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Archive for the ‘Privacy’ Category

Senator Rand Paul is being criticized and condemned by the Washington establishment.

That’s almost certainly a sign that he’s doing the right thing. And given the recent events in Russia and Ukraine, we should say he’s doing a great thing.

Rand PaulThis is because Senator Paul is waging a lonely battle to stop the unthinking and risky move to a world where governments – including corrupt and evil regimes – collect and share our private financial information.

I’ve written about this topic many times and warned about the risks of letting unsavory governments have access to personal information, but the Obama Administration – with the support of some Republicans who think government power is more important than individual rights – is actively pushing this agenda.

The White House has even endorsed the idea of the United States being part of a so-called Convention on Mutual Administrative Assistance in Tax Matters, even though that would require the sharing of large amounts of personal financial data with thuggish and corrupt regimes such as Argentina, Azerbaijan, China, Greece, Mexico, Nigeria, Russia, and Saudi Arabia!

I’m sure Vladimir Putin very much appreciates this insider access so he can monitor dissidents and track political opponents. His government even signed onto a recent G-20 Communique that endorsed automatic information-sharing.

Heck, there’s even a Russian heading up the Financial Action Task Force, which is endlessly pushing to give governments untrammeled access to private information. FATF even wants banks and other financial institutions to spy on customers, regardless of whether there’s the slightest evidence of any wrongdoing.

The general mindset in Washington is that we should all bury our heads in the sand and blithely allow this massive accumulation of power and information by governments. After all, Putin and other thugs would never abuse this system, right?

Senator Paul battles the statists

Fortunately, at least one lawmaker is trying to throw sand in the gears. Like Horatius at the bridge, who single-handedly thwarted an invasion of Rome in 509 BC, Senator Paul is objecting to this massive invasion of privacy.

He has this old-fashioned appreciation for the Constitution and doesn’t think government should have carte blanche to access private financial data. He even – gasp! – thinks that government power should be restrained by the 4th Amendment and that there should be due process legal protections for individuals.

No wonder the DC establishment doesn’t like him.

One example of this phenomenon is that Senator Paul has placed a “hold” on some tax treaties. Here are some excerpts from a recent article in Politico.

Paul for years has single-handedly blocked an obscure U.S.-Swiss tax treaty that lawmakers, prosecutors, diplomats and banks say makes the difference between U.S. law enforcement rooting out the names of a few hundred fat-cat tax evaders — and many thousands more. …International tax experts for years have seethed over Paul’s block on the Swiss and several other tax treaties. These sorts of mundane tax protocols used to get approved by unanimous consent without anyone batting an eyelash — until Paul came to town.

These pacts are “mundane” to officials who think there shouldn’t be any restrictions on the power of governments.

Fortunately, Senator Paul has a different perspective.

Kentucky’s tea party darling says the treaty infringes on privacy rights. …Paul, a libertarian Republican widely believed to be eyeing a 2016 presidential run, says his hold stems from concerns about Fourth Amendment protections against “unreasonable search and seizure.” “These are people that are alleged, not convicted of doing anything wrong,” Paul said a few weeks ago. “I don’t think you should have everybody’s information from their bank. There should be some process: accusations and proof that you’ve committed a crime.”

The article also notes that Senator Paul is one of the few lawmakers to fight back against the egregious FATCA legislation.

Paul’s protest is also linked to his abhorrence of the soon-to-take-effect Foreign Account Tax Compliance Act, which will force foreign banks to disclose U.S. account information to the IRS, and domestic banks to reciprocate to other nations’ revenue departments. …the senator has legislation to repeal FATCA and hesitates to support a treaty that enables a law he views as U.S. government overreach.

I don’t know how long Senator Paul can withstand the pressure in his lonely fight for individual rights, but I’m glad he’s waging the battle.

Even the Swiss government and Swiss banks have thrown in the towel, having decided that they have no choice but to weaken their nation’s human rights laws on financial privacy because of threats of financial protectionism by the United States.

So let’s give three cheers to our modern-day Horatius, a very rare elected official who is doing the right thing for the right reason.

For more information on the importance of financial privacy, here’s my video on the moral case for tax havens.

P.S. I shared some good jokes about Keynesian economics a few weeks ago.

Now, via Cafe Hayek, I have a great cartoon showing the fancy equation that left-wing economists use when they tell us that the economy will grow faster if there’s a bigger burden of government spending.

Keynesian Miracle Cartoon

Now you can see how the Congressional Budget Office puts together its silly estimates.

Indeed, Chuck Asay even produced a cartoon on CBO’s fancy methodology.

The next step is to find the secret equation that CBO uses when it publishes nonsensical analysis implying that growth is maximized when tax rates are 100 percent.

But to be fair, the politicians who pay their salaries want them to justify bigger government, so should we expect anything else?

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People are getting increasingly agitated about being spied on by government.

The snoops at the National Security Agency have gotten the most attention, and those bureaucrats are in the challenging position of trying to justify massive invasions of our privacy when they can’t show any evidence that this voyeurism has stopped a single terrorist attack.

And let’s not forget that some politicians and bureaucrats want to track our driving habits with GPS devices. Their immediate goal is taxing us (gee, what a surprise), but does anyone doubt that the next step would be a database of our movements?

But the worst example of government spying may be the web of laws and regulations that require banks to monitor our bank accounts and to share millions of reports about our financial transactions with the Treasury Department’s Financial Crimes Enforcement Network.

Money laundering laws were adopted beginning about 30 years ago based on the theory that we could lower crime rates by making it more difficult for crooks to utilize the financial system.

There’s nothing wrong with that approach, at least in theory. But these laws have become very expensive and intrusive, yet they’ve had no measurable impact on crime rates.

As you might expect, politicians and bureaucrats have decided to double down on failure and they’re making anti-money laundering laws more onerous, imposing ever-higher costs in hopes of having some sort of positive impact. This is bad for banks, bad for the poor, and bad for the economy.

And it’s encouraging banks to treat customers like crap. Check out this ridiculous example included in a BBC report.

Stephen Cotton went to his local HSBC branch this month to withdraw £7,000 from his instant access savings account to pay back a loan from his mother. A year before, he had withdrawn a larger sum in cash from HSBC without a problem. But this time it was different, as he told Money Box: “When we presented them with the withdrawal slip, they declined to give us the money because we could not provide them with a satisfactory explanation for what the money was for. They wanted a letter from the person involved.” Mr Cotton says the staff refused to tell him how much he could have: “So I wrote out a few slips. I said, ‘Can I have £5,000?’ They said no. I said, ‘Can I have £4,000?’ They said no. And then I wrote one out for £3,000 and they said, ‘OK, we’ll give you that.’ ” He asked if he could return later that day to withdraw another £3,000, but he was told he could not do the same thing twice in one day.

Here’s another absurd story.

Peter from Wiltshire, who wanted his surname withheld, had a similar experience. He wanted to take out £10 000 cash from HSBC, some to pay to his sons and some to fund his long-haul travel plans. Peter phoned up the day before to give HSBC notice and everything seemed to be fine. The next day he got a call from his local branch asking him to pay his sons via a bank payment and to provide booking receipts for his holidays. Peter did not have any booking receipts to show.

And another.

Belinda Bell is another customer who was initially denied her cash, in her case to pay her builder. She told Money Box she had to provide the builder’s quote.

Why is the bank treating customers like dirt? Well, because they’re pressured to act that way thanks to anti-money laundering laws, which basically require them to act as if unusual transactions are criminal. In other words, customers are guilty until they prove themselves innocent.

HSBC has said…”We ask our customers about the purpose of large cash withdrawals when they are unusual and out of keeping with the normal running of their account. Since last November, in some instances we may have also asked these customers to show us evidence of what the cash is required for.” “The reason being we have an obligation to protect our customers, and to minimise the opportunity for financial crime…” Money Box asked other banks what their policy is on large cash withdrawals. They all said they reserved the right to ask questions about large cash withdrawals.

They’ve “reserved the right”?!? I think Mr. Cotton was spot on when he groused, “You shouldn’t have to explain to your bank why you want that money. It’s not theirs, it’s yours.”

A few politicians also are unhappy about pointless government-mandated spying.

Douglas Carswell, the Conservative MP for Clacton, is alarmed… “All these regulations which have been imposed on banks…infantilises the customer. In a sense your money becomes pocket money and the bank becomes your parent.”

Not let’s look at an example of how anti-money laundering laws lead to foolish intervention in the United States.

We’ll start with a feel-good story from Wired about an entrepreneur coming up with a service that’s desired by consumers.

Mike Caldwell spent years turning digital currency into physical coins. That may sound like a paradox. But it’s true. He takes bitcoins — the world’s most popular digital currency — and then he mints them here in the physical world. …by moving the digital currency into the physical realm, he also prevents hackers from stealing the stuff via an online attack. …You send him bitcoins via the internet, and he sends you back metal coins via the U.S. Postal Service. To spend bitcoins, you need a secret digital key — a string of numbers and letters — and when Caldwell makes the coins, he hides this key behind a tamper-resistant strip. …Caldwell takes a fee of about $50 on each coin he mints.

But our silver cloud has a dark lining.

…he received a letter from the Financial Crimes Enforcement Network, or FINCEN, the arm of the Treasury Department that dictates how the nation’s anti-money-laundering and financial crime regulations are interpreted. According to FINCEN, Caldwell needs to rethink his business. “They considered my activity to be money transmitting,” Caldwell says. And if you want to transmit money, you must first jump through a lot of state and federal regulatory hoops Caldwell hasn’t jumped through.

And since the hoops are very expensive, we have yet another example of foolish red tape killing a business.

