The bad news is that politicians are making cross-border investment more difficult.
They are using tax and regulatory policies to hinder the flow of money, just like they use protectionist policies to hinder the flow of goods and services.
A new report from the Center for Freedom and Prosperity, authored by Bruce Zagaris, explains this unfortunate development. He starts by explaining some of the bad policies imposed by Washington.
The ever-growing complexity and reach of the U.S. tax system impinges on the ability of U.S. taxpayers to live abroad, work abroad, open bank accounts abroad, or conduct business abroad. …These developments create a challenging environment, with taxpayers being subject to onerous – and sometimes conflicting – requirements. The complex array of obligations put taxpayers in legal jeopardy as governments threaten to impose sanctions on investors and businesses… The U.S. has even proactively prosecuted individuals and companies for cross-border tax activities that do not violate American laws. …The paperwork and reporting requirements for cross-border economic activity are extensive. …The icing on the cake of intrusiveness and costly compliance is the Foreign Account Tax Compliance Act.
The difficulties caused by extraterritorial taxation are exacerbated by similar moves by other nations, often implemented as a response to aggressive policies by the United States. … the OECD has developed compliance and enforcement initiatives. …extraterritorial tax rules also are impinging on corporations. …The EU has taken a series of aggressive steps to impose tax on cross-border transactions. …Overly aggressive tax compliance and enforcement initiatives erode globalization, impede the ability of normal commerce and the movement of people, capital, and goods, and threaten privacy.
I especially like Bruce’s conclusion. All of the rules that stifle and hinder cross-border investment only exist because politicians have adopted bad tax laws.
Most of the policies reviewed above are only necessary because governments not only tax income, but also impose extra layers of tax on income that is saved an invested, exacerbated by decisions to impose such tax laws on income earned outside national borders. In a neutral, territorial tax system that taxes economic activity only one time, such as the Hall-Rabushka flat tax, almost all international tax conflicts disappear.
Amen. If we had a flat tax, there would be no case to be made for these bad policies.
Writing for the Washington Times, Richard Rahn of the Institute for Global Economic Growth cites this new study as he warns that an ever-expanding web of global tax rules is throwing sand in the gears of the global economy.
Global economic growth, particularly foreign investment, is slowing. One reason is likely the growing complexity of engaging in cross-border financial transactions. Major companies, banks and other financial institutions have been required to pay, in some cases, multi-billion-dollar fines to various governments for some alleged tax or other violation. The question is: Why is this occurring when virtually all of these institutions have compliance officers, tax lawyers, accountants, auditors, etc.? Much of the problem seems to stem from the ever-changing regulations and laws among countries, which are increasingly impossible to understand and comply with, even by the most sophisticated businesses. …The Center for Freedom and Prosperity Foundation has just published an important paper by the highly regarded international tax lawyer Bruce Zagaris, titled “Why the U.S. and the Worldwide Tax Systems Have Run Amok.” …Overly complex and even incomprehensible rules govern many international wealth and business transfers, as well as very onerous reporting requirements for people that have foreign interests. …In his paper, Mr. Zagaris details the problems caused by FATCA and a number of other international tax-related rules and regulations. Many of the rules and regulations would never meet basic cost-benefit analysis. They create much pain for little or no gain.
I would modify that last sentence.
The only “gain” from all these tax rules is a comparatively small amount of additional tax revenue for politicians (Obama originally promised $100 billion annually from FATCA and the actual law is projected to collect than $1 billion per year).
Yet there is great pain imposed on the private sector.
Moreover, laws to hinder cross-border capital flows are especially disadvantageous for the United States, as illustrated by this chart from Bruce’s report.
Sadly, damage to the productive sector of the economy is not something that politicians lose sleep over.
I realize that we’re in the midst of an important tax battle in Washington and that I should probably be writing about likely amendments to the Senate tax bill.
But long-time readers know that I’m bizarrely preoccupied by international tax issues (I would argue for very good reasons since global tax competition is a way to discipline greedy politicians and because I want the power of governments to be constrained by national borders).
