.P.S. Maybe Mathis can become a national spokesman for tax reform after he retires from football.
Last week, while writing about the latest IRS scandal, I noted that the IRS has a long record of abusive actions.
So I wasn’t surprised to learn that it also has politically biased employees.
But some Americans probably are shocked. So I want to be the first to publicly thank President Obama for – at the very least – presiding over a culture that gave IRS bureaucrats the green light to engage in this kind of misbehavior.
Why am I thanking Obama? For the simple reason that this scandal means that more Americans now understand that the IRS is a venal agency. And that presumably means that more Americans now realize we should junk the internal revenue code and implement a simple and fair flat tax.
Since I’m in an expansive and sharing mood, I think we also owe some appreciation to some of the good people who are helping to publicize the IRS’s despicable behavior.
Let’s start with George Will, who is predictably – and bitingly – critical.
…the nature of Barack Obama’s administration is being clarified as revelations about IRS targeting of conservative groups merge with myriad Benghazi mendacities. …we are told that a few wayward souls in Cincinnati, with nary a trace of political purpose, targeted for harassment political groups with “tea party” and “patriot” in their titles. …Jay Carney, whose unenviable job is not to explain but to explain away what his employers say, calls the IRS’s behavior “inappropriate.” No, using the salad fork for the entree is inappropriate. Using the Internal Revenue Service for political purposes is a criminal offense.
I also like that Will took the opportunity to criticize the worst (or at least close-to-worst) President in American history.
Time was, progressives like the president 100 years ago, Woodrow Wilson, had the virtue of candor: He explicitly rejected the Founders’ fears of government. Modern enlightenment, he said, made it safe to concentrate power in Washington, and especially in disinterested executive-branch agencies run by autonomous, high-minded experts. Today, however, progressivism’s insinuation is that Americans must be minutely regulated because they are so dimwitted they will swallow nonsense. Such as: There was no political motive in the IRS targeting political conservatives.
How painfully true. Sheep are not famous for their intelligence. And as the American people learn to be passively dependent on government, presumably we will acquire more sheep-like characteristics.
But the firestorm of protest leads me to think we’re not at that stage. At least not yet.
The lawless and abusive IRS even got Michael Gerson agitated.
…most Americans, myself included, become libertarians when a policeman is rude and swaggering during a traffic stop. Give me that badge number. It is precisely because police powers are essential to the public good that abusing them is so offensive. The same holds for overzealous or corrupt airport-security agents. And it is doubly true with IRS personnel who misuse their broad and intimidating powers. It is enough to bring out the Samuel Adams in anyone.
And here’s what my colleague Gene Healy wrote about the IRS’s history of political shenanigans.
Past presidents have found the IRS an extremely useful piece of federal machinery for that purpose. A lot of what we know about that sordid history comes from the Senate Select Committee on intelligence abuses, chaired by Sen. Frank Church, D-Idaho, in the mid-’70s. As Chris Hayes wrote in the Nation in 2006, “Church and many Democrats…soon found that presidents of both parties were culpable: “Secret documents obtained by the committee even revealed that the sainted FDR had ordered IRS audits of his political enemies.” In “The Lawless State,” his account of the Church Committee revelations, Morton Halperin noted that “the first organized political ‘strike force’ was formed within the IRS in 1961, and was directed against right-wing political groups.” In this case, I doubt there was ever a JFK or Nixon-style direct command from on high to harass the Tea Party. It’s more likely to be a case of “proactive” bureaucrats inspired by presidential railing against the Tea Party and Citizens United: “Will no one rid me of these meddlesome right-wing freaks?”
Let’s close with a couple of good cartoons.
The first one reminds me of the joke that “Service” is part of the IRS’s name, but only in the way that a bull services a cow.
The humor is a bit darker in this cartoon, but the message is the same.
P.S. Since I’m in such a good mood, I’ll share some of my other IRS humor, including a new Obama 1040 form, a death tax cartoon, a list of tax day tips from David Letterman, a cartoon of how GPS would work if operated by the IRS, an IRS-designed pencil sharpener, two Obamacare/IRS cartoons (here and here), a sale on 1040-form toilet paper (a real product), a song about the tax agency, the IRS’s version of the quadratic formula, and (my favorite) a joke about a Rabbi and an IRS agent.
But sometimes the IRS deserves some negative attention. The tax collection bureaucracy has thieving employees, incompetent employees, thuggish employees, brainless employees, and victimizing employees.
The senior folks at the IRS also deserve scorn for bone-headed decisions such as squandering millions of dollars on a P.R. campaign and a scheme to regulate and control private tax preparers.
Now it seems we have another reason to condemn the tax-collection bureaucracy. The IRS is engaging in Nixon-type political harassment.
Here’s some of what the Associated Press just reported.
The Internal Revenue Service inappropriately flagged conservative political groups for additional reviews during the 2012 election to see if they were violating their tax-exempt status, a top IRS official said Friday. Organizations were singled out because they included the words “tea party” or “patriot” in their applications for tax-exempt status, said Lois Lerner, who heads the IRS division that oversees tax-exempt groups.
Heaven forbid somebody self-identify as being patriotic. Obviously a cause for investigation by the IRS.
And it’s rather ironic that the IRS felt compelled to apologize just a few days after President Obama just told us we shouldn’t listen to “voices” telling us that bad things happen in Washington.
But it’s not just that the IRS targeted groups opposing big government. The bureaucrats also violated the rules designed to protect taxpayers from IRS abuse.
…groups were asked for their list of donors, which violates IRS policy in most cases, she said. “That was wrong. That was absolutely incorrect, it was insensitive and it was inappropriate. That’s not how we go about selecting cases for further review,” Lerner said at a conference sponsored by the American Bar Association. “The IRS would like to apologize for that,” she added.
But you can put your mind at ease because senior IRS officials assure us that the targeting of Tea Party groups had nothing to do with political bias.
Lerner said the practice was…not motivated by political bias. …IRS Commissioner Douglas Shulman told Congress in March 2012 that the IRS was not targeting groups based on their political views. “There’s absolutely no targeting. This is the kind of back and forth that happens to people” who apply for tax-exempt status, Shulman told a House Ways and Means subcommittee.
Just like we’re supposed to believe that political bias had nothing to do with all the IRS harassment of conservative groups during the Clinton years. The message from the elites in Washington is “Nothing to see here, move along.”
But as the Wall Street Journal warned at the time, it seems there is a remarkable lack of curiosity about patterns of IRS abuse.
…once we agree that a politicized IRS is a dangerous thing, it is hard to understand the see-no-evil approach taken by the Congress, the press and the judiciary about serious, current allegations of exactly this. …organizations have been using the Freedom of Information Act to find out if there is anything to the extraordinary run of audits that happened to hit a number of tax-exempt organizations that might reasonably be described as Clinton enemies. …we have lots of Clinton enemies who have suffered actual audits, and very little interest in finding out whether this was simply a massive coincidence or the result of something more sinister.
And now we’re going through the same process again.
Maybe, just maybe, there’s a lesson to be learned about the dangers of giving power to politicians and bureaucrats.
Yet another argument for the flat tax. If there’s no charitable deduction, there’s no opening for a politically biased IRS bureaucracy to investigate and harass non-profit groups because of their philosophical beliefs.
Posted in Bureaucrats, Government stupidity, Humor, IRS, Political Humor, Taxation, Taxpayer Ripoff, tagged Bureaucrats, Government stupidity, Humor, Internal Revenue Service, IRS, Political Humor, Taxation, Taxpayer Ripoff on April 19, 2013 | 12 Comments »
I just saw a headline that made me think that libertarian fantasies somehow had turned into reality.
As you can see, 24 IRS employees were just arrested for stealing. But what about the other 105,976 bureaucrats at the Internal Revenue Service who seize our money under the implied threat of violence?
Shouldn’t they be arrested for stealing from us as well?
But then my bubble burst. The story has nothing to do with the injustice of the internal revenue code and the shakedown of American taxpayers.
It turns out that these IRS bureaucrats were busted for getting unauthorized government handouts.
…authorities say Internal Revenue Service employees in Tennessee were stealing unemployment and other benefits while fully employed. On Thursday, 13 of those employees were indicted on federal charges that they lied to get unemployment, food stamps, welfare and housing vouchers. An additional 11 have been indicted on state charges of theft greater than $1,000.
In other words, these “public servants” were guilty of a form of triple dipping.
I’m actually surprised that they got arrested. Based on Keynesian economics, they should get medals for “stimulating” the economy.
P.S. All humor aside, non-anarchist libertarians face an interesting mental challenge. Many of them view the tax system as a form of theft. And there’s no question that it is enforced – ultimately – at the point of a gun. But with the exception of anarcho-capitalists, libertarians support the kind of limited government envisioned by the Founding Fathers. So how do you justify the taxes needed to finance that limited public sector? Most people would justify tax systems if they’re the result of a democratic process, but libertarians believe in rights rather than untrammeled majoritarianism. So how can they rationalize taxation? I freely confess that I don’t have the right answer. As I’ve noted before, I’m a practical libertarian, not the theoretical type. My job is to somehow figure out how we can shrink the federal government back to 3 percent of economic output. After that, the theoretical libertarians can figure out the thorny issues.
For the past 30 or so years, I’ve done my own taxes by hand. I thought this was a good approach because it would help me better understand the practical challenges of the tax code.
But it’s time to confess that I broke down and used Turbotax for yesterday’s tax return.