Running afoul of FINCEN is a risky proposition. In the spring, the Department of Homeland Security seized two bank accounts belonging to Mt. Gox. The reasoning behind the $5 million seizure: Mt. Gox, like Caldwell, hadn’t registered itself as a money transmission business. …Because he runs a bitcoin-only business, Caldwell says there’s no Casascius bank account for authorities to seize. But he adds that he has no desire to anger the feds, whether he agrees with them or not. So he’s cranking out his last few orders.

I’m not saying, by the way, that bitcoins are necessarily a good way to hold wealth.

But I do believe that it’s good to see the evolution of private forms of money as a hedge against bad government policy. As I wrote back in 2011, “I have no way of knowing how well this system will work and how insulated it will be from government interference, but I very much hope it will be successful. Governments will never behave if they think people have no escape options.”

Unfortunately, politicians and bureaucrats are in the process of trying to shut down that escape option.

P.S. Switching to a different topic, I don’t know if there are any big policy implications, but I was fascinated to find this map in my twitter feed. It shows the first word that pops up when you ask why a country is so ____?

Europe Google Results

Here are my observations, for what it’s worth. Luxembourg and Switzerland are tax havens, so it’s no surprise that they are rich. Other nations should mimic their successful policies.

Norway, meanwhile, is rich because of oil.

I had no idea the Italians were supposed to be racist, though obviously this map merely shows what Google users are searching for, not what’s actually true.

I’m mystified that Macedonia is “important,” though I suspect Greece was similarly labeled because it is the first domino of the European debt crisis. Hardly something to be proud of.

I’m also surprised that Lithuanians are perceived as suicidal. Isn’t that a Swedish stereotype?

Croatia is beautiful, I’ll agree, at least along the coast.

The neglected people from Montenegro don’t even get a word! Heck, even the Kosovars and Moldovans have Google words.

I won’t comment on the stereotype about France, other than to say that the nation did get in the top-10 on a poll for attractiveness.

P.P.S. Since we’re discussing European stereotypes, here’s some politically incorrect terrorism humor from a British friend.

P.P.P.S. Speaking of stereotypes, here’s some polling data on how the Europeans see each other. I’m not sure how to interpret these results, other than to say that trustworthy people apparently are arrogant and lack compassion.

P.P.P.P.S. It goes without saying that I can’t resist the temptation to share these satirical maps on how the Greeks and Brits view their European neighbors.

P.P.P.P.P.S. Since the main topic of this post is money laundering, let’s end with a joke about how President Obama dealt with these foolish laws.

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Last June, in response to a question about indiscriminate spying by the National Security Agency, I made two simple points about the importance of judicial oversight and cost-benefit analysis.

I want – at a minimum – there to be judicial oversight whenever the government spies on American citizens, but I also think some cost-benefit analysis is appropriate. Just because a court has the power to approve snooping, that doesn’t mean it’s a sensible use of law enforcement resources.

Nothing since then has changed my mind.

Indeed, I’m perhaps even more skeptical of untrammeled government power and ability to spy on citizens for the simple reason that I don’t trust politicians.

Just look at how the White House turned the supposedly professional IRS into a partisan political operation. The government had power, ostensibly for a legitimate reason, but politicians and bureaucrats then used the power is a grossly improper fashion.

On the other hand, I know there are people out there who hate America. And they don’t just hate us because we’re intervening in the Middle East. I suspect many of them would want to kill us even if we had a perfect libertarian foreign policy of non-intervention and peaceful global commerce.

Now we learn from a report in the Washington Post that government has become bigger and more powerful and that our privacy has been violated as part of the NSA’s spying, yet there have been no benefits. As is zero. Nada. Zilch.

Here are some excerpts.

An analysis of 225 terrorism cases inside the United States since the Sept. 11, 2001, attacks has concluded that the bulk collection of phone records by the National Security Agency “has had no discernible impact on preventing acts of terrorism.” In the majority of cases, traditional law enforcement and investigative methods provided the tip or evidence to initiate the case, according to the study by the New America Foundation, a Washington-based nonprofit group.

But perhaps, you may be thinking, this is merely the predictable conclusion of a group that is predisposed to be skeptical. That’s a fair concern, but the article also has some very compelling corroborating evidence.

The study, to be released Monday, corroborates the findings of a White House-appointed review group, which said last month that the NSA counterterrorism program “was not essential to preventing attacks” and that much of the evidence it did turn up “could readily have been obtained in a timely manner using conventional [court] orders.”

So not only do outsiders find little to no value in NSA spying, but even hand-picked insiders couldn’t come up with any evidence to show that the program was effective.

But you won’t be surprised to learn that defenders of the NSA have come up with a can’t-miss way of defining success.

Senior administration officials…say it has been valuable in knocking down rumors of a plot and in determining that potential threats against the United States are nonexistent. Director of National Intelligence James R. Clapper Jr. calls that the “peace of mind” metric.

Yes, your eyes did not deceive you.You actually read correctly. The government wants us to acquiesce to a loss of privacy because we will learn that there are no threats and we’ll have “peace of mind.”

That has to be the lamest justification for government power that I’ve ever read.

This is even more preposterous than asserting that we should squander $1 trillion per year on anti-poverty programs, not because that redistribution will help the poor, but rather because it makes leftists feel better about themselves.

That being said, supporters do have a somewhat powerful comeback.

Michael Morell, a former acting CIA director and a member of the panel, said the program “needs to be successful only once to be invaluable.”

Indeed, I suspect this is the main reason why ordinary people might support the NSA.

But I disagree with Mr. Morell because he asserts that a single example of success would be invaluable. The article, for instance, cites one “victory” for the NSA surveillance program.

…the program provided evidence to initiate only one case, involving a San Diego cabdriver, Basaaly ­Moalin, who was convicted of sending money to a terrorist group in Somalia. Three co-conspirators were also convicted. The cases involved no threat of attack against the United States.

I’m glad that a foreign terrorist attack was blocked, but is that really “invaluable”? Does that “victory” justify a very expensive and very intrusive NSA monitoring regime?

As I’ve acknowledged before, I don’t know enough about terrorism to offer an informed viewpoint. But I have studied a similar issue, money laundering laws, and that research leads me to be very suspicious about the NSA.

These laws were put in place with the excuse that government would collect and analyze large amounts of data to help deter crime.

All the evidence, however, shows that these laws are a costly failure. The invade our privacy, hurt the poor, impose high regulatory costs, and have little or no impact on underlying crimes.

Just something to keep in mind when people argue that government should have more power and authority.

P.S. At least the revelations about NSA spying have generated some first-rate political humor.

P.P.S. Keep in mind that the NSA is just one cog in the machinery of government. So if you’re worried about the NSA’s intrusion and power, then you should also worry about the power of the IRS. If you’re concerned about the IRS’s authority, then you also should fret about the Obamacare exchanges. And if you think the Obamacare exchanges give the government too much knowledge and power, then you should be agitated about “know-your-customer” laws that require banks to spy on their customers. And if you’re not happy about those money-laundering rules, then you surely should be dismayed about asset-forfeiture rules. And if you don’t approve of government stealing property, then maybe you don’t like government accumulation of power for the Drug War. And if the failed War on Drugs rubs you the wrong way, then perhaps you…I better stop now. I think you get the point.

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There are many reason I don’t like Obamacare, including its punitive impact on taxpayers and the way it takes our healthcare system even further from a market-based approach.

But now I’m increasingly worried Obamacare also is creating a playground for hackers and identity thieves – and the rest of us will be the victims.

Simply stated, the results probably won’t be very pretty when you mix together these two items.

1) Typical government incompetence.

2) Massive data collection by government.

I pontificate on these issues in an interview with Neil Cavuto.

To elaborate, the internal revenue code is filled with double taxation of income that is saved and invested. As such the IRS insists on knowing extensive details on our income-producing assets, as well as any capital gains we earn.

And, if you’re subject to the death tax, they’ll want to know about everything you own. None of that would be necessary if we had a flat tax or a national sales tax.

Heck, they wouldn’t even need to know about your bank account since there’s no double taxation of interest with real tax reform.

But we’re on the other side of the pendulum, with the government wanting to know just about everything about our financial affairs. That’s good news for statists who want more redistribution…and it’s good news for other thieves who also want to take our money (but without using government as a middleman).

If you think I’m needlessly worried, check out this CNBC report. Here are some key excerpts.

Serious security weaknesses in the Internal Revenue Service’s data system have left millions of taxpayers’ sensitive financial information vulnerable to hackers. The agency claims it has fixed the problem, but its auditors beg to differ. A new report released by the Treasury Inspector General for Tax Administration (TIGTA) found that although the IRS claimed it had implemented 19 fixes to secure the system recommended by the auditor in previous years, at least eight (or 42 percent) of them “had not been fully implemented,” and should not have been checked off as completed. The auditors said the IRS never tracked its progress on the repairs, and in many cases, it closed cases without submitting documentation to prove the fix was complete. …The report also found that the agency didn’t properly scan servers—which contain taxpayer information—for “major vulnerabilities,” or properly lock user accounts, and it did not update software on databases. “When the right degree of security diligence is not applied to systems, disgruntled insiders or malicious outsiders can exploit security weaknesses and may gain unauthorized access,” Treasury Inspector General J. Russell George said.

That’s not exactly reassuring.

But it gets worse. Obamacare exchanges are a disaster waiting to happen, as explained in a USA Today column by the Chairman of the House Intelligence Committee.