So I can’t resist commenting on a Washington Poststory about the tax implications of the upcoming wedding of Prince Harry and Meghan Markle.
It may seem like a modern fairy tale, but the upcoming wedding of Britain’s Prince Harry to American actress Meghan Markle will come with some mundane hurdles. Perhaps most inconveniently for the British royals, this transatlantic partnership could end up involving the United States’ Internal Revenue Service.
Most readers probably wonder how and why the IRS will be involved. After all, Ms. Markle no longer will be living in the United States or earning income in the United States after she marries the Prince.
But here’s the bad news (for the millions of Americans who live overseas, not just Ms. Markle): The United States imposes “worldwide taxation,” which means the IRS claims the right to tax all income earned by citizens, even if those citizens live overseas and earn all their income outside of America.
…there already has been widespread speculation that the union of Prince Harry and Markle eventually could result in some British royal children wielding American passports. But there’s a big obstacle in the way: American tax laws. …The United States’ citizenship-based taxation system is unusual: Only Eritrea has a similar system. It’s a relic of the Civil War and the Revenue Act of 1862, which called for the taxing of U.S. citizens abroad.
Here’s what this means for the royal family.
Markle’s American citizenship could open up the secretive finances of the royal family to outside scrutiny. If she remains a U.S. citizen, Markle will have to file her taxes to the IRS every year. And if she has more than $300,000 in assets at any point during the tax year — a likely scenario, given her successful acting career and her future husband — she will be expected to annually file a document called Form 8938 that will reveal the detail of these assets, which could include foreign trusts. …Although Markle’s tax information would not become public once sent to the United States, it would leave the royal family open not only to IRS review but also the risk that the information could leak, said Dianne Mehany, a tax lawyer at Caplin & Drysdale.
So what’s the solution if the royal family wants to avoid the greedy and intrusive IRS?
…the royal family employs some of the country’s best tax consultants. …”My guess is that she’ll be pressured by the Royal family to renounce [her U.S. citizenship], even if she’d rather not,” Spiro added. In many ways, that solution may be the simplest. And if Markle does give up her citizenship, she won’t be alone. Treasury Department data show that 5,411 people chose to expatriate in 2016 — a 26 percent year-over-year increase and potentially a historic high — and experts expect that number to keep rising because of the increasing tax burdens placed on U.S. citizens living abroad.
And it’s embarrassing to acknowledge that the United States has a very barbaric practice (used by evil regimes such as Nazi Germany and Soviet Russia) of extorting funds from Americas who are forced to give up citizenship.
She…would be subject to a potentially considerable exit tax.
This is adding injury to injury.
But Ms. Markle can be comforted by the fact that she’s not an outlier. Because of America’s bad worldwide tax regime (and especially because of FATCA, which makes enforcement of that bad system especially painful), an ever-growing number of overseas Americans have been forced to give up their citizenship.
Maybe as a wedding present to Prince Harry, American politicians can junk America’s terrible worldwide tax regime. That doesn’t require dramatic change, but why not fix a bunch of problems at once? I’ll simply point out that the flat tax is based on the common-sense approach of territorial taxation (governments only tax economic activity inside national borders).
Republicans promised voters all sorts of pro-growth reforms. They assured us that they learned a lesson about the dangers of expanding government and calling it “compassionate conservatism.”
Give us control of both Congress and the White House, they said before the election, and we’ll move our agenda to limit government and drain the swamp in Washington.
The Foreign Account Tax Compliance Act (FATCA) is an odious law enacted back in 2010 when the left controlled all the levers of power. It’s horrible legislation that threatens the rest of the world with financial protectionism (a 30 percent levy on all money flowing out of the United States) unless foreign governments and foreign financial institutions agree to serve as deputy tax collectors for America’s anti-competitive worldwide tax system.
I guess time will tell, but if the goal is good policy (and keeping promises), this law deserves to be tossed in the trash.
