Offshore Tax Havens: A Threat to America's Future
Emerging from the GOP nomination confusion is a much needed national dialogue on the abuse of offshore tax havens by both U.S. corporations and individuals.
Even though the topic of tax havens was generated by the tens of millions in personal wealth deposited in the Cayman Islands by Mitt Romney, the problem is bigger than one Republican candidate. According to a 2008 Senate Homeland Security Report, the United States loses an estimated $100 billion a year to abuses of offshore tax havens and this loss of revenue is growing.
It is of benefit to begin this examination by defining the nature and purpose of a tax haven. According to the internationally renowned magazine, The Economist, an area is defined as a tax haven if there exists a composite tax structure established deliberately to take advantage of, and exploit, a worldwide demand for opportunities to engage in tax avoidance. This definition is generally accepted as accurate throughout the world, with the possible exception of the Republican Party.
The modern concept of tax havens first appeared in the aftermath of World War I when many European nations raised taxes to help finance reconstruction after the war. Because Switzerland remained neutral in the Great War it was able to maintain a low level of taxes, therefore becoming one of the first tax havens. Again during World War II Nazi war criminals used Swiss capital havens to hide assets stolen from Holocaust victims. In 1998, Swiss banks agreed to a $1.25 billion settlement to the families of Holocaust survivors and their families.
Beginning in the 1980s, other areas such as the Cayman Islands began to serve as a tax avoidance haven for both corporations and individuals. Many well known corporations use the Cayman Islands as a tax refuge, including Morgan Stanley, Citigroup and the Bank of America to name a few. It is easy to see why the General Accounting Office claims that a crackdown on offshore tax havens would bring an additional 1 trillion dollars in revenue to America over the next 10 years.
The question becomes; what then should America do with the additional 100 billion in revenue each year to strengthen our economy and create jobs? First, we could use the increased revenue as incentives to corporations to create jobs here in the United States rather than outsourcing our jobs.
In addition, we could also use the revenue to support research and development here in the U.S. The key to America’s future success is directly tied to the amount of funding we place into research and development in areas such as information technology, medical research, energy alternatives, and high speed transit. America will quickly fall behind the rest of the world if we continue to cut funding for research and development.
The revenue should also be used to encourage young people to enter the fields of science, medicine, and engineering. Investment in education is the best vehicle to ensure that future generations of Americans have a strong economy and a better life than their parents. These ideas are just the beginning, there is so much good that could be done for the American people if we crack down on these offshore tax havens.
For most hard-working Americans there is no such thing as tax havens; they work hard and they pay their taxes, but there are too many in our country that think they are too important, too powerful, or too wealthy to pay taxes like the little people. Well I say to these privileged elite, this is still a nation of the people, by the people, and for the people, and corporations are not people, corporations are not patriotic, and they hold no love or allegiance to America, they are “international."
It is not corporations that fight and die defending America, it is hard-working, tax-paying Americans who do the tough job of dying for their country while corporations profit from war then show their total lack of patriotism by hiding their profits in tax havens in the Cayman Islands.
Mike L
8:56 am on Thursday, January 26, 2012
Excellent story......should not have been buried in the locals. The only thing I worry about is the almost all those congressmen and senators in Washington are lawyers that wrote the laws to get this way. They are also part of the 1 percent and the prove it everyday. Again excellent story!!!!
Melissa
12:25 pm on Thursday, January 26, 2012
I agree, excellent story! This article should not be buried in the locals section and should receive a more obvious location on this site. In addition, this writer has a clear, concise, and historical perspective on complex issues. We need to promote more discussion on this very important topic. Giving away our future and hiding money is not in anyway honest, moral, or just to all of our servicemen (who have given so much to this country), our children in need of a quality education to compete in a global society, nor our seniors who have worked a lifetime to ensure the country's success. Corporations need to pay their fair share, with the tax money gained used to benefit further investment in our country. Wealthy individuals need to demonstrate the same strength of character. It is time that the vast majority of citizens whom pay their taxes see the definition of 'tax havens' for what they truly are: stealing.
John Hayes
8:00 am on Friday, January 27, 2012
Rather than complain about taxes, we need to think about revenue.