Every day, personal information is the subject of hundreds of thousands of hacking attempts from all over the world. …On October 1, a major component of Obamacare made you even more vulnerable to devastating attacks on your personal information and the administration is doing too little about it. The Federal Data Services Hub (Hub), a component of the health insurance exchanges created by Obamacare, connects seven different government agencies and establish new access points to the sensitive personal information of the American public. Social Security numbers, employment information, birth dates, health records and tax returns are among the personal data that will be transmitted to this hub, consolidating an unprecedented amount of information. Every shred of data one would need to steal your identity or access your confidential credit information would be available at the fingertips of a skilled hacker, producing a staggering security threat. …These potential vulnerabilities are a dream of faceless international hackers and hostile foreign intelligence services.

Heck, you may as well put all your credit card info on your Facebook page.

More seriously, any sensible person will stay far away from Obamacare. Though if you don’t sign up on an Obamacare exchange, the White House wants you to get fined. So you lose no matter what.

Gee, isn’t big government wonderful?

P.S. I should have mentioned the huge privacy risks that will be created if politicians succeed in imposing an Internet sales tax cartel. Such a system will require a database of every online purchase and it will be accessible by bureaucrats from state and local governments.

P.P.S. I also failed to mention how high-tax governments such as France and Germany (with assistance from the Obama Administration) are pushing to create a global network of tax police that would collect and share information among governments – regardless of their level of corruption or pattern of human rights abuses!

NSA Yes We ScanP.P.P.S. Last but not least, we can’t have a discussion of privacy without mentioning our inquisitive friends at the NSA. Some of you may think it’s a non-story that the NSA is spying on just about all communications. The government, we are told, is merely trying to fight terrorism. Sounds okay in theory, but I’m not that sanguine for the simple reason that I don’t trust government. Indeed, all of us should worry that the NSA was just busted for spying on the web-surfing habits of its critics. Moreover, it doesn’t take much imagination to think the Obama White House would misuse that power to spy on political enemies. If you think I’m being paranoid, just consider how the IRS has been used as a partisan political tool in recent years.

P.P.P.P.S. I’ve been asked whether I’m worried that the NSA will snoop through my web history. As a matter of principle, I would object, but I’m not overly concerned because I’m a relatively boring person. That’s true even when I search for “libertarian porn” and “libertarian sex fantasies.”

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I’ve shared several videos that make the case against Obamacare.

Here’s one narrated by a Dutch woman warning that America shouldn’t repeat the mistakes of European government-run healthcare.

Here’s one from Reason TV about how free markets produce lower healthcare costs.

Here’s one explaining the need to deal with the government-caused third-party-payer crisis.

And I had to reluctantly admit that even one of Karl Rove’s group produced an effective video on Obamacare harming young people.

I think all of those videos are well done and contain critical information, but I suspect the humor in this clever video may change even more minds. Or at least it will be more widely watched.

Fortunately, the creepy Uncle Sam is only symbolic at this stage. While Obama probably would prefer a single-payer system like the one in the United Kingdom, where doctors and other medical personnel actually are government bureaucrats, the immediate danger is that Obamacare will turn health care professionals into agents of the government.

And the politicians will then direct doctors and others to collect information that the government shouldn’t possess.

If you think I’m exaggerating, read some of the chilling details from Betsy McCaughey’s recent New York Post op-ed.

‘Are you sexually active? If so, with one partner, multiple partners or same-sex partners?” Be ready to answer those questions and more the next time you go to the doctor, whether it’s the dermatologist or the cardiologist and no matter if the questions are unrelated to why you’re seeking medical help. And you can thank the Obama health law. …The president’s “reforms” aim to turn doctors into government agents, pressuring them financially to ask questions they consider inappropriate and unnecessary, and to violate their Hippocratic Oath to keep patients’ records confidential. …Dr. Richard Amerling, a nephrologist and associate professor at Albert Einstein Medical College, explains that your medical record should be “a story created by you and your doctor solely for your treatment and benefit.” But the new requirements are turning it “into an interrogation, and the data will not be confidential.”

I don’t like the idea of government bureaucrats having my private information, but what’s probably most worrisome about this Obama Administration scheme is that the data won’t be confidential.

As McCaughey writes, it’s just a matter of time before hackers or incompetent bureaucrats make that information public.

Patients need to defend their own privacy by refusing to answer the intrusive social-history questions. …Are such precautions paranoid? Hardly. WikiLeaker Bradley Manning showed how incompetent the government is at keeping its own secrets; incidents where various agencies accidentally disclose personal data like Social Security numbers are legion.

Do you want details about your sex life put at risk of disclosure? That’s what this issue is all about, not to mention the fact that what we do behind closed doors is none of the government’s business.

And I’m sure you’ll be delighted to know it’s not just data about your sex life that will be available for bureaucrats and identity thieves.

Here’s what Senator Orrin Hatch of Utah recently wrote.

Individuals signing up are required to provide personal information such as Social Security numbers, tax returns and household income information that will be entered into the Federal Data Services Hub (Data Hub) — a new information sharing network that allows other state and federal agencies, including the Internal Revenue Service (IRS) and the Department of Homeland Security, to verify a person’s information. The problem?  …Last month the department of Health and Human Services Office of Inspector General (HHS-OIG) issued a report saying the federal government had failed to meet multiple deadlines for testing operations and reporting data security vulnerabilities involved with the Data Hub. …The repercussions of opening the exchanges with an unproven security system could be devastating, putting the personal and financial records of millions of Americans at the fingertips of data thieves.  Other government certified systems have already proven to be less than reliable in protecting personal information. Look no further than the accidental release by the IRS this past July of thousands of taxpayer Social Security numbers on its website. …we can’t stand on the sidelines and let the Administration potentially expose the personal data of millions of Americans to more fraud.

By the way, everything written by McCaughey and Hatch also helps to explain why we should resist privacy-destroying schemes such as the Internet sales tax cartel being pushed by greedy politicians. I know I wouldn’t want all my online purchases in a database where state and local bureaucrats would be able to snoop for details.

And we also should oppose international tax harmonization schemes that are predicated on governments all over the world collecting and sharing private information about our finances. That kind of data would be a gold mine for hackers and identity thieves, not to mention there are huge risks of making that information available to corrupt, incompetent, and venal governments.

The common theme is that we shouldn’t let government have more information about us, particularly when the politicians want that data to pursue bad tax policy or bad health policy.

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If you don’t like the NSA collecting and monitoring all your communications, you probably won’t be thrilled about new technologies that will give government power to monitor where you drive and control how you drive.

Let’s look at a couple of options and then ponder which is more offensive.

We’ll start with government monitoring of where you drive. Here’s part of what Holman Jenkins wrote for the Wall Street Journal.

…the real threat to our autonomy gathers speed. “Autonomous” vehicles are part of the threat—because they won’t be autonomous at all. This column has warned for years about plate-recognition cameras, increasingly armed with face-recognition capabilities, that will make it impossible to go anywhere or do anything in public without being monitored. …The population is aging. An older, more timid society is likely to be in favor of penning up fellow citizens in a mesh of monitoring to regulate routine behavior. The authoritarianism of the weak, always a problem in society, will find an ally in the bureaucracy’s craving for resources.

Holman cites a few examples.

Traffic cameras…overwhelmingly ring up drivers for offenses that wouldn’t trouble a cop. New Jersey is just the latest state scandalized by discovery that yellow lights are set below the state minimum in order to yield more red-light camera tickets. …In some future discrimination or hate-crime lawsuit, will vehicle records be called up to show you locked your doors in a minority neighborhood but not in a white neighborhood? Will the state decide to raise your ObamaCare copays because a face-recognition camera also recognized a cigarette dangling from your lip? When our every action in space and cyberspace can be monitored and policed, we no longer police ourselves to any meaningful extent. We become not citizens but children. The state is our parent. The real threat is that many of our fellow citizens will like it this way.

This sounds very Orwellian and very bad, but there are other ways for government to make driving an unpleasant experience.

Let’s see what the UK-based Daily Mail is reporting about an obnoxious European proposal to give government control over your gas pedal.

Drivers face having their cars  fitted with devices that slam on the brakes if they go over the speed limit, under draconian new road safety measures being drawn up by  officials in Brussels. All new cars would have to include camera systems that ‘read’ the limits displayed on road signs and automatically apply the brakes. And vehicles already on the road could even be sent back to garages to be fitted with the ‘Big Brother’ technology… The EC’s Mobility and Transport Department hopes to roll out the ‘Intelligent Speed Adaptation’ technology (ISA) as part of a new road safety programme.

And how will this big-brother system work?

The ISA technology works in one of two ways – either through satellites, which communicate limits automatically to cars from databases, or by using cameras to read road signs. It then deploys one of three controls to slow drivers: ‘advice’, in which the motorist is simply notified of the speed limit by an alarm, giving them the opportunity to slow down; ‘driver select’, which arrests the car’s speed but gives the driver the option of disabling the device; or ‘mandatory’, which would not let a driver breach the speed limit under any circumstances. …A spokesman for the AA said at lower speeds the new technology could actually create dangers. He said: ‘If you were overtaking a tractor and suddenly needed to accelerate to avoid a head-on collision, you would not be able to.’

I’m glad people from the Automobile Association are warning that the system poses risks, but opposition should be based on more than utilitarian arguments. How about the freedom to be left alone and not monitored and pestered while you travel?

But let’s set that issue aside and contemplate whether it’s worse to have the government track where you drive or worse to have the government control how you drive.

Maybe this makes me a bad libertarian, but I’m not overly worried about the first option. Perhaps this is because I have a relatively staid life. I drive to work and I drive to softball. Every so often, I drive to the grocery store or to an airport. The bureaucrats tracking me would go crazy with boredom. Heck, I’d probably feel some pressure to spice up my social life simply because I’d feel sympathy for them.

Maybe they’ll force us to drive green cars?