I’ve previously explained that FATCA is so brutal that it has led many overseas Americans to give up their citizenship simply because FATCA made their lives miserable. They couldn’t open bank accounts. They had trouble finding places to manage their investments. Even retirement accounts became a nightmare.
Some people said that these difficulties were just temporary and would disappear once everyone learned how the law operated.
Hardly. Let’s start with some data from a Bloomberg story that should be a wake-up call for the crowd in Washington.
The number of Americans renouncing their citizenship rose to a new record of 5,411 last year, up 26 percent from 2015, according to the latest government data. …Since Fatca came into being, annual totals for Americans renouncing citizenship have reached their four highest historic levels.
And here’s a chart showing this dismal trend.
The Wall Street Journalopines on this issue today.
…the Foreign Account Tax Compliance Act (Fatca) became law in 2010 to go after fat cats stashing money abroad, these pages have reported that it has led the IRS to treat law-abiding Americans as criminals. …Under Fatca, Americans must now report overseas holdings of more than $50,000 even if they owe no taxes, or else face crushing fines. For foreign financial institutions, the penalty for not giving the IRS what it wants to know about their American clients is a 30% withholding penalty on any U.S.-sourced payment to these institutions. …With the GOP controlling Congress and White House, the time is ripe for Republicans to make good on their pledge and give Fatca the heave-ho.
Amazingly, even the “taxpayer advocate” at the IRS recognizes the law is a disgrace, reversing the presumption of innocence in the Constitution.
The IRS has adopted an enforcement-oriented regime with respect to international taxpayers. Its operative assumption appears to be that all such taxpayers should be suspected of fraudulent activity, unless proven otherwise.
This is a remarkable development. I’ve groused before that the IRS’s taxpayer advocate has a bad habit of advocating for the IRS rather than the American people, so FATCA must be really bad to generate a report that actually defends the rights of taxpayers.
It’s also bad news for financial institutions.
An article in the Economist has some very remarkable admissions, including the fact that compliance costs will be at least twice as high as the tax revenue that ostensibly is being generated.
FATCA’s intrusiveness has caused concern among banks and fund managers. It raises big questions about data privacy. Compliance costs, mostly borne overseas, are likely to be at least double the revenue that the law will generate for America. The necessary overhauls of systems and procedures and the extra digging around to identify American clients could add $100m or more to a large bank’s administrative costs. No wonder bankers have dubbed FATCA the Fear And Total Confusion Act. An OECD tax official describes the law as “awful, in a way, like a nuclear bomb” but also sees it as “a remarkable leap forward for transparency”. …A further concern is the risk of misuse of information by corrupt administrations, or rogue government employees, such as the sale of personal financial data to would-be kidnappers.
It’s also revealing that an OECD bureaucrat thinks that an “awful…nuclear bomb” can be seen as a “remarkable leap forward.” I guess that’s the attitude we should expect from leftist bureaucrats who are exempt from paying tax on their own bloated salaries.
Let’s now focus on how the law is an attack on the sovereignty of other nations (and how it creates a precedent that will be used to attack America’s fiscal sovereignty).
Some leftists justify this wretched law by saying it only targets so-called tax havens. But Trinidad and Tobago is hardly in that category. Yet because FATCA applies to the entire world, a senior official in that country very much hopes Trump will follow through on promises in the Republican platform to repeal the misguided legislation.
Kamla Persad-Bissessar, the leader of the opposition coalition in parliament, recently…discovered that the GOP had called for repeal of the Foreign Account Tax Compliance Act, or Fatca, which is best understood as a license for IRS imperialism. …Mrs. Persad-Bissessar wrote Donald Trump in January asking if he will keep this promise. …Mrs. Persad-Bissessar, a former prime minister, wants to know because the Trinidad and Tobago parliament is now considering changing the nation’s laws to accommodate Fatca.
Repeal would be good for T&T, but it also would be good for the USA.