It’s not that my financial affairs are complicated. I basically get my Cato salary and a bit of income from speeches and articles. But even that became too much of a challenge. The tipping point was the form for Health Savings Accounts. The IRS is yelling at me for how I filled out this form in past years, and I fear that I will be perpetually in their cross hairs without relying on a computer program to avoid mistakes.
To help me deal with yesterday’s traumatic experience, I’m sharing some very good cartoons.
We’ll start with one from Gary Varvel.
Sort of the visual version of this letter-to-the-editor.
Our next cartoon, which may be my favorite of the group, is from Glenn McCoy.
By the way, if you don’t think the IRS is capable of thuggery, read this horrifying story.
I don’t know Paul Fell’s work, but this next cartoon is a very good introduction.
This is the second time the grim reaper has appeared in a cartoon. The first time involved the death tax.
Last but not least, we have a Chip Bok cartoon about tax code complexity.
If you still need to be cheered up, here’s some more IRS humor to brighten your day, including the IRS version of the quadratic formula, a new Obama 1040 form, a list of tax day tips from David Letterman, a cartoon ofhow GPS would work if operated by the IRS, an IRS-designed pencil sharpener, a sale on 1040-form toilet paper (a real product), and two songs about the tax agency (here and here), and a PG-13 joke about a Rabbi and an IRS agent.
I’m not a big fan of the Internal Revenue Service, though I try to make sure that politicians get much of the blame for America’s convoluted, punitive, and unfair tax code.
But there is an office at the IRS that ostensibly exists to defend the interests of taxpayers. The Taxpayer Advocate Service, according to the government website, “an independent organization within the IRS and helps taxpayers resolve problems with the IRS and recommend changes that will prevent the problems.” The head of this office, Nina Olson, has the title of National Taxpayer Advocate.
Sounds good, right?
Well, not so fast. The TAS does some good things, but Ms. Olson spends at least part of her time advocating for the government.
Among the other problems Olson identifies in the report are…the underfunding of the Internal Revenue Service… The IRS, which Olson compares to the accounts receivable department of a company, should be fenced off from more budget cuts by Congress, she writes in the report.
Don’t rub your eyes or clean your glasses. You read correctly. The folks at the IRS who supposedly are advocating for you are instead advocating for a bigger IRS budget.
I debunked this silly argument last year, explaining why Congress should reject the Obama Administration’s assertion that more money for the IRS would be an “investment” that would yield big returns.
But I want to be fair. Some of what the TAS does is worth applauding. The report also discusses the grotesque levels of complexity in the code. Here’s more of the Bloomberg story.
The U.S. tax system’s most serious problem is the 4-million-word code’s excessive complexity that makes it tough for taxpayers to comply with and difficult for the government to administer, National Taxpayer Advocate Nina Olson wrote in an annual report to Congress. The tax code cost taxpayers and businesses $168 billion in compliance in 2010… “Lowering rates in exchange for broadening the tax base would be an excellent bargain,” says the report, released today in Washington. “We are confident that in the end, public support for a simpler code will be strong and deep.”
The TAS also produced this very depressing infographic (click to enlarge). It’s absolutely disgraceful that complying with the tax code requires the equivalent of 3 million full-time workers. It’s a vast understatement to call this a counterproductive misallocation of labor.
Or how about the fact that just the guidance for the income tax, when printed out, creates a stack of paper more than 12 inches high? And what about the nauseating little tidbit that the tax code has been changed more than once per day since 2001?
No wonder it’s such a corrupt mess. Isn’t it time we rip up the entire tax code and put in place something simple and fair like a flat tax? Here’s my case for real tax reform.
By the way, I’m also more than willing to replace the tax code with a national sales tax, perhaps something like the Fair Tax. I’m given speeches, testified to Congress, appeared on TV, and done all sorts of things to promote that idea.
But the one huge caveat is that we need to make sure that the politicians don’t pull a bait and switch and stick us with both an income tax and national sales tax. Which is what happened in Europe when governments implemented the value-added tax without repealing income taxes.
That’s why we would first need to get rid of the income tax and repeal the 16th Amendment. But then, because I don’t trust the Supreme Court (gee, I wonder why?), I would also want to replace the 16th Amendment with new language that would be so ironclad that even Chief Justice John Roberts couldn’t fabricate reasons why an income tax could ever return to plague the nation.
But since we can’t even get the votes to approve a watered-down balanced budget amendment, I’m not holding my breath for the day that the Constitution is amended to permanently kill the income tax.
And that’s why I think the flat tax is a safer option.
The worst thing that happens if we get a flat tax is that politicians change their mind and we degenerate back to the current system.
The worst thing that happens if we get a national sales tax is that politicians “forget” to eliminate the income tax, we wind up with both, and become France.
I used to think this image was a damning indictment of the internal revenue code. Or here’s another chart showing how the tax system has become more convoluted over time.
But this new image may be the most effective of all of them. We don’t know what’s in the other 72,000 pages of tax code, but we’re all familiar with the basic 1040 tax form. Look at what the politicians have done to it over the past several decades.
The only answer, needless to say, is to throw the entire mess in the trash can and replace it with a simple and fair flat tax.
Here’s my brief explanation of how the flat tax would work and why it’s a good idea.
It’s also based on the notion that discrimination is wrong and that class-warfare policy should be rejected.
So what’s not to like?
P.S. I always get a lot of email and comments from people who wonder whether we should adopt a national sales tax instead. That’s fine with me, for reasons I explain here, but you better make sure to first amend the Constitution so that scheming politicians don’t pull a bait-and-switch and saddle us with both an income tax and a sales tax.
Posted in Corruption, Fiscal Policy, Flat Tax, IRS, Tax Compliance, Tax Reform, Taxation, Video, tagged Corruption, Fiscal Policy, Flat Tax, Internal Revenue Service, Lobbyists, Tax complexity, Tax Compliance, Tax Reform, Taxation on September 19, 2012 | 4 Comments »
I’ve done thorough blog posts highlighting the economic benefits of the flat tax, but I find that most people are passionate about tax reform because they view the current system as being unfair and corrupt.
They also don’t like the IRS, in part because it has so much arbitrary power to ruin lives.
But it’s not just that is has the power to ruin lives. That can be said about the FBI, the DEA, the BATF, and all sorts of other enforcement agencies.
What irks people about the IRS is that it has so much power combined with the fact that the internal revenue code is a nightmare of complexity that can overwhelm even the most well-intentioned taxpayer. Just spend a couple of minutes watching this video if you don’t believe me.
I’ve already shown depressing charts on the number of pages in the tax code and the number of special breaks in the tax law. To make matters worse, not even the IRS understands how to interpret the law. According to a recent GAO report, the IRS gave the wrong answers on matters of tax law more than 530,000 times in 2010.
Yet if you use inaccurate information from the IRS when filing your taxes, you’re still liable. To add insult to injury (or perhaps injury to injury is the right phrase), you’re then guilty until you prove yourself innocent – notwithstanding the Constitution’s guarantee of presumption of innocence.
A new report from the Treasury Department reveals that volunteers (who presumably have the best of intentions) make mistakes in more than 50 percent of cases.
Here are some key excerpts from the report.
Of the 39 tax returns prepared for our auditors, 19 (49 percent) were prepared correctly and 20 (51 percent) were prepared incorrectly. The accuracy rate should not be projected to the entire population of tax returns prepared at the Volunteer Program sites. Nevertheless, if the 20 incorrect tax returns had been filed: 12 (60 percent) taxpayers would not have been refunded a total of $3,996 to which they were entitled, one (5 percent) taxpayer would have received a refund of $303 more than the amount to which he or she was entitled, one (5 percent) taxpayer would have owed $165 less than the amount that should have been owed, and six (30 percent) taxpayers would have owed an additional total of $1,483 in tax and/or penalties. …The IRS also conducted 53 anonymous shopping visits during the 2012 Filing Season. Volunteers prepared tax returns for SPEC function shoppers with a 60 percent accuracy rate.
So here’s the bottom line. We have a completely corrupt tax system that is impossibly complex. Yet every year politicians add new provisions to please their buddies from the lobbyist community.
Wouldn’t it be nice if we could rip up all 72,000 pages and instead have a simple and fair tax system?
Sadly, tax reform is an uphill battle for four very big reasons.
But there are now about 30 nations around the world that have adopted this simple and fair system, so reform isn’t impossible. But it will only happen when voters can convince politicians that they will lose their jobs if they don’t adopt the flat tax.
P.S. I’ll also take a national sales tax, like the Fair Tax, as a replacement. But since I don’t trust politicians, that option requires that we first replace the 16th Amendment with something so ironclad that not even Chief Justice John Roberts would be able to rationalize that an income tax was permissible.
Posted in England, Humor, IRS, Political Humor, Taxation, United Kingdom, tagged England, Humor, Internal Revenue Service, IRS, Political Humor, Taxation, United Kingdom on September 13, 2012 | 9 Comments »
Everyone seems to agree that the Brits have a good sense of humor, and I think you’ll agree if you peruse this modern glossary of financial terms and this example of politically incorrect terrorism humor.
So maybe there’s an alternative explanation for British humor. In any event, we can now add some tax humor to the list. I have no idea who Jeremy Kyle is, but I’m guessing an infamous moocher (sort of like America’s Diaper Man or Germany’s Footless Hans). The other dependents are self explanatory.
Quite clever, sort of like this letter defending drunken sailors from unfair and malicious comparisons.
Also, I suspect this comedian has helped improve awareness of excessive taxation.
And everyone seems to like this beer-centric explanation of the tax system.