By contrast, I would be very irritated if the government got control over my accelerator. It’s already annoying that revenue-hungry local governments and anti-automobile greenies conspire to set speed limits considerably below safe and efficient levels. But at least there’s very little risk if you drive within 10 miles of the limit and you always have the choice to drive even faster if you’re willing to take a chance that some random cop will pull you over. But if the government imposes some system that forces my car to stay within the speed limit, I won’t be a happy camper.

I’ll be very curious to read the comments for this post. In the meantime, I’m going to close with a few optimistic words.

Simply stated, government may have the technology to spy on us, but that doesn’t mean they have the brains, ability, or manpower to make much use of this power.

Money laundering laws are a good example. It’s rather offensive that the government has set up a system that forces banks and other financial institutions to spy on all of our financial transactions.

But other than imposing high costs on the financial sector, this system doesn’t have much impact on the average person. To be sure, some poor people lose access to the financial system. And, yes, there are horror stories about people who have their accounts frozen because they’ve engaged in an unusual transaction, but most of us will live our lives without ever noticing that the government has created this Orwellian regime.

Likewise, I don’t think the monitoring and collection of traffic data will impact our lives. At least not until the point the government uses its power in some of the ways described by Holman Jenkins. But I don’t think that’s going to happen anytime soon.

I’m also somewhat hopeful that car-control technologies won’t get abused. At least not right away. Local governments, for instance, would probably oppose a system to control travel speeds for the simple reason that they want to maintain the revenue from speeding tickets.

Moreover, I bet many Americans would rise up in revolt if the government tried to take control of our gas pedals. Politicians who pushed for such a scheme would lose election and bureaucrats who tried to impose such a system via regulation would get slapped down.

We’ve lost some of our freedoms and fighting spirit, but there are some lines the government still can’t cross. Driving faster than the government allows is as American as apple pie.

P.S. Speaking of American traditions, what about the young (and not-so-young) people who sometimes do a bit of romancing while in their cars? Maybe the bureaucrats (motivated by this Obama-NSA joke) will insist that we also install internal cameras in our vehicles.

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I want government to successfully and rationally fight crime and stop terrorism. That’s a perfectly appropriate libertarian sentiment since protecting life, liberty, and property are among the few legitimate roles for government.

But I don’t want to give bureaucrats carte blanche to monitor our lives and I don’t want to waste money in those cases where it is proper for the government to snoop on bad guys.

And those are some of the sentiments I expressed in this panel for Forbes on Fox.

My wonkish concern for cost-benefit analysis and corporate welfare is not empty posturing. There’s real money involved.

Here’s some of what CBS News reported on the issue.

How much are your private conversations worth to the U.S. government? Turns out, it can be a lot, depending on the technology. …AT&T, for example, imposes a $325 “activation fee” for each wiretap and $10 a day to maintain it. Smaller carriers Cricket and U.S. Cellular charge only about $250 per wiretap. But snoop on a Verizon customer? That costs the government $775 for the first month and $500 each month after that… Industry says it doesn’t profit from the hundreds of thousands of government eavesdropping requests it receives each year… “What we don’t want is surveillance to become a profit center,” said Christopher Soghoian, the ACLU’s principal technologist. But “it’s always better to charge $1. It creates friction, and it creates transparency” because it generates a paper trail that can be tracked. …The FBI said it could not say how much it spends on industry reimbursements because payments are made through a variety of programs, field offices and case funds.

I confess that I’m not an expert – or even a novice – on the details of law enforcement, but I’m glad that my speculation on the low cost of setting up a wiretap seems to have been accurate. At least based on this excerpt from the article.

In 2009, then-New York criminal prosecutor John Prather sued several major telecommunications carriers in federal court in Northern California in 2009, including AT&T, Verizon and Sprint, for overcharging federal and state police agencies. In his complaint, Prather said phone companies have the technical ability to turn on a switch, duplicate call information and pass it along to law enforcement with little effort. Instead, Prather says his staff, while he was working as a city prosecutor, would receive convoluted bills with extraneous fees. The case is pending.

This article, as well as the Forbes on Fox debate, deal with general law enforcement, not the controversy about NSA data collection and monitoring.

But I can’t resist sharing this excellent bit of NSA-related humor that arrived in my inbox.

NSA Obama Humor

Very similar in quality and theme to this great set of images.

And if you appreciate political cartoons on this topic, here are some of my favorites. I think the one featuring Nixon and Bush is the best of the bunch.

Last but not least, here are my thoughts on the NSA/Snowden controversy if you want some non-humorous analysis.

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To save readers some time, the honest answer to the question is that I don’t have many profound thoughts about the controversy surrounding Edward Snowden and snooping by the National Security Agency.

But since I’ve been asked by several people to pontificate on the matter, I won’t let trivial obstacles such as lack of knowledge or absence of expertise preclude me from giving a response. Heck, I’ve written about drone attacks, and terrorism policy, and my knowledge in those areas may be even less than the President’s understanding of the economy!

Normally, when I’m in the dark about some matter of public policy, I simply see what some of my Cato colleagues have said about an issue. But as you can see here, here, and here, those experts are split on the topic (brings to mind the joke about the politician who, when asked his position on some legislation, said “some of my friends are for the plan and some of my friends are opposed, and I always stick with my friends).

So I reckon I’ll just wing it with a couple of observations and a concluding thought about patriotism.

As I noted a couple of weeks ago, I want – at a minimum – there to be judicial oversight whenever the government spies on American citizens, but I also think some cost-benefit analysis is appropriate. Just because a court has the power to approve snooping, that doesn’t mean it’s a sensible use of law enforcement resources.

I confess I don’t know whether NSA snooping is a good use of time and energy, but I’m skeptical. Why? Because we don’t find much common sense in areas where I do know enough to run my mouth, such as money laundering laws and Transportation Security Administration rules. So why is NSA snooping any different?

It probably isn’t. As such, I side with other Americans in not wanting to give up my liberties simply because some politicians say our security is threatened.

That being said, I find myself irked by Mr. Snowden’s behavior. Some people believe he is a genuine patriot (in the proper sense of the word) motivated by libertarian principles, but the fact that he fled to Russia (perhaps en route to Cuba, Venezuela, or Ecuador) doesn’t reflect well on him.

For all its flaws, I rank the United States far above places such as Russia, China, and assorted Latin American thug regimes.

I understand that Snowden presumably wants to go someplace where he can’t be snatched by American officials, but he will cross the line and unambiguously become a traitor in my eyes if he gives sensitive material to unfriendly foreign governments.

And by sensitive, I don’t necessarily mean classified. I’m sure the federal government goes way overboard in labeling material as secret or classified. I’m talking about information that could compromise the security of the United States.

I’m guessing Edward Snowden has such information. If he shares it with hostile governments, he’s a bad person.

P.S. Here’s a humorous look at Obama-approved snooping.

P.P.S. If you think I’m being too hard on Snowden, you’ll probably beat my libertarian score on this comprehensive test.

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Because we live in an upside-down world, Switzerland is being persecuted for being a productive, peaceful nation that has a strong human rights policy with regards to privacy.

More specifically, politicians from high-tax nations resent the fact that investors flock to Switzerland to benefit from good policies, and they are pressuring the Swiss government to weaken that nation’s human rights laws so that governments with bad fiscal systems have an easier time of tracking and taxing flight capital.

I’ve resigned myself to this happening for the simple reason that it is well nigh impossible for a small nation (even one as well-armed as Switzerland) to withstand the coercion when all the world’s big nations are trying to impose one-size-fits-all policies designed to make it easier to raise tax rates and expand the size and power of government.

Switzerland v IRSBut, as the Wall Street Journal reports, the Swiss aren’t going down without a fight.

Switzerland’s lower house of Parliament voted 123-63 against the measure, which would have enabled many of the Alpine nation’s banks to sidestep the Swiss banking secrecy laws and start handing information to the U.S. Department of Justice about any past help they may have given to Americans hiding undeclared wealth in Swiss accounts. Earlier Wednesday, the smaller, upper house of Switzerland’s Parliament voted 26-18 in favor of the proposed plan. But in the lower house, lawmakers had raised concerns about the heavy-handedness of the U.S. effort to have them sign off on legislation that might have exposed the country’s banks and bank employees to legal hazards. Lawmakers had also raised concerns about the lack of detail in the plan regarding potential fines for banks that would have opted to participate.

I heartily applaud the lawmakers who rejected the fiscal imperialism of the United States government.

As I stated in my recent BBC interview on tax havens, I believe in sovereignty, and the IRS should have no right to impose bad American tax law on economic activity inside Swiss borders (just as, say, China should have no right to demand that the United States help track down Tiananmen Square protestors that escaped to America).

But I’m not opening champagne just yet, in part because I don’t like the stuff and in part because I fear that this will be a temporary victory.

The Swiss have resisted American demands before, and on more than one occasion, only to eventually back down. And it’s hard to blame them when they’re threatened by odious forms of financial protectionism.

That being said, I’m going to enjoy this moment while it lasts and hope that somehow David can continue to withstand Goliath.

P.S. If you want to understand more about the underlying economic and philosophical implications of this issue, I heartily recommend this New York Times column by Pierre Bessard of Switzerland’s Insitut Liberal.

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If you liked the cartoons I shared about the NSA spying scandal, I suspect you’ll like this story even more.

It begins with a newlywed heading home to his lovely wife…but has a surprise ending.

NSA 1 NSA 2 NSA 3 NSA 4 NSA 5NSA 6

Sort of reminds me of a scene in that cinematic class, American Pie II.

And you have to give the President credit for good timing when delivering a line. Maybe he does have a future career as a movie star?

He’d definitely do better on the silver screen than he did in his previous position.