Americans have an even bigger stake in the answer. …the law has become another example of gross federal overreach, adding another burden on Americans overseas who are already paying taxes where they live. The 2010 law has almost no parallel anywhere, for good reason. While most nations limit their taxes to income earned within their borders, the U.S. is among the smaller group of nations that taxes its citizens on global income. …The roughly eight million Americans working overseas have been hit hardest by this bad law. Some foreign banks and financial institutions have responded simply by refusing to take American customers, on grounds that Fatca requirements are more trouble than the business is worth. For similar reasons others do not want Americans as business partners. Many others of modest means who owe no U.S. taxes can still find themselves hit by hefty fines and penalties because they have fallen afoul of the reporting requirements.
Heck, even if the law isn’t repealed, Trump can defang it.
…the whole Fatca edifice has been built on the intergovernmental agreements that Treasury has negotiated with more than 100 countries—agreements for which there is no statutory authority or Congressional ratification. Mr. Trump could take the teeth out of Fatca by announcing he has suspended negotiations for future agreements and won’t enforce the ones we have. …Let’s hope President Trump gives the answer that Americans deserve, by making clear he intends to deliver on the GOP pledge to dismantle a bad law that never should have been passed.
Amen.
The law is also running into problems in Israel, another nation that hardly fits the “tax haven” definition. A Forbes columnist has a dismal assessment of this intrusive and destructive law.
…the Israeli High Court’s temporary injunction against the enforcement of America’s controversial global tax law FATCA should serve as “a wake-up call” for other nations to rethink enforcing this “toxic, flawed and imperialistic legislation,” according to the boss of a leading independent financial firm that advises high-net-worth individuals (HNWI’s) and expats globally. …“Justice Meltzer’s action should be championed,” deVere’s Green asserts, who is an outspoken critic of FATCA. “His wise caution should serve as a wake-up call for other countries to rethink enforcing this toxic, flawed, damaging legislation that is being imposed on sovereign states around the world by the U.S.” …FATCA could indeed be described as a “masterclass” in fiscal imperialism and unintended consequences. But also of concern is that the US is increasingly secret in matters of financial data. It’s no wonder some have labelled it “horrific” and a nightmare for financial institutions. …Perhaps unsurprisingly there a growing trend and an overwhelming number of U.S. citizens are giving up their American citizenship (citizenship abdications), which has been revealed by the U.S. Treasury Department. And, according to a survey conducted in early 2015 by deVere itself almost three quarters (73%) of Americans living overseas expressed the view that they were tempted to relinquish their U.S. passports.
Canada also is unhappy that the U.S. is engaging in an extraterritorial revenue grab.
Some 7m Americans outside the country (1m of them in Canada), along with an unknown number of “US persons”, are now caught in FATCA’s net. …Ms Hillis is fighting back through the courts. She and Gwen Deegan, an artist who has lived in Canada since she was five, filed a suit claiming that the Canadian government’s co-operation with FATCA violates a tax treaty and constitutional protections against discrimination. …If Ms Hillis and Ms Deegan win in court, Canada’s government will face an awkward choice between complying with the decision and exposing Canadian banks to huge penalties. The Alliance for the Defence of Canadian Sovereignty, which is paying the women’s legal expenses, has harvested donations from China, Vatican City and beyond.
An article from CNBC highlights how bad the law is.
With an estimated 9 million Americans currently living overseas, the U.S expatriate community is comprised of a wide variety of people from all walks of life. ..The one nagging truth that is both common and unique to all of these individuals? They remain effectively fettered to the U.S. tax system. Unlike almost every other tax regime in the world, the U.S. taxes its citizens no matter where they reside. Thus, even if you expect never to return, you should expect to have to file an annual tax return. …As many expats can attest, it has become more difficult to open or maintain a bank account overseas without having to sign an IRS Form W-9 or other U.S. tax-related documentation. This increasingly common bank procedure is a result of the Foreign Account Tax Compliance Act, which requires foreign banks and other financial institutions, among other things, to gather and report information to the IRS about their U.S. customers or face stiff tax-withholding penalties on U.S. investments.
