Every so often, you get a “teaching moment” in Washington, and we now have an excellent opportunity to educate lawmakers about the “offshore” world because President Obama’s nominee to be Treasury Secretary has been caught with his hand in the tax haven cookie jar.
Mr. Lew not only invested some of his own money in a Cayman-based fund, he also was in charge of a Citi Bank division that had over 100 Cayman-domiciled funds.
As you can imagine, Republicans are having some fun with this issue.
Democrats used to be critical of Ugland House
Mitt Romney was subjected to a lot of class-warfare demagoguery during the 2012 campaign because he also invested some of his wealth in a Cayman fund, so GOPers are hoisting Lew on a petard and grilling him about the obvious hypocrisy of a leftist utilizing – both personally and professionally – a jurisdiction that commits the unforgivable crime of not imposing income tax.
In a sensible world, Lew would say what everyone in the financial world already understands, which is that the Cayman Islands are an excellent, fully legal, tax-neutral platform for investment funds because 1) there’s no added layer of tax, 2) there’s good rule of law, and, 3) foreigners can invest in the American economy without creating any nexus with the IRS.
But we don’t live in a sensible world, so Lew instead wants us to believe he’s a moron and that he didn’t realize that funds were domiciled in Cayman.
And I guess all the other wealthy leftists with offshore-based investments probably think that as well, right?
Anyhow, I’m taking a glass-half-full perspective on this kerfuffle since it gives me an opportunity to educate more people about why tax havens are a liberalizing and positive force in the global economy.
Oh, what about Lew as Treasury Secretary? Well, as I explain for Real News, he’s competent but misguided.
In other words, the chances of any good reform in the next four years are asymptotically approaching zero. Based on his background (and also based on the views of the President he’ll be serving), it’s virtually impossible to envision good entitlement reform, pro-growth tax reform, and any changes to lessen the likelihood of future Greek-style fiscal collapse (as amusingly illustrated by this cartoon).
So with any luck, they’ll be some tax havens around that the rest of us can utilize when that day of reckoning occurs.
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