Posted in Competitiveness, Economics, Geithner, Government Thuggery, IRS, Regulation, Tax Competition, Tax Haven, Taxation, tagged Competitiveness, Economics, Geithner, Government Thuggery, IRS, Regulation, Tax Competition, Tax Haven, Taxation on May 1, 2012 | 17 Comments »
I’ve been fighting for more than 10 years to stop an IRS regulation that would force American banks to put foreign tax law above US tax law.
Sadly, I recently lost that battle when Treasury Secretary Tim Geithner finalized the third version of the regulation (it was first proposed by Clinton, and then a second version was put forth by the Bush White House).
In previous posts, I explained why this regulation represents bad tax policy and undermines the rule of law. I also have explained that it will hurt the American economy and why it endangers the human rights of people living under tyrannical and thuggish regimes.
But such concerns don’t matter to the tax cheat who is serving as the Treasury Secretary.
Richard Rahn is not happy about this outcome, either, and here is some of what he wrote in the Washington Times.
Over the past several years, Treasury Secretary Timothy F. Geithner was warned by many private economists and members of Congress of the adverse consequences of a proposed rule that would force U.S. banks to be uncompensated tax collectors for foreign governments. On April 17, Mr. Geithner issued the rule anyway. …To put it simply, the Obama Treasury Department and Internal Revenue Service (IRS) are forcing U.S. banks to report to foreign governments that often are corrupt or worse on lawful deposits their citizens hold in U.S. banks, thus putting those citizens’ lives at risk. As the former governor of Oklahoma and now president of the American Bankers Association, Frank Keating, wrote: “While the IRS minimizes potential security issues, nonresident aliens are unlikely to feel reassured by promises that their information won’t fall into the wrong hands. These pledges could be met with apprehension when countries with questionable human rights records remain on the recipient list. This rule gives nonresident aliens every incentive to pick up and move their deposits elsewhere.” …Looking at the actions and words of Mr. Geithner, you can conclude that he is consciously trying to destroy the U.S. economy, he lacks a sufficient number of brain cells and nerve connections for the job, or his ego and desire to pander to his boss and well-known economic illiterates has caused him to be willfully negligent over and over again. The latter is probably closest to the truth.
What makes this new regulation so disturbing is that it is a gross abuse of the regulatory process. For more than 90 years, Congress has maintained a policy of seeking to attract capital to the American financial system. Lawmakers repeatedly have looked at this issue of “nonresident alien” deposits, and they always have decided that America should be a safe haven for foreigners who want a good place to deposit money.
Yet the IRS, which is supposed to issue regulations that enforce existing law, proposed a regulation that overturns the law. And Geithner approved it. No vote from Congress. No legislation from the White House. No need to bother with the rule of law or democracy (and people wonder why there is rhetoric about a gangster government!).
I cover some of the key points in this video about the proposal.
You may be wondering why the Obama Administration is in favor of such a bad idea. Well, there’s no great mystery. Politicians get very upset if people have the freedom to shift economic activity to jurisdictions with better tax law. This process, known as tax competition, creates pressure for better tax policy.
Statists from all around the world have united in a campaign to undermine tax competition and expand the power of governments to impose bad tax policy. Obama and his team are simply doing their part to advance this dystopic vision.
The implementation of this IRS regulation means we’ve suffered an unfortunate defeat in this battle. So if we care about promoting good policy and restraining the greed of the political class, we need to redouble our efforts.
I thought I despised the IRS, but I’m just an amateur. I’m in Geneva, Switzerland, where I just finished speaking to a group of overseas Americans who have steam coming out of their ears.
So let’s ease the pain with some tax humor.
Losing an arm and a leg isn’t much fun, which reminds me that some Congressman (I think) had a very good idea of shifting election day so that it coincides with tax day. Not a bad idea, given the message of the cartoon.
Tax day is just around the corner, and we even get a one-day reprieve since April 15 falls on a Sunday.
And since everyone knows that I’m a big fan of the current tax system and the IRS (speaking of which, here’s a very good joke), let’s celebrate by digging into the Jeff MacNelly archives for these two tax cartoons.
First, here’s what many of us will be doing next weekend. Click to enlarge the cartoon. Every line is worth reading.
It would be nice to have a simple and fair system like the flat tax, requiring a 10-line return that can fit on a postcard. But be wary of some “simple” plans, as shown by Barack Obama’s two-line plan for a flat tax.
Jeff MacNelly was my favorite political cartoonist during my formative years. Sadly, he passed away far too early.
Some of the world’s most disgusting and evil regimes restricted the right to emigrate, including the imposition of exit taxes designed to fleece those who did want to escape.
…citizens have been refused permission to leave the Soviet Union unless they pay a new tax… Nearly 500 Jews signed a letter to U.N. Secretary General Kurt Waldheim calling the tax an illegal “ransom” and an extreme injustice. Jews trying to emigrate to Israel have been the main victims of the new tax imposed by a decree… However, the tax is applied to anyone trying to emigrate from the Soviet Union.
Not surprisingly, the Nazis also used the same approach. Here are the relevant passages from a report by the World Jewish Congress.
… nearly a third of the German war effort was paid for with money stolen from Jews according a new study about the role of the German Finance Ministry during the ‘Third Reich’. …Ministry officials robbed an estimated 120 billion reichsmarks [the equivalent of nearly US$ 20 billion today] by looting and through stringent confiscation laws. …Tax laws discriminated against Jews from 1934, while some who managed to leave Germany before the Holocaust had much of their wealth seized through an ‘exit tax’.
Unfortunately, exit taxes still exist, and I’m embarrassed to say that the United States is one of the few countries to impose such a levy.
There’s no anti-Semitic motive for the tax. Instead, politicians have imposed exit taxes because some Americans decided to emigrate to jurisdictions with better tax law. And rather than interpret this as a sign that the tax code was too onerous and should be replaced with something like a flat tax, they decided to enact a law to ransack people as they crossed the border.
But even this reprehensible policy isn’t enough for some of the clowns in Washington. Senator Barbara Boxer, the empty suit from the formerly Golden State, has decided that basic liberties such as the presumption of innocence are an impediment to tax enforcement. As such, she’s attached an odious provision to a transportation bill that would restrict the right to travel.
A bill…that could potentially allow the federal government to prevent any Americans who owe back taxes from traveling outside the U.S. is one step closer to becoming law. Senate Bill 1813 was introduced back in November by Senator Barbara Boxer (D-LosAngeles)… Section 40304 of the legislation states that any individual who owes more than $50,000 to the Internal Revenue Service may be subject to “action with respect to denial, revocation, or limitation of a passport”. … there does not appear to be any specific language requiring a taxpayer to be charged with tax evasion or any other crime in order to have their passport revoked or limited — only that a notice of lien or levy has been filed by the IRS.
The good news, at least relatively speaking, is that Boxer is only motivated by greed and statism. But the end result is still a reprehensible restriction on the liberty of people disfavored by the ruling elite.
I’m rather clueless on matters of popular culture, but I know the IRS is a vicious and needless bureaucracy that plagues the American people (though IRS agents could learn something from their Pakistani counterparts)
So I’m obviously a fan of this song that several people have sent me.
About a month ago, I made fun of the IRS for wanting to squander $15 million of our tax dollars on a PR campaign. What’s great about this song is that it presumably is akin to a big PR campaign against the IRS jackboots.
And remember, while most of the blame for a terrible tax system should be directed against the clowns in Congress and the White House, the IRS goes above and beyond legislative requirements to hassle and torture Americans. Heck, sometimes it simply decides to ignore the law!
But let’s not end this post on a depressing note. Here’s some IRS humor to brighten your day, including the IRS version of the quadratic formula, a new Obama 1040 form, a list of tax day tips from David Letterman, a cartoon of how GPS would work if operated by the IRS, an IRS-designed pencil sharpener, two Obamacare/IRS cartoons (here and here), a sale on 1040-form toilet paper (a real product), a song about the tax agency, and (my favorite) a joke about a Rabbi and an IRS agent.
Posted in Flat Tax, Government Thuggery, IRS, Regulation, Taxation, tagged Flat Tax, Government Thuggery, Institute for Justice, Internal Revenue Service, IRS, IRS Commissioner, Tax Reform, Taxation on March 15, 2012 | 5 Comments »
Early in 2010, I wrote about a reprehensible IRS plan to create a cartel in the tax preparation industry, which would screw small firms and entrepreneurs to help line the pockets of big companies such as H&R Block.
And, earlier this year, I specifically criticized the IRS Commissioner for moving ahead with this scheme, which I also suspect is motivated by a desire on the part of the IRS to have a group of captive tax preparers who will be timid about protecting the interests of taxpayers.
With thuggish moves like that, no wonder the IRS wants to flush $15 million of our tax dollars down the toilet in a futile effort to improve its public image.
But there is some good news. The Institute for Justice has filed suit against the IRS for its disgusting behavior. This video explains.
One point from the video that should be emphasized is that the IRS is taking this step without any congressional authorization or instruction. But if you read this link about an IRS regulation that would force American banks to put foreign law above US law, you’ll know that the tax agency is capable of rogue behavior.
By the way, the Institute for Justice is a great organization that effectively fights for individual rights. Check out this IJ video on asset forfeiture laws (which basically enable stealing by the government).
And since we’re on the topic of theft by government, this IJ video on property rights, eminent domain, and the Kelo decision also is very much worth watching.
P.S. I’m not interested in protecting the interests of the tax preparation industry. Indeed, I want a simple and fair flat tax, which would decimate all tax preparation firms. But I don’t want the thugs at the IRS to decide which firms are allowed to operate.