The last sentence is that excerpt deserves some attention. The FATCA law is so onerous that it is advantageous for many to simply not invest in the American economy.
And that means less growth and prosperity for the rest of us.
But that’s just part of the story.
Because the United States has imposed this awful law on the rest of the world, other nations now want to do the same thing. Indeed, the tax-aholics at the OECD have modified a Multilateral Convention and turned it into an Orwellian regime for promiscuous collection and sharing of data by almost every government. This scheme, sometimes referred to as the Global Account Tax Compliance Act because of its similarity to FATCA (I call it a nascent World Tax Organization), will boomerang on America because of the presumption that we’re obliged to change our tax and privacy laws so that foreign governments can tax investments in the United States.
Let’s close with a semi-amusing description of FATCA.
But if you prefer my more dour approach, here’s what I said a few years ago about FATCA for a Chinese network.
I’ve been criticizing this awful legislation from the beginning. Hopefully Congress and the Trump Administration will give me one less thing to worry about.
But there is something even worse, a Multilateral Convention on Mutual Administrative Assistance in Tax Matters that has existed for decades but recently has been dangerously modified. MCMAATM is a clunky acronym, however, so let’s go with GATCA. That’s because this agreement, along with companion arrangements, would lead to a Global Tax Compliance Act.
And the United States would be the biggest loser. That’s because FATCA was bad legislation that primarily imposed heavy costs on – and caused much angst in – the rest of the world.
Let’s learn more about this bad idea, which will become binding on America if approved by the Senate.
James Jatras explains this dangerous proposal in a column for Accounting Today.
Treasury’s real agenda is…a so-called “Protocol amending the Multilateral Convention on Mutual Administrative Assistance in Tax Matters.” The Protocol, along with a follow-up “Competent Authority” agreement, is an initiative of the G20 and the Organization for Economic Cooperation and Development (OECD), with the support, unsurprisingly, of the Obama Administration. …the Protocol cannot be repaired. It is utterly inconsistent with any concept of American sovereignty or Americans’ constitutional protections. Ratification of the Protocol would mean acceptance by the United States as a treaty obligation of an international “common reporting standard,” which is essentially FATCA gone global—sometimes called GATCA. Ratifying the Protocol arguably would also provide Treasury with backdoor legal authority to issue regulations requiring FATCA-like reporting to foreign governments by U.S. domestic banks, credit unions, insurance companies, mutual funds, etc. This would mean billions of dollars in costs passed on to American taxpayers and consumers, as well as mandating the delivery of private data to authoritarian and corrupt governments, including China, Saudi Arabia, Mexico and Nigeria.
The Foreign Relations Committee unfortunately has approved the GATCA Protocol.
…the senator is right to insist that the OECD Protocol is dead on arrival.
Taxpayers all over the world owe him their gratitude.
In a column for Investor’s Business Daily, Veronique de Rugy of the Mercatus Center warns that this pernicious and risky global pact would give the IRS power to collect and automatically share massive amounts of our sensitive financial information with some of the world’s most corrupt, venal, and incompetent governments.
During a visit to the World Bank this week, I got a sobering lesson about the degree to which the people working at international bureaucracies, including the Organization for Economic Cooperation and Development, dislike tax competition. For years, these organizations — which are funded with our hard-earned tax dollars — have bullied low-tax nations into changing their tax privacy laws so uncompetitive nations can track taxpayers and companies around the world. …they never tire of trying to raise taxes on everyone else. Take the Organization for Economic Cooperation and Development’s latest attempt to impose a one-size-fits-all system of “automatic information exchange” that would necessitate the complete evisceration of financial privacy around the world. A goal of the Convention on Mutual Administrative Assistance in Tax Matters is to impose a global network of data collection and dissemination to allow high-tax nations to double-tax and sometimes triple-tax economic activity worldwide. That would be a perfect tax harmonization scheme for politicians and a nightmare for taxpayers and the global economy.
But she closes with the good news.