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It goes without saying that I’m always ready to defend tax havens when statists are seeking to undermine tax competition, financial privacy, and fiscal sovereignty.

So when the BBC asked if I would debate the topic, I said yes even though I’m in Paris (where supporting liberty is probably a capital crime).

I think the debate went well. Or, to be more precise, I was happy that I got to make my points.

I’ve been in debates on tax havens when I’m outnumbered 3-1, so a fair fight almost seems like a treat.

P.S. If you have a burning desire to watch me debate tax havens, you can see me cross swords with a bunch of different statists by clicking here.

P.P.S. Or if you like watching when I’m outnumbered, here’s my debate against three leftists on state-run TV.

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I shared some nauseating and jaw-dropping examples of hypocrisy the other day, but the Obama Administration’s continuation (and expansion!) of Bush-style surveillance-state tactics surely must set some sort of record for double-talk.

Even by Washington standards.

So regardless of your views on the merits or demerits of collecting metadata, let’s enjoy some cartoons mocking the White House’s forked-tongue policies.

We’ll start with one from Jim McKee that doesn’t make a strong philosophical point, but I’m hokey enough that I liked the use of Santa Claus.

NSA Spy Cartoon 2

This next cartoon from Steve Kelley should make honest liberals cringe with embarrassment.

NSA Spy Cartoon 3

This Scott Stantis cartoon may be even better because it links Obama with Bush and Nixon. I knew they all shared a statist orientation on economic policy, but who knew they had the same affinity for monitoring other people’s communications?

NSA Spy Cartoon 4

But this second Jim McKee cartoon may be my favorite because it goes after the hypocritical statists directly. You can see why I’m glad that McKee’s work has come to my attention.

Obama NSA Spy Cartoon 1

In closing, I suppose I should provide some initial thoughts on the more serious issue of whether the Obama Administration is improperly and needlessly invading our privacy.

If I understand correctly, the government did get judicial approval before collecting this data, so perhaps there’s nothing improper about this data-collection scheme.

But that doesn’t mean it’s a wise or good policy. Like most (if not all) libertarians, as well as other sensible people, I wonder whether the government will misuse the information being collected. If nothing else, the recent IRS scandals should make all of us very sensitive to that possibility.

But even if you assume that politicians and bureaucrats are angels, that still wouldn’t necessarily make this a good use of law enforcement resources. And that’s an empirical question.

I’m not qualified to give an answer, but I’m definitely in the need-to-be-convinced category. This policy reminds me of anti-money laundering laws, which also were put in place with the excuse that government would collect and analyze large amounts of data to help deter crime.

All the evidence, however, shows that these laws are a costly failure. The invade our privacy, hurt the poor, impose high regulatory costs, and have little or no impact on underlying crimes.

So put me in the skeptics camp. National defense is a legitimate function of government, and I fully realize that there are people out there who want to kill me and my family for no other reason that our freedoms, so I don’t automatically object to government actions in this area.

But I want their efforts to be concentrated and effective. And if our government is so big and bloated that we can’t monitor and stop known bad guys (like some of the 9-11 terrorists and at least one of the Tsarnaev brothers), then I don’t want to give the bureaucrats new powers without some sort of convincing argument that we’ll get positive results.

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Art Laffer has a guaranteed spot in the liberty hall of fame because he popularized the common-sense notion that you can’t make any assumptions about tax rates and tax revenue without also figuring out what happens to taxable income.

Lot’s of people on the left try to denigrate the “Laffer Curve,” but it’s worth noting that even left-wing economists now admit that you don’t maximize revenue with a 100 percent tax rate.*

Indeed, I think the only people who now cling to that absurd view are the bureaucrats at the Joint Committee on Taxation.

But this post isn’t about the Laffer Curve. It’s about a disappointing column that Art Laffer wrote for today’s Wall Street Journal.

The issue is whether states should have the power to impose taxes on sales that take place outside their borders. Art starts the column with a very good point about the link between growth and living standards.

After enjoying an average growth rate above 3.5% per year between 1960 and 1999, Americans have had to make do with less than one-half that pace since 2000. The consequences are already dramatic and will become even more so over time. Overall we are 20% poorer today than we would be had the pre-2000 growth rate persisted.

That’s a great point. I’ve also tried to get people to focus on the importance of long-run growth.

Heck, just look at what’s happened in Hong Kong and Singapore and you’ll agree.

In his column, Art also correctly defines good tax policy.

The principle of levying the lowest possible tax rate on the broadest possible tax base is the way to improve the incentives to work, save and produce—which are necessary to reinvigorate the American economy and cope with the nation’s fiscal problems.

But he then asserts that an Internet sales tax cartel somehow will result in better policy.

…there are reforms that can alleviate the problems associated with declining sales-tax bases and, at the same time, allow the states to move closer to a pro-growth tax system. One such reform would be to have Internet sellers collect the sales taxes that are owed by in-state consumers when they purchase goods over the Web. So-called e-fairness legislation addresses the inequitable treatment of retailers based on whether they are located in-state (either a traditional brick-and-mortar store or an Internet retailer with a physical presence in the state) or out of state (again as a brick-and-mortar establishment or on the Internet). …The exemption of Internet and out-of-state retailers from collecting state sales taxes reduced state revenues by $23.3 billion in 2012 alone, according to an estimate by the National Conference of State Legislatures. The absence of these revenues has not served to put a lid on state-government spending. Instead, it has led to higher marginal rates in the 43 states that levy income taxes.

This is a very disappointing collection of sentences. Let’s review.

1. States have declining sales-tax bases because state lawmakers treat that levy the same way that politicians in Washington treat the income tax – they put in loopholes in exchange for campaign cash and political support. For them to complain about declining sales-tax bases is sort of like the old joke about the guy who murders  his parents and then asks the court for mercy because he’s an orphan.

2. Art offers zero evidence that state governments would use the additional revenue from a state sales tax cartel to reduce income tax rates. What’s next, a column saying we should have a value-added tax because the politicians may use the revenue to get rid of the income tax? Yeah, good luck with that approach.

3. Why is it “inequitable” for there to be different tax policies in different states? That’s another way of describing federalism, and it’s something we should be celebrating and promoting. Particularly since it promotes tax competition, which is one of the most effective ways of restraining the greed of the political class.

4. The Internet sales tax cartel being promoted by Art and various politicians requires that governments have the ability to tax sales that tax place outside their borders. That’s an assault of sovereignty, particularly since out-of-state merchants will be coerced into being tax collectors for a distant government. This is the same dangerous ideology that is used by high-tax governments to promote global anti-tax competition policies.

5. Art offers zero evidence that the absences of a state sales tax cartel has led to higher income tax rates. Yes, some states have raised tax rates in recent years, but others have lowered tax rates.

For more information on why a sales tax cartel among the states would be a bad idea, here’s my short speech to an audience on Capitol Hill.

*This should be an obvious point, but I can’t resist emphasizing that maximizing revenue should not be the goal of fiscal policy.

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If you saw my speech to Capitol Hill staff on the topic, you know I’m strongly opposed to schemes that would allow greedy state politicians to impose taxes on online sales that occur outside their borders.

I reiterated these sentiments in a debate that was posted today by U.S. News & World Report. Here’s some of what I wrote.

The debate over the so-called Marketplace Fairness Act is not about a level playing field. It is an attempt by politicians to grab more tax revenue to facilitate bigger government. …they want to create an elaborate and intrusive system to force out-of-state merchants to act as tax collectors. …To understand why this is a radical step, imagine if you took a trip to Las Vegas and played blackjack, but then got arrested when you returned home because your state doesn’t allow gambling. That would be an outrage because a state only has sovereign power to enforce laws (good ones or bad ones) on things that take place within its borders. And it would be equally outrageous if state governments tried to force Las Vegas casinos to discriminate against non-Nevada residents.

I also explain why this type of system is bad news for reasons other than fiscal policy.

This legislation also has very troubling implications for privacy. It can only work by creating a massive database that matches online purchases with the state and local sales tax rates for every consumer. I don’t know about you, but I’m not confident that this type of untested system will be secure. We’ve already seen major leaks of confidential data from both government and private companies. This database will be a magnet for identity thieves and other hackers looking for credit card information.

If you agree, feel free to give me an “up” vote on this U.S. News page featuring all the debate participants.

I’ve had good luck in these debates, coming in first place in debates on double taxation, European fiscal policy, flat tax, and Obamanomics, so I don’t want to break the streak.

Otherwise I may have to cry and sulk, like I did after Richard Epstein and I lost the Keynesian stimulus debate in New York City (you can click here to see why we should have prevailed!).

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I’ve explained before that I’m skeptical of the Fair Tax, hostile to the value-added tax, and opposed to other forms of a national sales tax for the simple reason that I don’t trust politicians to get rid of the income tax.

Indeed, I fully suspect that the crowd in Washington – including many Republicans – would like nothing better than to impose a VAT on top of the current internal revenue code.

For the same reason, I’m inherently hostile to proposals that would create a new tax on the basis of how much we drive. As I explain in this interview for Fox Business News, the politicians would treat this tax as a new source of revenue and not get rid of gas taxes and/or property taxes on cars.

By the way, I hope everyone appreciates my sartorial splendor. A couple of years ago, some of my degenerate softball buddies made fun of me for the relatively subdued jacket I wore in this interview.

That motivated me to take the next step and unveil the madras.

P.S. Never trust politicians when they introduce a tax at a low rate and claim it won’t be a big burden. I mentioned in the interview how the first income tax in 1913 morphed into the nightmare we face today, but I also call your attention to the British tax on air travel, which has ballooned since its introduction in 1994.