Posted in Fiscal Policy, Government Thuggery, IRS, Tax Reform, Taxation, tagged Fiscal Policy, Flat Tax, Internal Revenue Service, IRS, IRS Commissioner, Tax Reform, Taxation on February 29, 2012 | 8 Comments »
This interview with the IRS Commissioner is really irritating. He wants us to believe that all the problems exist because of bad laws enacted by Congress.
I certainly agree that the crowd in Washington is venal, corrupt, and duplicitous. But the IRS takes a bad situation and makes it worse, whether we’re looking at gross abuses of the regulatory process or absurd proposals to squander money on a P.R. campaign to make the agency more cuddly.
So I’m less than overwhelmed by this performance.
Commissioner Shulman also makes reference to a distasteful IRS proposal to regulate the tax preparation industry, which is really a scheme to enrich the big firms like H&R Block at the expense of smaller competitors.
So that’s another black mark against the bureaucracy.
But the most noxious part of the interview is when he admits he has to pay someone to file his tax return and then dodges a question on what could be done to make the system better.
But that’s not surprising. Mr. Shulman oversees a bureaucracy with about 100,000 employees (bigger than the FBI, CIA, and DEA combined), and they obviously wouldn’t want the type of reform that would force them to get jobs in the real world.
But I don’t have any problem with telling the truth. America should have a simple and fair flat tax.
Actually, that’s just an interim step. What we really need is to restore a limited central government, as envisioned by the Founding Fathers. That way we wouldn’t need any broad-based tax to finance Washington.
Posted in Boondoggle, Fiscal Policy, Government Spending, IRS, Waste, tagged Boondoggle, Fiscal Policy, Government Spending, Government waste, Internal Revenue Service, IRS on February 21, 2012 | 12 Comments »
The overwhelming fiscal policy challenge for America is entitlement programs, as I explain in this set of videos. To protect America from becoming another Greece, we need personal retirement accounts for Social Security. We need vouchers for Medicare. And we need to block-grant Medicaid back to the states.
Real reform can give people more security and save taxpayers by reducing the burden of government spending by trillions of dollars over the next several decades.
But sometimes it is the comparatively tiny bits of spending that effectively illustrate the waste, stupidity, and venality of big government. Lets talk about how the Internal Revenue Service (IRS) is squandering $15 million in a way that should drive taxpayers ballistic with rage.
Here are some disturbing details from the Wall Street Journal report.
The nation’s tax collector wants a “full service communications and marketing company” to help convey its “corporate vision and goals,” according to a 49-page solicitation sent to 12 agencies. The winner’s duties could include market research, educating the public about new tax provisions, and designing national information campaigns. The one-year contract could be extended for four more years, with a total value of as much as $15 million, the IRS solicitation says. PR firm Porter Novelli has had the contract for four years, but it reached the $17.5 million limit, IRS spokesman Terry Lemons said. …The IRS has relied on Porter Novelli to help inform taxpayers about some new laws and programs. Porter Novelli confirmed that the firm works with the IRS, but declined to comment further. Public relations experts said it would be an attractive challenge, given the agency’s unpopularity. …PR types said it’s technically possible to think of tougher marketing challenges — but not many. “Advancing the interests of the North Korean leadership at the moment would be harder than the IRS,” suggested Matthew Harrington.
Isn’t it wonderful that the IRS isn’t as despised as the North Korean dictatorship! I guess that’s because the North Korean government will sometimes kill you or starve you to death. The IRS, by contrast, only steals your money and occasionally gets you tossed in prison.
To show that I’m a public-spirited person, I’m going to save taxpayers $15 million by giving the IRS two good pieces of advice.
1) Obey the Constitution, which means respecting the presumption of innocence and following the Fourth Amendment’s guidelines about illegal search and seizure. I realize that complicates the job of enforcing a terrible tax code, but the Constitution exists precisely because the Founding Fathers thought some things were more important than “efficient” government.
2) Urge your overseers in the U.S. Congress to junk the internal revenue code and replace it with a simple and fair flat tax. The video below provides a simple explanation.
See how simple that was. No need to throw $15 million down the toilet of some politically connected PR firm.
Enjoy the video.
And here’s another video documenting the onerous compliance burden of the current system and explaining how that flat tax would de-fang the IRS.
Posted in Fiscal Policy, Global Taxation, Government Thuggery, International bureaucracy, International Taxation, IRS, OECD, Organization for Economic Cooperation and Development, Sovereignty, Switzerland, Tax avoidance, Tax Competition, Tax Compliance, Tax evasion, Tax Harmonization, Tax Haven, Taxation, tagged Fiscal Sovereignty, OECD, Organization for Economic Cooperation and Development, Switzerland, Tax Competition on February 19, 2012 | 18 Comments »
I fight to preserve tax competition, fiscal sovereignty, and financial privacy for the simple reason that politicians are less likely to impose destructive tax policy if they know that labor and capital can escape to jurisdictions with more responsible fiscal climates.
My opponents in this battle are high-tax governments, statist international bureaucracies such as the Organization for Economic Cooperation and Development (OECD), and left-wing pressure groups, all of which want to impose some sort of global tax cartel – sort of an “OPEC for politicians.”
In my years of fighting this battle, I’ve has some strange experiences, most notably in 2008 when the OECD threatened to have me thrown in a Mexican jail for the supposed crime of standing in a public area of a hotel and advising representatives of low-tax jurisdictions on how best to resist fiscal imperialism.
A few other bizarre episodes occurred in Barbados, back when I was first getting involved in the issue. Here’s a summary of that adventure.
As part of its “harmful tax competition” project, the OECD had called a meeting in 2001 and invited officials from the so-called tax havens to attend in hopes of getting them to surrender their fiscal sovereignty and agree to become deputy tax collectors for uncompetitive welfare states.
Realizing that the small, relatively powerless low-tax nations and territories would be out-gunned and out-manned in such a setting, I organized a delegation of liberty-minded Americans to travel to Barbados and help fight back (as regular readers know, I’m willing to make big sacrifices and go to the Caribbean when it’s winter in Washington).
One of the low-tax nations asked me to provide technical assistance, so they made me part of their delegation. But when I got to the OECD conference, the bureaucrats refused to let me participate. That initial obstacle was overcome, though, when representatives from the low-tax country arrived and they created a stink.
So I got my credentials and went into the conference. But this obviously caused some consternation. Bureaucrats from the OECD and representatives from the Clinton Treasury Department (this was before Bush’s inauguration) began whispering to each other, followed by some OECD flunky coming over to demand my credentials. I showed my badge, which temporarily stymied the bad guys.
But then a break was called and the OECD announced that the conference couldn’t continue if I was in the room. The fact that the OECD and some of the high-tax nations had technical consultants of their own was immaterial. The conference was supposed to be rigged to generate a certain outcome, and my presence was viewed as a threat.
Given the way things were going, with the OECD on the defensive and low-tax jurisdictions unwilling to capitulate, we decided to let the bureaucrats have a symbolic victory – especially since all that really happened is that I sat outside the conference room and representatives from the low-tax jurisdictions would come out every few minutes and brief me on what was happening. And everything ended well, with the high-tax nations failing in their goal of getting low-tax jurisdictions to surrender by signing “commitment letters” drafted by the OECD.
While the controversy over my participation in the meeting was indicative of the OECD’s unethical and biased behavior, the weirdest part of the Barbados trip occurred at the post-conference reception at the Prime Minister’s residence.
I was feeling rather happy about the OECD’s failure, so I was enjoying the evening. But not everybody was pleased with the outcome. One of the Clinton Treasury Department officials came up and basically accused me of being disloyal to the United States because I opposed the Administration’s policy while on foreign soil.
As you can probably imagine, that was not an effective argument. As this t-shirt indicates, my patriotism is to the ideals of the Founding Fathers, not to the statist actions of the U.S. government. And I also thought it was rather silly for the Treasury Department bureaucrat to make that argument when there was only a week or so left before Clinton was leaving office.
I’m reminded of this bit of personal history because of some recent developments in the area of international taxation.
The federal government recently declared that a Swiss bank is a “fugitive” because it refuses to acquiesce to American tax law and instead is obeying Switzerland’s admirable human rights policy of protecting financial privacy. Here are some details from a report by Reuters.
Wegelin & Co, the oldest Swiss private bank, was declared a fugitive after failing to show up in a U.S. court to answer a criminal charge that it conspired to help wealthy Americans evade taxes. …The indictment of Wegelin, which was founded in 1741, was the first in which the United States accused a foreign bank, rather than individuals, of helping Americans commit tax fraud. …Wegelin issued a statement from Switzerland saying it has not been served with a criminal summons and therefore was not required to appear in court. “The circumstances create a clear dilemma for Wegelin & Co,” it said. “If it were to adhere to current U.S. legal practice aimed at Swiss banks, it would have to breach Swiss law.” …Wegelin has no branches outside Switzerland.
It’s time for me to again be unpatriotic because I’m on the side of the “fugitive.” To be blunt, a Swiss bank operating on Swiss soil has no obligation to enforce bad U.S. tax law.
To understand the principles at stake, let’s turn the tables. What if the Iranian government demanded that the American government extradite Iranian exiles who write articles critical of that country’s nutjob leadership? Would the Justice Department agree that the Iranian government had the right to persecute and prosecute people who didn’t break U.S. law. Of course not (at least I hope not!).
Or what if the Chinese government requested the extradition of Tiananmen Square protesters who fled to the United States? Again, I would hope the federal government would say to go jump in a lake because it’s not a crime in America to believe in free speech.