Somehow the bureaucrats persuaded the lawmakers on the Senate Foreign Relations Committee to approve it. Thankfully, it’s currently being blocked by Sens. Rand Paul, R-Ky., and Mike Lee, R-Utah.
Actually, all that’s being blocked is the ability to ram the Multilateral Convention through the Senate without any debate or discussion.
John Gray explains the procedural issues in a piece for Conservative Review.
Senators Rand Paul (R-KY) and Mike Lee (R-UT)…aren’t blocking these treaties at all. Instead, they are just objecting to the Senate ratifying them by “unanimous consent.” The Senate leadership has the authority to bring these tax treaties to the floor for full consideration – debate, amendments, and votes. That is what Senators Paul and Lee are asking for. …Unanimous consent means that the process takes all of about 10 seconds; there is no time to review the treaties, there is no time for debate, and not a second of time to offer amendments. They simply want them to be expedited through the Senate without transparency. …As sitting U.S. Senators, they have the right to ask for debate and amendments to these treaties. …These treaties are dangerous to our personal liberties. Senator Paul and Senator Lee deserve the transparency and debate they’ve requested.
Amen.
For those of us who want good tax policy, rejecting this pact is vital.
An ideal fiscal system not only has a low rate, but also taxes income only one time and only taxes income earned inside national borders.
For fans of the flat tax, national sales tax, or other proposals for tax reform, this would be a death knell.
But this isn’t just a narrow issue of tax policy. On the broader issue of privacy and government power, Professor Niall Ferguson of Harvard makes some very strong points in a column for the South China Morning Post.
I should be a paid-up supporter of the campaign to close down tax havens. I should be glad to see the back of 500-euro bills. …Nevertheless, I am deeply suspicious of the concerted effort to address all these problems in ways that markedly increase the power of states – and not just any states but specifically the world’s big states – at the expense of both small states and the individual.
He cites two examples, starting with the intrusive plan in the U.K. to let anybody and everybody know the owners of property.
The British government announced it will set up a publicly accessible register of beneficial owners (the individuals behind shell companies). In addition, offshore shell companies and other foreign entities that buy or own British property will henceforth be obliged to declare their owners in the new register. No doubt these measures will flush out or deter some villains. But there are perfectly legitimate reasons for a foreign national to want to own a property in Britain without having his or her name made public. Suppose you were an apostate from Islam threatened with death by jihadists, for example.
…getting rid of bin Ladens is the thin end of a monetary wedge. …a number of economists…argue cash is an anachronism, heavily used in the black and grey economy, and easily replaced in an age of credit cards and electronic payments. But their motive is not just to shut down the mafia. It is also to increase the power of government. Without cash, no payment can be made without being recorded and potentially coming under official scrutiny. Without cash, central banks can much more easily impose negative interest rates, without fearing that bank customers may withdraw their money.
He’s right. The slippery slope is real. Giving governments some power invariably means giving governments a lot of power.
And that’s not a good idea if you’re a paranoid libertarian like me. But even if you have a more benign view of government, ask yourself if it’s a good idea to approve a global pact that is explicitly designed to help governments impose higher tax burdens?
Senators Paul and Lee are not allowing eight treaties to go forward without open debate and discussion. Seven of those pacts are bilateral agreements that easily could be tweaked and approved.
But the Protocol to the Multilateral Convention can’t be fixed. The only good outcome is defeat.
But once it gets set up, Congressman Alan Grayson of Florida will definitely be a charter member.
Here are some passages from a column in the Tampa Bay Times.
U.S. Rep. Alan Grayson, the outspoken, populist Democrat who thunders against Wall Street fat cats,and used to to joke about Mitt Romney’s low tax bill, incorporated a couple hedge funds in the Cayman Islands so investors could avoid taxes. Grayson Fund Ltd. and Grayson Master Fund were incorporated in 2011 in the Cayman Islands… That was the same year he wrote in the Huffington Post that the IRS should audit every Fortune 500 company because so many appear to be “evading taxes through transfer pricing and offshore tax havens.”
But apparently Grayson only wants other people to cough up more money to Washington.