P.P.S. Here’s another post on the topic of a miles-driven tax, but focusing more on the threat to privacy.

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Tax competition, as I have explained to the point of being a nuisance, is an important restraint on the greed of the political class. Simply stated, politicians are less like to over-tax and over-spend if they know that geese with the golden eggs can fly across the border.

This is mostly an issue in the world of international tax policy, but the same principles apply for sub-national governments inside a nation.

State and local governments should compete with each by offering the best fiscal climate. Sadly, just as high-tax nations such as France and Germany are trying to hinder global tax competition, high-tax state governments are seeking to undermine fiscal rivalry inside the United States.

More specifically, they want to create a state sales tax cartel that would allow governments to force out-of-state businesses serve as deputy tax collectors. Greedy politicians are fearful that online shopping deprives them of revenue, so they are pushing for a privacy-threatening database that will enable them to track and tax these transactions.

I explained this issue last week for a standing-room-only audience on Capitol Hill.

The entire discussion is posted online, including the very astute observations of my former Heritage Foundation colleague, Adam Thierer, now at the Mercatus Center.

Investor’s Business Daily also has opined on why this is a bad idea, but if you want to get really worried, the clowns at the United Nations want to power to tax and regulate the Internet.

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I’ve periodically written about the overall cost of regulation, and I’ve also highlighted the onerous costs of proposals such as the Dodd-Frank bailout bill.

This blurb from the IFC Review may give readers a sense of the regulatory onslaught facing financial institutions.

Banks and other financial services firms had to deal with 60 regulatory changes each working day during 2011, according to a report from Thomson Reuters Governance, Risk & Compliance, reports City AM. Regulators around the world announced 14,215 changes in 2011, a 16 per cent increase from the 12,179 announcements in 2010. The report shows that the majority of regulatory activity, 57 per cent, came from the US… Scott McCleskey, head of financial services regulation at the GRC unit, said: “This growth in activity also has an effect on the level of compliance spending leaving less to lend, invest, and do the other core activities which will be necessary to revive the global economy.”

Wow, an average of 60 regulations every single day. Great for lobbyists and politicians. Not so good for competitiveness and prosperity.

Now let’s touch on just one specific part of the regulatory burden. Banks and other financial firms must deal with a costly array of laws and regulations as part of the government’s war on money laundering. This video explains the issue.

Now let’s consider whether we’re getting any bang for the buck. We know anti-money laundering (AML) laws impose very high costs and make it difficult for many poor people to get banking services.

But are there some offsetting benefits? Unfortunately, the answer seems to be no. Professor Jason Sharman explains, starting with an explanation of the scope and cost of AML policies.

It is now just over 20 years since the first international anti-money agreements were concluded….Since then, the monitoring and implementation of AML standards have morphed into a global industry. …A vast array of financial institutions, from banks to brokers, insurance firms to casinos, money remitters to hedge funds, have now been conscripted into monitoring their clients for signs of suspicious financial activity. All this has imposed substantial costs on governments, private financial firms, and, indirectly, consumers, with the burden being especially significant for International Financial Centres.

He then raises a very important question, but one that everyone else seems to ignore.

…it is disconcerting how seldom the most obvious questions about this system are asked. First amongst these is whether AML standards actually work. That is to say, is there any less money laundered now than there was 20 years ago?  Is there any less predicate crime that gives rise to these dirty funds in the first place? Despite all the evaluations performed by the FATF, other international organisations, national governments and the army of private AML experts that has grown up, it is striking that these sort of first-order questions are almost never asked, let alone answered.

Given the incompetence of government, you won’t be shocked to learn that the bureaucrats view the laws as an excuse for empire building and bloat.

Surprisingly, however, one can read through thousands of pages of FATF reports, covering everything from football to free-trade zones, without finding much, if any, attention devoted to these measures. Instead, the international surveillance and monitoring system that judges almost every country to see whether they have ‘the right stuff’ in AML terms has tended to foster a bureaucratic game of goal displacement: means to an end have become ends in themselves.

And what about stopping crime?

The most careful studies of effectiveness (both in absolute terms and relative to the cost) have been done by those outside the system, for example scholars like Peter Reuter, Edwin Truman, Jackie Harvey and Michael Levi. Each of these observers notes the mismatch whereby we have an incredibly extensive and intrusive policy apparatus, but very little knowledge about the results produced. On the basis of the fragmentary evidence that is available, however, it is hard to see any impact that AML rules have made on the incidence of crime.  The general conclusion is that the expansion of the AML regime owes more to a political imperative to ‘do something’ in response to hot-button issues like crime or terrorism, rather than any track record of success.

Remarkable. Billions upon billions of regulatory costs. The immeasurable loss of privacy because of government-mandated snooping and spying. Yet all for naught.

And now the statists are even talking about getting rid of the $100 bill, making life even more inconvenient.

Maybe the answer is less regulation? Maybe the answer is that politicians and bureaucrats should do cost-benefit tests? But those types of rules would mean less government and more freedom, so don’t hold your breath.

P.S. This map shows you the countries considered most at risk of dirty money, which should make you wonder why anyone is foolish enough to think that higher costs on American banks will make a difference.

P.P.S. You probably didn’t realize there was such a thing as money laundering humor, but you’ll enjoy this joke featuring President Obama.

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Being the world’s self-appointed defender of so-called tax havens has led to some rather bizarre episodes.

The bureaucrats at the Organization for Economic Cooperation and Development threatened to have me thrown in a Mexican jail for the horrible crime of standing in the public lobby of a hotel and giving advice to low-tax jurisdictions.

On a more amusing note, my efforts to defend tax havens made me the beneficiary of grade inflation and I was listed as the 244th most important person in the world of global  finance – even higher than George Soros and Paul Krugman.

But if that makes it seem as if the battle is full of drama and (exaggerated) glory, that would be a gross exaggeration. More than 99 percent of my time on this issue is consumed by the difficult task of trying to convince policy makers that tax competition, fiscal sovereignty, and financial privacy should be celebrated rather than persecuted.

Sort of like convincing thieves that it’s a good idea for houses to have alarm systems.

And it means I’m also condemned to the never-ending chore of debunking left-wing attacks on tax havens. The big-government crowd viscerally despises these jurisdictions because tax competition threatens the ability of politicians to engage in class warfare/redistribution policies.

Here’s a typical example. Paul Vallely has a column, entitled “There is no moral case for tax havens,” in the UK-based Independent.

To determine whether tax havens are immoral, let’s peruse Mr. Vallely’s column. It begins with an attack on Ugland House in the Cayman Islands.

There is a building in the Cayman Islands that is home to 12,000 corporations. It must be a very big building. Or a very big tax scam.

If lying is immoral, this is a quick black mark on Mr. Vallely rather than tax havens. I’ve already explained, in a post eviscerating an empty-suit Senator from North Dakota, that a company’s home is merely the place where it is chartered for legal purposes. A firm’s legal domicile has nothing to do with where it does business or where it is headquartered.

In other words, there is nothing nefarious about Ugland House, just as there is nothing wrong with the small building in Delaware that is home to more than 200,000 companies. Obama, by the way, demagogued about Ugland House during the 2008 campaign.

Now that we’ve established that the author is a careless and know-nothing hack, let’s see what else he has to say.

Are there any legitimate reasons why anyone would want to have a secret bank account – and pay a premium to maintain their anonymity – or move their money to one of the pink dots on the map which are the final remnants of the British empire: the Caymans, Bermuda, the Turks and Caicos and the British Virgin Islands?

Actually, there are lots of people who have very compelling reasons to keep their money in havens, and only a tiny minority of them are escaping onerous tax burdens.What about:

o Jews in North Africa and the Middle East?

o Persecuted ethnic Chinese in Indonesia and the Philippines?

o Political dissidents in places such as Russia and Venezuela?

o Entrepreneurs in thug regimes such as Venezuela and Zimbabwe?

o Families threatened by kidnapping failed states such as Mexico?

o Homosexuals in murderous regimes such as Iran?

As this video explains, there are billions of people around the world that are subject to state-sanctioned (or at least state-permitted) religious, ethnic, racial, political, sexual, and economic persecution. These people are especially likely to be targeted if they have any money, so the ability to invest their assets offshore and keep that information hidden from venal governments can, in some cases, be a life-or-death matter.

And let’s not forget the residents of failed states, where crime, expropriation, kidnapping, corruption, extortion, and economic mismanagement are ubiquitous. These people also need havens where they can safely and confidentially invest their money.

The author of the column is probably oblivious to these practical, real-world concerns. Instead, he is content with sweeping proclamations.

The moral case against is clear enough. Tax havens epitomise unfairness, cheating and injustice. .

But if he is against unfairness, cheating, and injustice, why does he want to empower the institution – government – that is the source of oppression in the world?

To be fair, our left-wing friend does attempt to address the other side of the argument.

Apologists insist that tax havens protect individual liberty. They promote the accumulation of capital, fair competition between nations and better tax law elsewhere in the world. They also foster economic growth. …Yet even if all that were true – and it is not – does it outweigh the ethical harm they do? The numbered bank accounts of tax havens are notoriously sanctuaries for the spoils of theft, fraud, bribery, terrorism, drug-dealing, illegal betting, money-laundering and plunder by Arab despots such as Gaddafi, Mubarak and Ben Ali, all of whom had Swiss accounts frozen.

But he can’t resist trying to discredit the economic argument by resorting to more demagoguery, asserting that tax havens are shadowy regimes. Not surprisingly, he offers no supporting data. Moreover, you won’t be surprised to learn that the real-world evidence directly contradicts what he wrote. The most comprehensive analysis of dirty money finds 28 problem jurisdictions, and only one could be considered a tax haven.