I could provide dozens of additional examples, but I assume you get the point. Nations only cooperate with each other when they share the same laws (and the same values, including due process legal protections).
This is why Wegelin is not cooperating with the United States government, and this is why genuine patriots who believe in the rule of law should be on the side of the “fugitive.”
For further information, here’s a video I narrated on tax competition.
The moral of the story is that “tough on crime” is the right approach, but only when laws are just. At the risk of stating the obvious, the internal revenue code does not meet that test – especially when the IRS is trying to enforce it in a grossly improper extraterritorial fashion.
Posted in Big Government, Class warfare, Economics, Fiscal Policy, Government Thuggery, IRS, Laffer Curve, Tax avoidance, Tax Compliance, Tax evasion, Taxation, Underground Economy, tagged Big Government, Class warfare, Flat Tax, Government Spending, Internal Revenue Service, IRS, Obama, Obamacare, Tax avoidance, Tax complexity, Tax Compliance, Tax evasion, Taxation, Underground Economy on January 30, 2012 | 3 Comments »
Simply stated, people respond to incentives. When tax rates are punitive, folks earn and report less taxable income, and vice-versa.
In a previous post, I quoted an article from the International Monetary Fund, which unambiguously concluded that high tax burdens are the main reason people don’t fully comply with tax regimes.
Macroeconomic and microeconomic modeling studies based on data for several countries suggest that the major driving forces behind the size and growth of the shadow economy are an increasing burden of tax and social security payments… The bigger the difference between the total cost of labor in the official economy and the after-tax earnings from work, the greater the incentive for employers and employees to avoid this difference and participate in the shadow economy. …Several studies have found strong evidence that the tax regime influences the shadow economy.
Indeed, it’s worth noting that international studies find that the jurisdictions with the highest rates of tax compliance are the ones with reasonable tax systems, such as Hong Kong, Switzerland, and Singapore.
Now there’s a new study confirming these findings. Authored by two economists, one from the University of Wisconsin and the other from Jacksonville University, the new research cites the impact of tax burdens as well as other key variables.
Here are some key findings from the study.
According to the results provided in Table 2, the coefficient on the average effective federal income tax variable (AET) is positive in all three estimates and statistically significant for the overall study periods (1960-2008) at beyond the five percent level and statistically significant at the one percent level for the two sub-periods (1970-2007 and 1980-2008). Thus, as expected, the higher the average effective federal income tax rate, the greater the expected benefits of tax evasion may be and hence the greater the extent of that income tax evasion. This finding is consistent with most previous studies of income tax evasion using official data… In all three estimates, [the audit variable] exhibits the expected negative sign; however, in all three estimates it fails to be statistically significant at the five percent level. Indeed, these three coefficients are statistically significant at barely the 10 percent level. Thus it appears the audit rate (AUDIT) variable, of an in itself, may not be viewed as a strong deterrent to federal personal income taxation [evasion].
Translating from economic jargon, the study concludes that higher tax burdens lead to more evasion. Statists usually claim that this can be addressed by giving the IRS more power, but the researchers found that audit rates have a very weak effect.
The obvious conclusion, as I’ve noted before, is that lower tax rates and tax reform are the best way to improve tax compliance – not more power for the IRS.
Incidentally, this new study also finds that evasion increases when the unemployment rate increases. Given his proposals for higher tax rates and his poor track record on jobs, it almost makes one think Obama is trying to set a record for tax evasion.
The study also finds that dissatisfaction with government is correlated with tax evasion. And since Obama’s White House has been wasting money on corrupt green energy programs and a failed stimulus, that also suggests that the Administration wants more tax evasion.
Indeed, this last finding is consistent with some research from the Bank of Italy that I cited in 2010.
…the coefficient of public spending inefficiency remains negative and highly significant. …We find that tax morale is higher when the taxpayer perceives and observes that the government is efficient; that is, it provides a fair output with respect to the revenues.
And I imagine that “tax morale” in the United States is further undermined by an internal revenue code that has metastasized into a 72,000-page monstrosity of corruption and sleaze.
On the other hand, tax evasion apparently is correlated with real per-capita gross domestic product. And since the economy has suffered from anemic performance over the past three years, that blows a hole in the conspiratorial theory that Obama wants more evasion.
All joking aside, I’m sure the President wants more tax compliance and more prosperity. And since I’m a nice guy, I’m going to help him out. Mr. President, this video outlines a plan that would achieve both of those goals.
Given his class-warfare rhetoric, I’m not holding my breath in anticipation that he will follow my sage advice.
Posted in Big Government, Cost-Benefit Analysis, Financial Privacy, Global Taxation, International Taxation, IRS, Tax avoidance, Tax Competition, Tax Compliance, Tax evasion, Tax Haven, Taxation, tagged Bureaucracy, Bureaucrats, Competitiveness, Economics, Financial Privacy, Human Rights, International Taxation, Investment, IRS, Regulation, Rule of Law, Tax avoidance, Tax Competition, Tax evasion, Tax Haven, Taxation, Video on January 17, 2012 | 8 Comments »
I’ve written several times about a proposed IRS regulation that would force American banks to put foreign law above U.S. law. I’ve repeatedly warned that the scheme, which would force financial institutions to report the deposit interest they pay to foreigners, is bad economic policy, bad regulatory policy, and bad banking policy.
My arguments have included:
But these points don’t seem to matter to the Obama Administration, which is ideologically committed to the anti-tax competition agenda of Europe’s welfare states. This is why the White House supports all sorts of destructive policies, including not only this misguided regulation, but also the creation of something akin to a world tax organization that will have power to block free-market tax policy.
A new article in the Weekly Standard explains what’s at stake.
Early last year the Treasury Department published its “Guidance on Reporting Interest Paid to Nonresident Aliens,” which would require banks to report to the Internal Revenue Service the interest paid to foreign depositors with a U.S. bank account. While the Treasury and the regulatory apparatus insist that the cost and inconvenience of adhering to this regulation is next to nothing, the rule may cost the U.S. banking system hundreds of billions of dollars in lost deposits, in turn costing our economy billions of dollars, while providing no discernible benefit to banks, depositors, taxpayers, or the U.S. economy. …a much bigger problem—for banks and the economy—than the compliance costs is the threat of a massive capital flight. The United States is a very popular place for foreigners to park their savings, for a variety of reasons. For starters, we offer a stable government that can be trusted to keep its hands off deposits—something that appeals greatly to residents of Venezuela, Argentina, Ecuador, and any number of other unstable countries. …As a result, a staggeringly large amount of savings from abroad is currently held in U.S banks. While the Treasury asserts that “deposits held by nonresident alien individuals are a very small percentage of the [total] deposits held by U.S. financial institutions,” that very small percentage amounts to more than $3.7 trillion, according to a 2011 Bureau of Economic Analysis report, hardly a pittance. The massive amount of foreign savings here is a boon to the U.S. economy. Banks lend against these deposits, mainly to companies here in the United States. Jay Cochran, an economist at George Mason University, studied the impact that the more limited 2002 reporting requirements would have had on the banking system, estimating that it would have resulted in nearly $100 billion in deposits leaving the U.S. banking system. A reporting regulation that covers all foreign accounts would likely result in two to three times more capital flight. The impact would be harmful not just for the banks but for the broader economy. The decline in profits in the banking sector alone from a roughly quarter-trillion-dollar capital flight would be in the range of $5-10 billion—which makes a mockery of the notion that the costs of the regulation are under $100,000.
For more information about this wretched proposal, here’s a video I narrated on the topic.
To put it bluntly, the Obama Administration is pushing this regulation because it thinks the anti-tax competition agenda of Europe’s welfare states is so important that it is willing to risk the health of the American economy, undermine the soundness of U.S. financial institutions, disregard the rule of law, and abuse the regulatory process.
Indeed, this proposal is even worse than the increasingly infamous Foreign Account Tax Compliance Act.
And that’s saying something, because with each passing day, it is more and more obvious that FATCA is a destructive law that will significantly harm the American economy. But at least it’s a law, one that was approved by Congress and signed by the President. And the costly FATCA regulations being developed by the IRS are for the purpose of enforcing the law.
The interest-reporting IRS regulation is also costly and destructive, to be sure, but what makes it so perverse is that it is – at best – completely gratuitous. It is being advanced solely for reasons of ideology, regardless of the law and consequences be damned.
Posted in Big Government, Competitiveness, Drug War, Economics, Financial Privacy, Fiscal Policy, Global Taxation, Government intervention, Government stupidity, Government Thuggery, Higher Taxes, International bureaucracy, International Taxation, IRS, Mitchell's Law, OECD, Organization for Economic Cooperation and Development, Statism, Tax avoidance, Tax Compliance, Tax evasion, Tax Haven, Taxation, Territorial Taxation, Worldwide Taxation, tagged Big Government, FATCA, Financial Privacy, Foreign Account Tax Compliance Act, Government Thuggery, Internal Revenue Service, International Taxation, IRS, Mitchell's Law, OECD, Organization for Economic Cooperation and Development, Statism, Tax Compliance, Taxation, Worldwide Taxation on December 30, 2011 | 30 Comments »
Last year, I came up with a saying that “Bad Government Policy Begets More Bad Government Policy” and labeled it “Mitchell’s Law” during a bout of narcissism.
There are lots of examples of this phenomenon, such as the misguided War on Drugs being a precursor to intrusive, costly, and ineffective money laundering policies.
Or how about government healthcare subsidies driving up the price of healthcare, which then leads politicians to decide that there should be even more subsidies because healthcare has become more expensive.
But if you want a really stark example of Mitchell’s Law, the internal revenue code is littered with examples.