Grayson’s financial disclosure statements indicate he has between $5-million and $25-million invested in the Grayson fund, and he lists no income from it.
The above sentence frankly doesn’t make sense. How can Grayson have millions of dollars of personal wealth and not generate any income?
The only plausible answer is that he’s just as bad at managing his own money as he is at managing the money of taxpayers (he “earned” an F from the National Taxpayers Union).
In any event, Grayson has plenty of company from fellow leftists who also use tax havens.
The on-air “talent” at MSNBC also has trouble obeying tax laws. At least Bill and Hillary Clinton have figured out how to legally dodge taxes while endorsing higher burdens for the rest of us.
I’m just irked when I discover that greedy pro-tax politicians are protecting their own money while pillaging our money.
P.P.S. By the way, it’s worth noting that the Cayman Islands is basically a conduit for investment in America’s economy.
Here’s a chart, prepared by the Treasury Department, showing that “Caribbean Banking Centers” are the biggest source of investment for America’s financial markets.
And the reason why the Cayman Islands are a platform for investment to the United States is that America is a tax haven for foreigners, assuming they follow certain rules.
P.P.P.S. Since today’s topic deals with international taxation, here’s an update on “FATCA,” which arguably is the worst provision in the entire tax code.
Here are some passages from a recent column in the New York Times.
…recent efforts by the United States Congress to capture tax revenues on unreported revenues and assets held in foreign accounts are having disastrous effects on a growing number of Americans living abroad. The Foreign Account Tax Compliance Act, or Fatca, signed into law in March 2010 but only now coming into full effect, has been a bipartisan lesson in the law of unintended consequences. Pressure is growing to halt its pernicious impact.
I agree the law is a disaster and that pressure is growing to ameliorate its negative effects, but we need more lawmakers like Rand Paul if we want to translate unhappiness into action.
Here are further details from the column.
The bureaucratic burden of identifying, verifying and reporting has caused many banks to regard American clients, particularly those of moderate means, as more trouble than they are worth. Middle-class Americans living abroad are losing bank accounts and home mortgages and, in some cases, having their retirement savings exposed to debilitating taxes and penalties. …Those impacted are left with the choice of uprooting their families (including foreign spouses and children), careers and businesses to re-establish a life in the United States; or to make the painful decision to renounce their citizenship.
Worse yet, the law has spawned a potentially more intrusive program known as the Global Account Tax Compliance Act, or Gatca. The proposal, developed by the Organization for Economic Cooperation and Development, calls for data from accounts opened by a foreign national to be automatically reported to that person’s homeland tax authorities. While Gatca is in an early stage of negotiation and implementation, observers believe that as many as 65 countries will ultimately be involved. Fatca, and by extension Gatca, are forming more links in the chain of global government snooping into the lives of innocent individuals under the guise of identifying criminals and tax cheats. For Americans, it is a massive breach of the Fourth Amendment, which forbids unreasonable search and seizure. The repeal of Fatca is the only way to end this dangerous and growing government overreach.
And they also are just as proficient at sleaze as their cousins in Washington.
Politico has a sobering report on pervasive state-level corruption. They start with a rundown of what’s been happening with the criminal class in the Empire State.
Other states have plenty of corruption, but it’s hard to beat New York when it comes to sheer volume. The criminal complaint Monday against Dean Skelos, the state Senate majority leader, and his son Adam came just three months after charges were brought against Sheldon Silver, then the Assembly Speaker. Having the top leaders in both chambers face criminal charges in the same session is an unparalleled achievement, but Skelos is now the fifth straight Senate majority leader in Albany to face them. …Senate Republicans are standing by Skelos, but if they decide to make a change, they probably won’t turn to Thomas Libous, the chamber’s Number Two leader. He faces trial this summer on charges of lying to the FBI… All told, more than two dozen members of the New York state legislature have been indicted or resigned in disgrace over the past five years.
But other states are doing their best to show corruption and government go hand in hand.