Last but not least, the author addresses the issue that really motivates the left – the potential loss of access to other people’s money, funds that they want the government to confiscate and redistribute.

Christian Aid reckons that tax dodging costs developing countries at least $160bn a year – far more than they receive in aid. The US research centre Integrity estimated that more than $1.2trn drained out of poor countries illicitly in 2008 alone. …Some say an attack on tax havens is an attack on wealth creation. It is no such thing. It is a demand for the good functioning of capitalism, balancing the demands of efficiency and of justice, and placing a value on social harmony.

There are several problems with this passage, including the (perhaps deliberate) mixing of tax evasion and tax avoidance. But the key point is that the burden of government spending in most nations is now at record levels, undermining prosperity and reducing growth. Why should add more fuel to the fire by giving politicians even more money to waste?

Let’s now shift from the inaccurate ramblings of a left-winger to some real-world evidence. The Wall Street Journal has an article on the Canton of Zug, Switzerland’s tax haven within a tax haven. This hopefully won’t surprise anyone, but low-tax policies have been very beneficial for Zug.

Developed nations from Japan to America are desperate for growth, but this tiny lake-filled Swiss canton is wrestling with a different problem: too much of it. Zug’s history of rock-bottom tax rates, for individuals and corporations alike, has brought it an A-list of multinational businesses. Luxury shops abound, government coffers are flush, and there are so many jobs that employers sometimes have a hard time finding people to fill them. …If Switzerland is the world’s most famous tax haven, Zug amounts to a haven within a haven.

Here’s some of the evidence of how better fiscal policy promotes prosperity. This is economic data, to be sure, but isn’t the choice between growth and stagnation also a moral issue?

Zug long was a poor farming region, but in 1947 its leaders began to trim tax rates in an effort to attract companies and the well-heeled. In Switzerland, two-thirds of total taxes, including individual and corporate income taxes, are levied by the cantons, not the central government. The cantons also wield other powers that enable them compete for business, such as the authority to make residency and building permits easy to get. …businesses moved in, many establishing regional headquarters. Over the past decade, the number of companies with operations of some sort in the canton jumped to 30,000 from 19,000. The number of jobs in Zug rose 20% in six years, driven by the economic boom and foreign companies’ efforts to minimize their taxes. At a time when the unemployment rate in the European Union (to which Switzerland doesn’t belong) is 9.4%, Zug’s is 1.9%.

It turns out that Zug is growing so fast that lawmakers actually want to discourage more investment. What a nice problem to have.

Describing Zug’s development as “astonishing,” Matthias Michel, the head of the canton government, said, “We are too small for the success we have had.” …Zug has largely stopped trying to lure more multinationals, according to Mr. Michel.

Its worth pointing out that the residents of Zug are not some sort of anomaly. The rest of Switzerland is filled with people who recognize the value of limited government.

…the Swiss are mostly holding fast to their fiscal beliefs. Last November, in a national referendum, they overwhelmingly rejected a proposal that would have established a minimum 22% tax rate on incomes over 250,000 francs, or about $315,000.

Sadly, even though the world is filled with evidence that smaller government is good for prosperity (and even more evidence that big government is bad for growth), statism is not abating.

Indeed, the left’s anti-tax haven campaign continues to gain steam. At a recent OECD meeting, high-tax nations (with the support of the Obama Administration) put in place a bureaucratic monstrosity that is likely to become a world tax organization.

This global tax cartel will be akin to an OPEC for politicians, and the impact on taxpayers will be quite similar to the impact of the real OPEC on motorists.

If that’s a moral outcome, then I want to be a hedonist.

To conclude, here are two other videos on tax havens. This one looks at the economic issues.

And here’s a video debunking some of the usual attacks on low-tax jurisdictions.

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I’m depressed about the global network of tax police being organized by the OECD and high-tax governments. If successful, it will lead to much bigger, more oppressive government. But maybe there’s a way of fighting back. Here’s a video from the folks at Reason TV about something that governments would hate – anonymous, digital money.

And here’s a video from the bitcoin people. I have no way of knowing how well this system will work and how insulated it will be from government interference, but I very much hope it will be successful. Governments will never behave if they think people have no escape options.

If anybody has an informed opinion about this, I’d welcome some feedback.

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I commented yesterday about the silly idea, being promoted by a few politicians, to impose a tax on toilet paper. That post mostly was an opportunity to have some fun mocking greedy government because even a dour pessimist like me doesn’t expect that idea to get very far.

But there’s a new tax idea that sounds equally absurd, but actually is a much greater threat to taxpayers. The bureaucrats at the Congressional Budget Office have issued a report suggesting a tax based on the number of miles driven. Since such a tax almost surely (despite initial assertions to the contrary) would be in addition to existing gas taxes, this would be a way for politicians to grab more of our money.

But that’s not the only thing we should worry about. To impose such a tax, the government obviously would need the ability to track our vehicle usage. At the risk of stating the obvious, my driving patters are not the government’s business.

Here’s a blurb from a report in The Hill.

The Congressional Budget Office (CBO) this week released a report that said taxing people based on how many miles they drive is a possible option for raising new revenues and that these taxes could be used to offset the costs of highway maintenance at a time when federal funds are short. The report discussed the proposal in great detail, including the development of technology that would allow total vehicle miles traveled (VMT) to be tracked, reported and taxed, as well as the pros and cons of mandating the installation of this technology in all vehicles. …The report was requested by Senate Budget Committee Chairman Kent Conrad (D-N.D.), who held a hearing on transportation funding in early March. In that hearing, Transportation Secretary Ray LaHood said the Obama administration is hoping to spend $556 billion over the next six years, much of which would go to federal transportation improvement projects. Conrad said in response that federal funds are tight, and in asking for recommendations on how to raise that money, he noted the possibility of a VMT tax as a way to solve the problem of collecting less in taxes as people move to more fuel-efficient vehicles.

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Here’s a new mini-documentary from the Center for Freedom and Prosperity, narrated by Natasha Montague of Americans for Tax Reform, that explains why the process of tax competition is a critical constraint on the propensity of governments to over-tax and over-spend.

The issue is very simple. When labor and capital have the ability to escape bad policy by moving across borders, politicians are more likely to realize that it is foolish to impose high tax rates. And they oftentimes compete for jobs and investment by lowering tax rates. This virtuous form of rivalry helps explain why so many nations in recent years have lowered tax rates and adopted simple and fair flat tax systems.

Another great feature of the video is the series of quotes from winners of the Nobel Prize. These economists all recognize competition between governments is just as desirable as competition between banks, pet stores, and supermarkets.

The video also discusses how politicians are attacking tax competition. It mentions a privacy-eroding scheme concocted by governors to tax out-of-state purchases (how dare consumers buy online and avoid state sales tax!).

And it also discusses a very destructive tax harmonization effort by a Paris-based bureaucracy (the Organization for Economic Cooperation and Development, subsidized with American tax dollars!), which would undermine fiscal sovereignty by punishing jurisdictions that adopt pro-growth tax systems that attract labor and capital.

The issues discussed in this video generally don’t get a lot of attention, but they are critical for the long-run battle to restrain government. Please share widely.

P.S. This speech by Florida’s new Governor is a good example of how tax competition encourages governments to do the right thing.

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One of the good features of the Internet is that it gives people more options. But this is bad news for politicians, who like to control – and tax – what people are doing. But it’s not easy for politicians at the state level to impose high sales taxes on consumers when people have the freedom to buy things sold in other states. Politicians do impose “use taxes,” which supposedly require people to pay taxes on goods purchased in other states, but 99 percent of consumers evade this tax since there’s no feasible way to enforce the levy. In an effort to gain more control (and more money), greedy politicians at the state and local level want Congress to impose a nationwide sales tax cartel. I wrote about why this was a bad idea back in 2001, both because it would undermine tax competition between states and because it would be a gross invasion of privacy. Here’s an excerpt from a report on the latest battle in this fiscal war:
The halcyon days of tax-free Internet shopping will, if Rep. Bill Delahunt gets his way, soon be coming to an abrupt end. Delahunt, a Massachusetts Democrat, introduced a bill on Thursday that would rewrite the ground rules for Internet and mail order sales by eliminating the option for many Americans to shop over the Internet without paying state sales taxes. At the moment, Americans who shop over the Internet from out-of-state vendors usually aren’t required to pay sales taxes. Californians buying books from Amazon.com or cameras from Manhattan’s B&H Photo, for example, won’t be required to cough up the sales taxes that they would if shopping at a local mall. …The National Conference of State Legislatures applauded Delahunt’s legislation, saying he should be commended for allowing states to collect as much as $23 billion in new taxes. …the pro-tax forces have offered a proposal that they hope Congress can be persuaded to adopt. The concept is called the Streamlined Sales Tax Agreement, invented in 2002 by state tax officials hoping to straighten out some of sales tax laws’ most notorious convolutions. Since then, some 24 states have signed on, either wholly or partially, to the agreement, meaning they agree to simplify their tax codes and make them uniform. If enough states participate, proponents believe it will be easier to convince Congress to make sales collection mandatory for out-of-state retailers. …State tax collectors haven’t exactly been idle while waiting for Congress. They’ve been trying to force Amazon to turn over purchase records in North Carolina, attempting to force retailers to become tax-tattlers in California and Tennessee, and putting the squeeze on affiliate programs in Colorado.