The politicians created a nightmarishly complex tax system, for instance, and then decided that enforcing the wretched system required the erosion of civil liberties and constitutional freedoms.
The latest example of this process involves the Foreign Account Tax Compliance Act, a piece of legislation that was imposed in 2010 because politicians assumed they could collect lots of tax revenue every single year by getting money from so-called tax havens.
This FATCA law basically imposes a huge regulatory burden on all companies that have international transactions involving the United States, and all foreign financial institutions that want to invest in the United States. It is such a disaster that even the New York Times has taken notice, recently reporting that:
…the Foreign Account Tax Compliance Act, or Fatca, as it is known, is now causing alarm among businesses outside the United States that fear they will have to spend billions of dollars a year to meet the greatly increased reporting burdens, starting in 2013. American expatriates also say the new filing demands are daunting and overblown. …The law demands that virtually every financial firm outside the United States and any foreign company in which Americans are beneficial owners must register with the Internal Revenue Service, check existing accounts in search of Americans and annually declare their compliance. Noncompliance would be punished with a withholding charge of up to 30 percent on any income and capital payments the company gets from the United States. …The I.R.S., under pressure from angry and confused financial officials abroad, has extended the deadline for registration until June 30, 2013, and is struggling to provide more detailed guidance by the end of this year. But beginning in 2012, many American expatriates — already the only developed-nation citizens subject to double taxation from their home government — must furnish the I.R.S. with detailed personal information on their overseas assets. …He said his sense was that Fatca required companies “to prove your innocence.” …Then there is a question of reciprocity: Would the United States accept the same demands for information from the tax authorities in other countries — say Russia or China?
It’s worth noting at this point that FATCA only exists because of bad tax law. If the United States had a simple and fair flat tax, there would be no double taxation of income that is saved and invested. As such, the IRS wouldn’t have any reason to care whether Americans had bank accounts and/or investments in places such as London, Hong Kong, and Panama.
But as is so often the case with politicians, they choose not to fix bad policy and instead decide to impose one bad policy on top of another. Hence, the crowd in Washington enacting FATCA and sending the IRS on a jihad.
By the way, the New York Times was late to the party. Many other news outlets already have noticed that the United States is about to suffer a big self-inflicted economic wound.
Indeed, what’s remarkable about Obama’s FATCA policy is that the world is now united. But it’s not united for something big and noble, such as peace, commerce, prosperity, or human rights. Instead, it’s united in opposition to intrusive, misguided, and foolish American tax law.
Let’s look at some examples.
o From the United Kingdom, a Financial Times column warns that, “This summer, the senior management of one of Asia’s largest financial groups is quietly mulling a potentially explosive question: could it organise some of its subsidiaries so that they could stop handling all US Treasury bonds? …what is worrying this particular Asian financial group is…a new law called the Foreign Account Tax Compliance Act…the new rules leave some financial officials fuming in places such as Australia, Canada, Germany, Hong Kong and Singapore. Little wonder. Never mind the fact that implementing these measures is likely to be costly. …Hence the fact that some non-US asset managers and banking groups are debating whether they could simply ignore Fatca by creating subsidiaries that never touch US assets at all. “This is complete madness for the US – America needs global investors to buy its bonds,” fumes one bank manager. “But not holding US assets might turn out to be the easiest thing for us to do.”
o From India, the Economic Times reports that, “FATCA, or the Foreign Account Tax Compliance Act, will require overseas banks to report U.S. clients to the Internal Revenue Service, but its loose definition of who is a U.S. citizen will create a huge administrative burden and could push non-residents to slash their U.S. exposure, some bankers say. …Bankers say the scheme will be extremely costly to implement, and some say that as the legislation stands, any bank with a client judged to be a U.S. citizen will be also obliged to supply documentation on all other clients. “FATCA will cost 10 times to the banks than it will generate for the IRS. It is going to be extremely complicated,” said Yves Mirabaud, managing partner at Mirabaud & Cie and Swiss Bankers Association board member.”
o Discussing the impact in Canada, Reuters notes, “The new regulation has drawn criticism from the world’s banks and business people about its reach and costs. ..”Hundreds of millions of dollars spent on developing compliance processes to target Canadian citizens would not be a useful exercise, and they are, for the most part, people who actually have no tax liabilities because they do not earn income in the United States,” [Canadian Finance Minister] Flaherty said.”
o A Taiwan news outlet said, “Taiwan’s domestic banks will reportedly reduce holdings of American bonds worth an estimated NT$100 billion (US$3.33 billion) due to the U.S. government’s recent decision to impose 30% tax on foreign-investment income in U.S. securities as bonds. Taiwan’s eight government-linked banks reportedly hold U.S. financial products worth over US$2 billion… On April 8, 2011, the U.S. government issued a notice advising foreign financial institutions to meet certain obligations under the Foreign Account Tax Compliance Act (FATCA), under which foreign financial institutions are subject to complex reporting rules related to their U.S. accounts.”
o From the Persian Gulf, the Bahrain Daily News noted, “A US law…has drawn the criticism of the world’s banks and business people, who dismiss it as imperialist and “the neutron bomb of the global financial system.” The unusually broad regulation, known as FATCA, or the Foreign Account Tax Compliance Act, makes the world’s financial institutions something of an extension of the tax-collecting Internal Revenue Service – something no other country does for its tax regime. …Even the European Commission has objected, and experts say other countries may create their own FATCA-style regimes for US banks or withdraw from US capital markets. In a barrage of letters to the Treasury, IRS and Congress, opponents from Australia to Switzerland to Hong Kong assail FATCA’s application to a broad swath of institutions and entities.”
o A story from Singapore finds, “For many years, thousands of foreign investors have put their money into American shares or other investments. Now, however, a somewhat obscure law called the Foreign Account Tax Compliance Act (FATCA) may make investments in the United States for everyone, from billionaires to the man on the street, here in Singapore far less attractive. …some banks or investment managers may advise customers not to invest in the US. … “private bankers are publicly advising their clients to clear their portfolios of all US securities”. A fund manager here told me his company is also advising clients to avoid US investments, and other companies may similarly start telling large clients as well as smaller ones the same story. Investors could then see recommendations not to invest in the US, and they may put their money elsewhere. …As consulting firm PwC said, “some institutions could decide that complying with the due diligence and verification provisions may not be cost effective” so they may stop making investments in the US. Banks or other asset managers may similarly decide it is easier not to offer US investments than to try and comply with the FATCA.”
o From Switzerland, a story “about the backlash from United States expats and the financial sector to the Foreign Account Tax Compliance Act (FATCA)” reports that, “Growing numbers of American expatriates are renouncing their US citizenship over a controversial new tax law and ever more burdensome fiscal and reporting obligations. …banks and business people who are supposed to enforce it on behalf of the US tax man are worried about its costly administrative burden… it’s just too expensive. The consequence will be that they cut out US clients and stop investing in the US. …Three or four years ago no one talked about renouncing nationality – now it’s an open discussion. That’s a major shift in mentality.
o Writing about the reaction from Europe, one columnist noted, “FATCA encourages foreign financial institutions to limit their exposure to U.S. assets. In a joint letter to the Treasury and the IRS, the European Banking Federation and the Institute of International Bankers, which together represent most of the non-U.S. banks and securities firms that would be affected by FATCA, warned that “many [foreign financial institutions], particularly smaller ones or those with minimal U.S. investments or U.S. customers, will opt out of U.S. securities rather than enter into a direct contractual agreement with a foreign tax authority (the IRS) that imposes substantial new obligations and the significant reputational, regulatory, and financial risks of potentially failing those obligations.” A widespread divestment of U.S. securities by institutions seeking to avoid the burdens of FATCA could have real and harmful effects on the U.S. economy.”
These press excerpts help demonstrate the costs of FATCA, but what about the benefits? After all, maybe the law will lead to lots of good results that offset the high regulatory costs and lost investment for the American economy.
Well, the only “benefit” anybody had identified is that FATCA will transfer more money from the productive sector of the economy to the government. Indeed, Obama argued during the 2008 campaign that cracking down on “tax havens” with proposals such as FATCA would give politicians lots of additional money to spend.
But when the legislation was approved in 2010, the Joint Committee on Taxation estimated that the new law would raise only $8.7 billion over 10 years, not the $100 billion that Obama claimed could be collected every single year. This video has some of the damning details.
One final point demands attention.
While it appears that the rest of the world is against FATCA, that’s not completely true. Some international bureaucrats in Paris, funded by American tax dollars, actually want the rest of the world to adopt the same Orwellian system. Here’s a blurb from the New York Times story.
Jeffrey Owens, a tax expert at the Organization for Economic Cooperation and Development, said catching tax evaders was “a concern that many member countries share.” If countries could agree to new global reporting standards for exchanging information, he said, then “maybe there’s a way forward.”
In other words, the pinhead bureaucrats at the OECD think FATCA’s such a swell idea that they want to create a global network of tax police. So not only would America erode the sovereignty of other nations because of our bad tax law, but those other nations would be able to impose their bad tax law on income earned in America!
And just in case you think that’s just irresponsible demagoguery, it’s already beginning to happen. Check out this IRS regulation, proposed by the Obama Administration, that would require American banks to put foreign law above American law.
Posted in Constitution, Financial Privacy, Government Thuggery, IRS, Taxation, tagged Civil Liberties, Constitution, Government Thuggery, Internal Revenue Service, Privacy, Taxation on December 19, 2011 | 17 Comments »
Thanks to a punitive “worldwide” approach to taxation, we have needless conflicts with other nations, leading the United States to side with high-tax governments and persecute low-tax nations.