Silver was one of four state House Speakers to face criminal charges over the past year (Alabama, Rhode Island and South Carolina are home to the others). In Massachusetts, three Speakers prior to current incumbent Robert DeLeo all resigned and pleaded guilty to criminal charges. When Dan Walker died last week, it was hard for obituary writers not to note that he was one of four Illinois governors over the past five decades who ended up in prison. …Give any U.S. attorney a year and 10 FBI agents and he or she can probably come back from the state capital with a passel of indictments.
At some point, even non-libertarians need to recognize that 2+2=4. In other words, the evidence is overwhelming that the public sector is a breeding ground for corruption because it is premised on buying votes with other people’s money.
Which is the basic message of my First Theorem of Government.
By the way, I’m not making a partisan point. It should be obvious from the story cited above, but I’ll reiterate that Republicans are just as capable of venal behavior as their opponents.
And don’t delude yourself into thinking that “principled” Democrats are immune to sleazy behavior.
Here’s the video I narrated explaining how bloated government enables corruption.
P.S. You can enjoy some government corruption humorhere,here,here, here, and (my personal creation)here.
P.P.S. If you’re a fan of Barack Obama, you may be pleased to know that we’re setting records as a result of his policies.
Now we have a new record. More Americans than ever before have decided to give up U.S. citizenship. Here are some of the details from a Bloombergreport.
More Americans living outside the U.S. gave up their citizenship in the first quarter of 2015 than ever before, according to datareleased Thursday by the IRS. The 1,335 expatriations topped the previous record by 18 percent, according to data compiled by Bloomberg. Those Americans are driven to turn in their passports in part because of laws that have expanded bank reporting and tax compliance requirements for expatriates. The increase in early 2015 follows an annual record in 2014, when 3,415 Americans gave up their citizenship. An estimated 6 million U.S. citizens are living abroad, and the U.S. is the only country within the Organization for Economic Cooperation and Development that taxes citizens wherever they reside.
Here’s one example from the story.
“The cost of compliance with the complex tax treatment of non-resident U.S. citizens and the potential penalties I face for incorrect filings and for holding non-U.S. securities forces me to consider whether it would be more advantageous to give up my U.S. citizenship,” Stephanos Orestis, a U.S. citizen living in Oslo, wrote in a March 23 letter to the Senate Finance Committee. “The thought of doing so is highly distressing for me since I am a born and bred American with a love for my country.”
There are two lessons from this story.
First, it is absurd that our tax laws are so onerous (even worse than France in this regard) that some people feel compelled to give up American citizenship.
Second, while there are lots of ordinary Americans who are being pushed to give up their passports (folks married to foreigners, for instance), the average expatriate presumably has above-average income and is an asset to be welcomed rather than a burden to be repelled.
that’s a good outcome.to onerous – and sometimes conflicting – requirements. The complex array of obligations put taxpayers in legal jeopardy as governments threaten to impose sanctions on investors and businesses… The U.S. has even proactively prosecuted individuals and companies for cross-border tax activities that do not violate American laws. …The paperwork and reporting requirements for cross-border economic activity are extensive. …The icing on the cake of intrusiveness and costly compliance is the Foreign Account Tax Compliance Act.
The question is: Why is this occurring when virtually all of these institutions have compliance officers, tax lawyers, accountants, auditors, etc.? Much of the problem seems to stem from the ever-changing regulations and laws among countries, which are increasingly impossible to understand and comply with, even by the most sophisticated businesses. …The Center for Freedom and Prosperity Foundation has just published an important paper by the highly regarded international tax lawyer Bruce Zagaris, titled “Why the U.S. and the Worldwide Tax Systems Have Run Amok.” …Overly complex and even incomprehensible rules govern many international wealth and business transfers, as well as very onerous reporting requirements for people that have foreign interests. …In his paper, Mr. Zagaris details the problems caused by FATCA and a number of other international tax-related rules and regulations. Many of the rules and regulations would never meet basic cost-benefit analysis. They create much pain for little or no gain.
International Liberty 