US corporate tax rates are out of step with the rest of the world. When additional state rates are added, the average marginal tax rate for U.S. corporations rises to 39.2%, the second highest in the developed world, only slightly behind Japan’s. But revenue from corporate taxes represents only about 2.1% of GDP, which is at the lower end of developed countries. Why is the revenue so low when rates are so high?
Current corporate tax laws are complicated by too many credits and deductions that benefit a narrow set of (politically preferred) taxpayers at the expense of the many. This results in some corporations not paying any tax at all.
The solution is to lower statutory rates and simplify the tax code by eliminating most deductions and credits. When rates are lower, there is less incentive for companies to keep profits overseas, and more incentive to return those profits to shareholders. This also lowers compliance costs for everyone, estimated to be as high as 30% of revenue. That means companies are spending $30 in regulatory compliance costs for every $100 they send to the government.
Corporate tax simplification will raise revenue, save companies and their shareholders money, and allow the US to be competitive in the global marketplace.
John Hayes
8:16 am on Friday, January 27, 2012
I need to add one more comment. The TOTAL REVENUE paid by US corporations to foreign countries in 2007 (the most recent year for which comprehensive IRS data is available) was $100 billion. To claim, as the author does, that closing loopholes would increase revenue by that same amount is silly.
In fact, the larger problem created by our high statutory rates is not lost revenue, but profits not realized by American shareholders, pensioners and 401K owners, since the money is kept overseas.
Bob P
8:46 am on Saturday, January 28, 2012
Sad to see that Obama's class warfare made it to the Patch. When are we going to see that tax burdens are what cause people and companies to seek shelters in the first place?
Bob Griffiths
10:04 am on Saturday, January 28, 2012
Obama's class warfare???? It is evident that the "class warfare" defense is what the banks and securities firms will use to defend their illegal acts, their crimes that drove America into economic collapse by 2007. The pursuit of the truth is not class warfare, it is justice. In President Obama's State of the Union address he announced he was in the process of creating a special unit within the Department of Justice to investigate and prosecute the financial fraud perpetrated on the American People by those institutions that caused our economic collapse. That was great news to the State Attorney Generals that have been fighting alone to prosecute corporations for financial fraud.There is one fundamental difference between the Great Depression of 1929 and our Economic Collapse of 2007, in 1929 the American People knew who was to blame and who needed to be regulated, and that was the banks and Wall Street, but this time the banks and Wall Street are trying to convince the American People that the "people" are to blame by screaming about class warfare. I have a feeling the "class warfare" defense will not work when the American People find out the seriousness of the crimes and deception committed by banks as they drove the housing market and our economy over a cliff.
Ralph Splendorio
10:56 am on Monday, January 30, 2012
All of this is resolved by a rational tax system. The problem is not tax loopholes but high taxes.
Steve
9:55 am on Saturday, February 4, 2012
HOORAY!!! You said in 19 words when all of the above babbled on forever. They must have written the tax code.
bayboat
1:57 pm on Tuesday, February 7, 2012
Optimal tax code.
1. What is your income?
2. Multiply number in question #1 by .15
3. Send check to Uncle Sam
4. Thank You
John Hayes
9:03 am on Friday, February 10, 2012
I love it! Let me do my taxes on a postcard. Goodbye Turbotax.
TP
11:17 am on Saturday, April 7, 2012
Welcome to the future, where all your decisions are made by someone else, and any flimsy excuse can be used a weapon. But wait, there's more:
"While we are unable to comment on individual cases, we would like to assure patients there is a procedure GP practices need to follow before they can remove patients from their lists.”
Even the hospitals and doctors are not free to think and act independently. They have their overlords as well.
Well brother, you asked for it.
Surgery bans elderly patient over her carbon footprint - Telegraph
www.telegraph.co.uk
An elderly woman was ordered to find a new GP because the “carbon footprint” of her two-mile round trips to the surgery where she had been treated for 30 years was too large...
Lookin, and hopin, and singin, and prayin
11:29 am on Saturday, April 7, 2012
If you think that this problem is remote from us, think again. Investigate Chairman Gilmore, his partner, highly paid poltical appointments, and attorneys, engineers, etc. you will find such goings on right here. Did Ritacco hide some of his money there? I agree the tax code must be rewritten, but something must be done quickly. We are being robbed.