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Here’s a bit of good news to begin the weekend. Arizona politicians have been forced to suspend a statewide speed camera program. I’m especially pleased to see that civil disobedience played a role in forcing politicians to pull the plug on the Orwellian system. Here’s an excerpt from the news:

Arizona is ending a groundbreaking and contentious program that put speed cameras along Phoenix-area freeways and in vans deployed across the state. Opponents have argued the cameras open the door for wider “Big Brother” surveillance and are more about making money than safety. The program has been the target of an initiative measure proposed for the November ballot. Even Gov. Jan Brewer has said she doesn’t like the cameras, and her intention to end the program was first disclosed in her January budget proposal. That was followed by a non-renewal letter sent by the Arizona Department of Public Safety this week to the private company that runs the program. Scottsdale-based Redflex said Thursday that the 36 fixed cameras will be turned off and the 40 vans taken off highways on July 16, the day after its state contract expires. …The camera program was instituted by Brewer’s predecessor, Janet Napolitano, now the Homeland Security secretary. Cameras were introduced in September 2008 and were added until all 76 were up and running by January 2009. …Napolitano estimated that the program would bring in $90 million revenue in its first year, but actual revenue fell far short as many motorists ignored notices received in the mail. …The end of the state program does not affect local governments’ use of cameras for speed enforcement, but the proposed ballot measure would prohibit state and local governments from using cameras for both speed violations and red-light running.

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In a previous blog post, I showed a cartoon joking about Obamacare as a Trojan Horse for the IRS, but with each passing day we are learning new – and always unpleasant – details about the mammoth legislation that was imposed by the left. The excerpt below from the Boston Globe reveals that businesses will face costly new reporting requirements to the internal revenue service because of government-run healthcare:

Tucked away in just 23 lines of Section 9006 of the Healthcare reform bill be a dramatic change in the 1099 reporting requirements.  No longer will corporations or payments for merchandise be exempt 1099 reporting.  This new law is effective January 1, 2012.  A large majority of payments made by a business will now be reported on a 1099.  …There is no doubt this will be an administrative nightmare for many businesses in the first year or two.  Taxpayer identification numbers need to be collected for all vendors.  Have a large business related meal at a restaurant, this will need to be reported on a 1099.  Spend a week in a hotel in Waco Texas, you will need to send a 1099.

My Cato colleague has more details in one of his recent blog posts.

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Here’s an excellent idea for all American readers. One of the guys who posts on National Review Online is urging everyone to identify themselves as “some other race” on the census form. And writing “American” next to that box would be an added bonus. The goal, he explains, is to undermine the government’s racial bean-counting intrusiveness. Forward this to every American resident you know.

Fully one-quarter of the space on this year’s form is taken up with questions of race and ethnicity, which are clearly illegitimate and none of the government’s business… My initial impulse was simply to misidentify my race so as to throw a monkey wrench into the statistics; I had fun doing this on the personal-information form my college required every semester, where I was a Puerto Rican Muslim one semester, and a Samoan Buddhist the next. …Instead, we should answer Question 9 by checking the last option — “Some other race” — and writing in “American.” It’s a truthful answer but at the same time is a way for ordinary citizens to express their rejection of unconstitutional racial classification schemes. In fact, “American” was the plurality ancestry selection for respondents to the 2000 census in four states and several hundred counties.

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There’s a principled Fourth Amendment argument against anti-money laundering laws. In  this video, however, I mostly focus on the cost-benefit issue, explaining that the fight against crime will be more effective if law enforcement is not forced to look for a needle in a haystack.

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In a rational world, Switzerland would be a role model for other nations. It is quite prosperous thanks largely to a modest burden of government. There is remarkable ethnic and religoius diversity, but virtually no tension because power is decentralized (sort of what America’s Founders envisioned for the United States). Yet despite these – and many other – attractive features, Switzerland is being persecuted because of strong human rights laws that protect financial privacy. Money-hungry politicians from other nations resent Swtizerland’s attractive policies, and they would rather trample Swiss sovereignty rather than fix their own oppressive tax laws. An official from the Swiss Bankers Association provides some background in a New York Times column:

In Switzerland, this tradition of treating a client’s financial affairs in confidence became law in 1934 when it was codified in Article 47 of the country’s first-ever federal banking act as a contemporary reaction to the economic crisis, various domestic political considerations and well-publicized cases of espionage involving France and Germany. …Banking secrecy, therefore, is not some gimmick the Swiss devised to attract foreign clients to their banks. It reflects the very high degree of trust that exists between the Swiss state and its citizens and it has strong democratic foundations. …The Swiss are proud of their system and they reward it with a high level of taxpayer honesty. It works because the Swiss vote their own taxes, they have a high degree of control over the way tax revenues are spent and over all they believe their tax system to be reasonable, comprehensible, transparent and fair. The principle of self-declaration backed up with withholding taxes and, if necessary, stiff fines supports this “honesty box” system. …Doesn’t Switzerland hear the snapping jaws and cracking whips of foreign finance ministers, tax collectors, O.E.C.D. bureaucrats, cash-dispensing government agents and other denizens of the encroaching real world as they circle round Mother Helvetia intent on biting huge chunks out of her banking secrecy, if not swallowing it whole? …In March last year the Swiss announced they would give up the evasion-fraud distinction for foreign bank clients and adopt  the O.E.C.D. standards on information exchange in tax matters. …However, requests for assistance must be made with regard to a specific individual, and “fishing expeditions” — any indiscriminate trawling through bank accounts in the hope of finding something interesting — remain ruled out. …Switzerland demonstrates to the world that it is possible for a state to collect taxes with a high degree of taxpayer honesty and without the authorities being corroded with suspicion about the financial activities of their citizens. Citizens in a democracy would never allow their police force to have an automatic right of forced entry into their homes just on the off-chance of finding some stolen goods, so why on earth should the state have an automatic right of forced entry into citizens’ banks accounts just on the off-chance of discovering some tax evasion? There must be a limit to the extent to which respect for an individual’s privacy is sacrificed on the altar of international cooperation in tax matters.

Sadly, the United States is part of the effort to create a global tax cartel. An “OPEC for politicians” would be terrible news for taxpayers, though, much as a cartel of gas stations would be bad for driviers. So-called tax havens play a valuable role in curtailing the greed of the political class. Ask yourself a simple question: Would politicians be more likely or less likely to raise tax rates if they knew taxpayers had no escape options?

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A Swiss court just threw a wrench in the gears of an IRS effort to impose bad US tax law on an extraterritorial basis, ruling that UBS does not have to hand over data to the American tax authorities. This ruling nullifies an agreement that the Swiss government was coerced into making with the US government last year. In typical arrogant fashion, the IRS already has indicated that it still expects acquiescence, notwithstanding Switzerland’s strong human rights policy on personal privacy. The Bloomberg story excerpted below has the details, but it’s worth noting that this entire fight exists solely because the internal revenue code imposes double taxation on income that is saved and invested and imposes that bad policy on economic activity outside America’s border. But just as other governments should not have the right to impose their laws on things that happen in America, the United States should not have the right to trample the sovereignty of other nations:

A UBS AG account holder won a Swiss court case preventing data from being disclosed in a ruling that may impede a U.S. crackdown on overseas tax evasion. The failure by U.S. citizens to complete certain tax forms or declare income doesn’t constitute “tax fraud” that would require Switzerland to disclose account data, the country’s Federal Administrative Court ruled in a judgment released today. …“The prosecutors at the Justice Department are not going to be happy with this opinion,” Namorato said in an interview in Washington. “It guts the settlement that they negotiated with the Swiss authorities.” …The Swiss government said in a statement that it will decide Jan. 27 how the Swiss-U.S. agreement can be implemented in light of the ruling. U.S. Justice Department spokesman Charles Miller declined to comment. …The Internal Revenue Service said in a statement that while the agency hadn’t reviewed the ruling it “had every expectation that the Swiss government will continue to honor the terms of the agreement.” …Today’s ruling involved a single test case, and the court said there were 25 more involving similar claims that it will ask the Swiss tax authority to review. “It’s a landmark decision,” said Bernhard Loetscher a partner at Zurich-based law firm CMS von Erlach Henrici AG. “The court considers the case so crystal clear that it invited the SFTA to withdraw the 25 other claims.” …Under the 1996 double taxation treaty, “tax fraud and the like” means fraudulent behavior that causes or attempts an illegal and important reduction in tax owed. Examples included keeping separate accounts of incorrect profit, losses and orders, as well as a scheme of lies. Switzerland distinguishes between tax fraud, which is a crime, and tax evasion, which is a civil offense. “The U.S. will soon start to renegotiate the double taxation treaty, to give up the distinction between tax evasion and tax fraud,” said Zurich lawyer Wolfram Kuoni. “The key battle will be if it will apply retrospectively.”

This battle is part of a broader effort by uncompetitive nations to persecute “tax havens.” Creating a tax cartel for the benefit of greedy politicians in France, Germany, and the United States would be a mistake. An “OPEC for politicians” would pave the way for higher taxes, as explained here, here, and here. But this also is a human rights issue. Look at what happened recently in the thugocracy known as Venezuela, where Chavez began a new wave of expropriation. The Venezuelans with money in Cayman, Miami, and Switzerland were safe, but the people with assets inside the country have been ripped off by a criminal government. Or what about people subjected to persecution, such as political dissidents in Russia? Or Jews in North Africa? Or ethnic Chinese in Indonesia? Or homosexuals in Iran? And how about people in places such as Mexico where kidnappings are common and successful people are targeted, often on the basis of information leaked from tax departments. This world needs safe havens, jurisdictions such as Switzerland and the Cayman Islands that offer oppressed people the protection of honest courts, financial privacy, and the rule of law. Heck, even the bureaucrat in charge of the OECD’s anti-tax competition campaign admitted to a British paper that “tax havens are essential for individuals who live in unstable regimes.” With politicians making America less stable with each passing day, let’s hope this essential freedom is available in the future.

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