But the impact on civil liberties and constitutional rights may be how the internal revenue code does the greatest damage to America.
In part, this involves the loss of basic rights. Our Constitution, for instances, guarantees the presumption of innocence. But that fundamental freedom has been thrown out the window to help the IRS enforce a bad tax system. If the IRS decides you’ve done something wrong or not coughed up enough cash, you are guilty until you prove yourself innocent.
Now there’s a new – and very disturbing – development. A reckless federal judge has decided to let the IRS go on a fishing expedition of California real estate records because it is theoretically possible that some people haven’t reported information on their tax returns. Here are some details from a report at Forbes.
A federal district court judge has given the Internal Revenue Service permission to serve a “John Doe” summons on the California State Board of Equalization demanding the names of residents who transferred property to their children or grandchildren for little or no money, from 2005 to 2010. The IRS wants those names as part of a crackdown on what it believes is the widespread failure to file required tax returns when real property is passed between family members. …officials of California’s BOE said state law prohibited them from disclosing the information without a court approved summons. …With a normal summons, the IRS seeks information about a specific taxpayer whose identity it knows. A John Does summons, by contrast, allows the IRS to get the names of all taxpayers who are members of a certain group.
To put this in context and to understand how sinister this is, imagine if some agency of government decided that to comb through the records of all African-Americans because some blacks commit crime? Or they decided to investigate all Occupy Wall Street protesters because of the crimes committed by some of the campers? Or how about snooping on the private lives of all tea partiers simply because the government doesn’t like dissent?
We would all agree (hopefully!) that these steps would represent unjustified fishing expeditions. And if there is any justice left in our system, the courts would stop the government from infringing our rights.
But, for some reason, the Constitution gets thrown under the bus when it comes to taxation.
The answer, as you hopefully agree, is to rip up the entire tax code and replace it with a simple and fair flat tax. This video explains.
America already has a tax code that ranks in the bottom half of the “tax oppression index.” If we don’t fix the IRS soon, don’t be surprised if we wind up in last place at this rate.
Posted in Big Government, Entitlements, Government intervention, Health Care, Health Reform, IRS, Obama, Tax Compliance, Taxation, tagged Complexity, Government-run healthcare, Internal Revenue Service, IRS, Obamacare, Small Business, Tax Compliance on November 12, 2011 | 4 Comments »
As this image illustrates, the internal revenue code is a nightmare of complexity.
And this chart shows how Obamacare is turning the health care system into a Byzantine nightmare.
So what happens when you mix bad tax policy and bad health care policy? Well, you get this chart, which shows the maze that small business owners must navigate in order to comply with a new Obamacare tax credit.
Maybe this cartoon was right after all.
Posted in Financial Privacy, Fiscal Policy, Human Rights, International Taxation, IRS, Obama, Regulation, Sovereignty, Taxation, Video, tagged Financial Privacy, Human Rights, Internal Revenue Service, International Taxation, IRS, Regulation, Rule of Law, Sovereignty, Taxation on September 28, 2011 | 4 Comments »
Earlier this year, President Obama’s IRS proposed a regulation that would force banks in America to report any interest they pay to accounts owned by non-resident aliens (that’s the technical term for foreigners who don’t live in the U.S.).
What made this regulation so bizarre, however, is that Congress specifically has exempted these account from taxation for the rather obvious reason that they want to attract this mobile capital to the American economy. Indeed, Congress repeatedly has ratified this policy ever since it was first implemented 90 years ago.
So why, you may be asking, would the IRS propose such a regulation? After all, why impose a regulatory burden on a weakened banking sector when it has nothing to do with enforcing American tax law?
The answer, if you can believe it, is that they want American banks to help enforce foreign tax law. And the bureaucrats at the IRS want to impose this burden even though the regulation is completely contrary to existing U.S. law.
Not surprisingly, this rogue behavior by the IRS already has generated considerable opposition. Senator Rubio has been a leader on the issue, being the first to condemn the proposed regulation.
Both Senators from Texas also have announced their opposition, and the entire Florida congressional delegation came out against the IRS’s regulatory overreach.
And now we have two more important voices against the IRS’s rogue regulation.
The Chairman of the Oversight Subcommittee in charge of the IRS, Congressman Charles Boustany of Louisiana, just sent a very critical letter to Treasury Secretary Geithner, and these are some of his chief concerns.
If the regulation were to take effect, it would not only run counter to the will of the Congress, but would potentially drive foreign investments out of our economy, hurting individuals and small businesses by reducing access to capital. I write to request that IRS suspend the proposed regulation. …As the Internal Revenue Code imposes no taxation or reporting requirements on this deposit interest, the proposed regulation serves no compelling tax collection purpose. Instead, it is my understanding that the IRS seeks this new authority to help foreign governments collect their own taxes abroad. …It is disappointing to see the IRS once again try to impose unnecessary regulations and costs on U.S. banks. To attract investment of foreign dollars into the U.S. economy, the Internal Revenue Code generally exempts these deposits from taxation and reporting requirements. These foreign investments in turn help to finance a variety of products essential to economic growth, such as small business loans and home mortgages. Imposing reporting requirements on these deposits through regulatory fiat threatens to drive significant investments out of our economy by undermining the rules Congress has set in place specifically to attract it, and at exactly the time when our economy can least afford it.
But criticism is not limited to Capitol Hill. The Center for Freedom and Prosperity has spearheaded opposition from think tanks, taxpayer organizations, and public policy groups.
And now the business community has become involved. Here’s some of what the Chamber of Commerce recently said, and you can click this PDF file (USCC S1506) to read the entire letter.
Given the fragile state of America’s economic recovery, it is disturbing to see actions by the Treasury that could jeopardize deposits at U.S. banks and credit unions held by nonresident aliens. These deposits, which are not subject to U.S. taxes, are at risk of being abruptly withdrawn and future deposits deterred, which could lead to a reallocation of deposits out of the U.S. banking system and, thus, reduce lending to businesses. Furthermore, complying with the proposed regulation places additional reporting requirements and expenses upon financial firms. Without any real benefit stemming from the collection of this information, imposition of this reporting requirement seems to be a solution in search of a problem.
This may seem like an arcane issue and international tax matters often are not terribly exciting, but a couple of minutes of watching this video will make you realize there are some very important principles at stake.
Only the IRS could manage to combine bad tax policy, bad regulatory policy, bad human rights policy, and bad sovereignty policy into one regulation.
I’ve shared many examples of IRS humor over the years, including a new Obama 1040 form, a list of tax day tips from David Letterman, a cartoon of how GPS would work if operated by the IRS, an IRS-designed pencil sharpener, two Obamacare/IRS cartoons (here and here), a sale on 1040-form toilet paper (a real product), a song about the tax agency, and (my favorite) a joke about a Rabbi and an IRS agent.
So you’ll understand why I can’t resist sharing this gem I saw on the TaxProf Blog.
If you want to move from humor to real-world tragedy, watch this video on IRS complexity.
Posted in Big Government, Competitiveness, Economics, Financial Privacy, Human Rights, IRS, Regulation, Tax Competition, Tax Haven, Taxation, Video, tagged Competitiveness, Financial Privacy, Human Rights, Internal Revenue Service, IRS, Regulation, Tax Competition, Taxation, Video on August 4, 2011 | 17 Comments »
Senator Rubio continues to impress with his Reagan-like efforts to restrain government and promote growth. His latest initiative is legislation to curtail rogue IRS bureaucrats who are seeking to use regulatory edicts to overturn 90 years of law.
Here are excerpts from a report in The Hill.
Sen. Marco Rubio (R-Fla.) and other Senate Republicans on Tuesday introduced a bill aimed at blocking pending regulations that would require banks to report to the Internal Revenue Service all interest deposits paid to nonresident aliens (NRA). Rubio, along with Texas GOP Sens. John Cornyn and Kay Bailey Hutchison, introduced S. 1506 because they believe the pending regulations have the potential to drive billions of dollars of deposits away from U.S. banks. A summary of the bill provided by Rubio’s office argues that this could leave U.S. banks undercapitalized and less able to lend in the U.S. “Simply put, this rule will cause billions of dollars in important NRA deposits to be withdrawn from American banks and invested in countries with less onerous reporting requirements,” the lawmakers state in the bill summary. “A capital flight of any magnitude will hurt the lending capacity of community banks and damage local and state economies — not to mention endanger those who invest in U.S. banks due to corruption, inflation, and violence in their home countries, particularly in nations like Mexico and Venezuela.” The summary also notes that Congress has explicitly exempted NRA deposits from taxation… Rubio’s bill is a companion bill to H.R. 2568, which was introduced by Reps. Bill Posey (R-Fla.), Francisco Canseco (R-Texas), Mario Diaz-Balart (R-Fla.), Ruben Hinojosa (D-Texas) and Gregory Meeks (D-NY).
This may sound like a technical issue, but this video explains why it has huge implications.
As a Yankees fan, it was particularly exciting that Derek Jeter became only the second player to get his 3000th hit with a home run.
As a student of human nature, it was remarkable that the fan who caught the ball, Christian Lopez, returned it to Jeter instead of selling it for as much as $300,000.
As a libertarian, it is disgusting that the jackboots at the IRS have now gotten involved by threatening to tax Mr. Lopez because the Yankees repaid his generosity with luxury box seat s and signed memorabilia. Here are some of the details from NBC New York.
