In an important shift, the Wall Street Journal takes a more sympathetic view of bank secrecy. The WSJ’s editorial page has always been an excellent source for pro-market opinion, but the editors were not overly sympathetic to some aspects of tax competition. But Holman Jenkins’ column highlights key moral and economic reasons for financial privacy:
That’s the paradoxical virtue of Swiss banking secrecy, which has protected both greedy tax scofflaws and those merely trying to save something for the next generation when politicians are burning down the economy back home. …A decade ago, this column took a more sanguine view of this gradual erosion than we might today. Then, we noted that the world was moving toward democracy and rule of law. Governments were dismantling senseless regulations and tax rates so high they inhibited growth and collected less revenue than government would have collected with lower rates. The world was becoming more like the Swiss, we said at the time—i.e., sane. A similar judgment does not leap from our lip today, not after two years so reminiscent of the omen-filled early 1930s. …today’s IRS war on Swiss banking secrecy does not occur in a vacuum. In 1934, Swiss politicians were legislating in response to specific events abroad: a Nazi law that made it a death-penalty crime to hold assets outside the country; a scandal stoked by French socialist politicians over Swiss bank accounts held by prominent citizens. The Swiss looked out and saw a world gone mad: bank failures, depression, militarism, fascism, communism. The new law was meant to buttress the world’s confidence in the privacy and security of a Swiss bank account. Today, the world is at least slightly deranged, with the possibility of getting very much worse. Democrats in Congress, in the face of every economic lesson, want to push marginal tax rates back up to confiscatory levels.