The tax man may be on the hunt for the super fan who caught Derek Jeter’s 3,000th hit. Christian Lopez, 23, recovered the prized ball his father fumbled after The Captain hammered it into their section of the stands in the third inning of the Yankees’ win over Tampa Bay on Saturday. The Verizon salesman from Highland Mills, N.Y., gave the ball back to Jeter, whom he called an “icon,” and the Yankees lavished a slew of prizes, including luxury box seats for every remaining home game this season and post-season and some signed memorabilia. Now the IRS wants a piece. The prizes Lopez received are estimated to be worth more than $32,000 — and, like game show contestants, Lopez may have to pay taxes on the gifts and prizes because the IRS considers them income. Some estimate the IRS will put Lopez on the hook for anywhere between $5,000 and $13,000, reports the Daily News.
The only thing missing from this story is whether the thugs at the IRS also plan to tax Jeter for the value of the ball. Actually, I probably shouldn’t have mentioned that idea. But, then again, it’s highly unlikely that IRS bureaucrats are reading a blog dedicated to liberty.
Posted in Big Government, Financial Privacy, Government Thuggery, International Taxation, IRS, Statism, Tax Compliance, Taxation, Worldwide Taxation, tagged Big Government, FATCA, Financial Privacy, Foreign Account Tax Compliance Act, Government Thuggery, Internal Revenue Service, International Taxation, IRS, Statism, Tax Compliance, Taxation, Worldwide Taxation on June 20, 2011 | 34 Comments »
One of the tax increases buried in Obamacare was an onerous and intrusive “1099″ scheme that would have required businesses to collect tax identification numbers for just about any vendor and then send paperwork to the IRS whenever they did more than $600 of business.
o Buy a printer for the office? The printer company would need to provide a tax ID and the purchaser would have to submit a form to the IRS.
o Have a retirement dinner for somebody in the accounting department? Get the restaurant’s tax ID and submit another form to the IRS.
This system was seen as a nightmare, even leading to rather amusing cartoons mocking the law and showing how it would expand an already abusive IRS. And in a rare fit of common sense, the 1099 requirement was repealed earlier this year.
That’s the good news. The bad news is that an international version of Obamacare’s 1099 scheme also was enacted early last year. But since the burden is largely falling on foreigners, there’s no groundswell among voters to repeal the law – even though it will impose far more damage on the American economy.
Known as the FATCA (the acronym for the Foreign Account Tax Compliance Act), this law was included as a revenue-raising provision to pay for one of Obama’s failed stimulus bills.
But while the bill didn’t create jobs, it has created a giant nightmare for all sorts of people and firms – including foreign financial institutions that may now decide that it’s no longer worth the trouble to invest in America.
Consider these excerpts from a shocking story in the Financial Times.
…one of Asia’s largest financial groups is quietly mulling a potentially explosive question: could it organise some of its subsidiaries so that they could stop handling all US Treasury bonds? Their motive has nothing to do with the outlook for the dollar. …Instead, what is worrying this particular Asian financial group is tax. In January 2013, the US will implement a new law called the Foreign Account Tax Compliance Act. …the new rules leave some financial officials fuming in places such as Australia, Canada, Germany, Hong Kong and Singapore. …implementing these measures is likely to be costly; in jurisdictions such as Singapore or Hong Kong, the IRS rules appear to contravene local privacy laws. …Terry Campbell, head of Canada’s banking association, points out, the rules are essentially akin to “conscripting financial institutions around the world to be arms of US tax authorities”. …the IRS is threatening to impose a withholding tax of up to 30 per cent on sales of US assets by groups that it deems to be “non-compliant” – and the assets could include US shares or US Treasury bonds. Hence the fact that some non-US asset managers and banking groups are debating whether they could simply ignore Fatca by creating subsidiaries that never touch US assets at all. “This is complete madness for the US – America needs global investors to buy its bonds,” fumes one bank manager. “But not holding US assets might turn out to be the easiest thing for us to do.” …“Right now my board is probably as concerned about political risk in America as Indonesia, from a business perspective – perhaps more so,” says the head of one large global bank. It is a complaint that American politicians ignore at their peril.
Many people, when hearing about foreign banks resisting demands by the IRS, might automatically assume the issue involves jurisdictions with strong human rights laws with regards to financial privacy, such as Switzerland or the Cayman Islands.
There are plenty of those stories, to be sure, but American tax law has become so bad that the IRS is causing headaches and anger even in nations with high taxes and weak protection of client data.
Toronto-Dominion Bank is putting up a fight against a new U.S. regulation that would compel foreign banks to sort through billions of dollars of deposits to find U.S. citizens who might be hiding money. According to Bloomberg News, TD has complained that the proposed IRS rule is unreasonable because it would require the bank to make US$100-million investment in new software and staff. Other lenders resisting the effort include Allianz SE of Germany, Aegon NV of the Netherlands and Commonwealth Bank of Australia, Bloomberg said. Now the Canadian Bankers association has joined the fray. In an emailed statement the CBA called the requirement “highly complex” and “very difficult and costly for Canadian banks to comply with.” …According to the New York-based Institute of International Bankers, major global banks would end up spending US$250 million or more to comply with the regulation in terms of new technology employee training.
The vast majority of Americans are very fortunate that they don’t have any personal interactions with the IRS’s onerous international tax rules. But that doesn’t mean they shouldn’t care. The tax treatment of cross-border economic activity can have enormous implications for America’s prosperity, as I’ve already explained in my discussions of a reckless IRS regulation that could drive more than $100 billion of capital out of American banks.
But that’s just the tip of the iceberg. FATCA is far more onerous and extensive, so the damage will be much greater. Not surprisingly, the law utterly fails to satisfy any sort of cost-benefit analysis.
From the perspective of politicians, the “benefit” is more tax revenue. So how does FATCA score on this basis? During the 2008 campaign, Obama claimed this policy would generate $100 billion of additional revenue every year. When it came time to score the legislation, however, the Joint Committee on Taxation predicted that the law will generate only $870 million per year. That’s a big drop-off, even by the shoddy standards of Washington.
Yet for this tiny amount of revenue, the law imposes a giant regulatory burden on all individuals, companies, and institutions that meet two criteria: 1) They have some form of cross-border economic activity, and 2) They have a business or citizenship relationship with the United States.
Americans living overseas are one of the groups that will be severely penalized. Simply stated, foreign financial institutions are treating U.S. citizens like lepers because they don’t want to deal with the IRS and be deputy enforcers of terrible American law. Here are comments from some of Americans living in other nations (all of whom wish to remain anonymous because they fear being targeted by a thuggish IRS).
o From an American with a spouse working in Germany – “…when he went to create an account, he discovered that the bond fund could not be sold to US citizens.”
o From a non-profit group operating in Europe – “…we received notification from [bank redacted] that they were terminating our account.”
o From an American working in Switzerland – “I’m in the process of having my…accounts with [bank redacted] forced closed, except for the mortgage. I’ve been unable to open an account with any other Swiss bank.”
o From an American living in Belgium – “…my portfolio of investments held at their bank was blocked. …He advised me that as of that
date, I could no longer trade, but could only hold, sell or transfer my portfolio. I was banned from trading in either US stocks or all others.”
o From a retired teacher in Germany – “I was denied the policy because I am an American citizen. My agent very clearly said that he could sell the policy that I wanted to any other nationality, except me-because I was American!”
o From an American working in Saudi Arabia – “As a resident of Saudi Arabia, I have twice been rejected as a customer, purely on the basis of my US citizenship. In both instances, I was told that increased administrative and compliance burdens imposed by US authorities have led the banks in question to refuse to open securities accounts for American citizens.”
o From an American in Japan – “All of these banks and institutions are cutting me off from participation in any but the most simple of basic bank account. Why? Because they do not want to take the time and instill the systems and carry the cost of reporting the income of each of their US citizen clients to the US government.”
o From an American married to a European – “I have been unable to gain legal advice in Switzerland regarding US Wills and Guardianships because [bank redacted] lawyers are ‘not permitted to speak to Americans about legal, tax or banking matters in specific terms.’”
o From an American married to a European – “The company who has been holding my modest UK share portfolio wrote to me in September 2010 saying they were closing my account. They were removing all US persons from their client base due to the increased reporting and audit costs placed on them by the Fatca legislation.”
o From an American in Europe with a foreign spouse – “They sent me a letter saying: Our records show that you are an American citizen. Because of various strict new American rules regarding securities accounts held by American shareholders, we are closing such accounts including yours.”
o From an American assigned overseas by his company – “I was extremely surprised and outraged by the fact that not one bank (including foreign branches of US banks!) would allow me to open a simple savings account to pay my rent and bills. All of the banks cited my US citizenship and the difficulties they experience with the US government.”
o From an American in Spain – “I have been forced to close a U.S. bank account due to being an overseas citizen and cannot open new bank or brokerage accounts in the U.S. I am also being denied the opening of new brokerage accounts in Spain.”
Last but not least, another set of victims are foreigners who legally reside in the United States. That makes them tax residents according to American tax law, which means that they also are lepers from the perspective of foreign financial institutions.
Let’s close this lengthy post by including this letter from a Danish bank to a Danish citizen living in the United States. Once again, identifying information is redacted because the person did not want to suffer IRS persecution (it should disturb all of us, by the way, that there is such universal fear of IRS thuggery).
Found this in my inbox. I was thinking about saving it for next April, but then decided I might forget so I better use it now. You can click to enlarge and get a clearer image.
This is somewhat clever, though I don’t like line 6c since it indirectly implies that McCain would have been better than Obama. But let’s just enjoy a good cartoon and not dwell on the fact that there was no good choice in 2008.