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Posts Tagged ‘Tax Havens’

Senator John Kerry is enriched by tax havens. Former Democratic Senator (and professional slug) John Edwards got to use tax havens. Former President Bill Clinton got to benefit from tax havens. Connecticut’s Attorney General (and Senate candidate), Richard Blumenthal, saves money with tax havens.

Now we find out that a major Democratic donor and significant other to a Democratic Congresswoman from Maine, Donald Sussman, appears to be guilty of the horrible crime of…gasp…trying to lower his tax burden by using a tax haven. What makes this story interesting in part is the hypocrisy angle. Why is it leftists want all of us to pay more, but they get to utilize havens – or, in the case of folks like Geithner, Daschle, and Rangel, engage in outright evasion?

I’ve argued many times that tax havens are very beneficial for the world economy, so I certainly have no objection to what these Democrats are doing. I just wish they would let the rest of us in on some of the action.

But the other juicy part of the story is that there appears to be a legal catch-22 for Sussman and Congresswoman Pingree. In order for Sussman to be eligible for the big tax savings in the Virgin Islands, he needs to be a legal resident. But in order for Congresswoman Pingree to legally take rides on Sussman’s corporate jet, he needs to be living with her in Maine (technically, riding on his jet is only supposed to be legal if he’s a family member, but I guess shacking up counts in today’s society). Here’s are some amusing excerpts from the Weekly Standard.

As far as liberal financiers go, you don’t get much more powerful than S. Donald Sussman.

Since 1989, the hedge-fund billionaire has pumped millions into the coffers of Democratic politicians and their political pet projects. …he’s been one of the top contributors to left-leaning 527 organizations during the 2010 election cycle.

But while Sussman has long kept a behind-the-scenes profile, a recent ethics controversy in Maine has flung him into the center of a complicated dispute over state residency, tax dodging and congressional ethics – the implications of which extend all the way from the rocky coast of southern Maine to the offshore tax haven of the U.S. Virgin Islands.

According to Sussman’s fiancée, Rep Chellie Pingree (D-ME), the philanthropist lives with her and has been a resident of Maine since 2009. But financial records and other documents indicate that Sussman has claimed full-time residency and extensive tax breaks in the U.S. Virgin Islands for years – and may be continuing to claim them.

…Confusion over Sussman’s residency status has been dogging his fiancée’s congressional reelection bid for weeks. As the former president of an ethics watchdog group, Pingree caught flack in late September after she was found to be traveling on Sussman’s private jet – an activity prohibited by election rules, unless the aircraft owner is a family member.

In response to Republican criticism over the incident, the congresswoman said that Sussman lives with her in Maine, which may qualify him as family. The House Ethics committee has since cleared her of any charges.

…But this seems to conflict with records that suggest a company owned by Sussman is currently receiving financial benefits in the U.S. Virgin Islands. A decade ago, Sussman founded Trust Asset Management, LLP., in St. Thomas, and began paying himself income from his Connecticut-based hedge-fund firm through it. As recently as September, Trust Asset Management LLP., was listed as an active beneficiary of the Virgin Island’s tax breaks, known as the Economic Development Commission (EDC) benefits.

U.S. Virgin Island tax attorneys said that in order to receive these benefits through the EDC, a company owner must be a “bona fide” resident of the territory – meaning that the individual needs to live in the area for more than six months out of the year.

…Other information has added to the confusion over Sussman’s residency status. During an interview with the Virgin Islands Daily News in July, the hedge-fund owner reportedly told the paper that he has resided full-time in the territory since 2000.

…Sussman’s Securities and Exchange Commission filings from September also list his address as the Virgin Islands, as do political contributions he made in 2009. The website for the Great Cruz Bay Homeowners Association in St. John names Sussman as the organization’s president.

Over the past few years, the U.S. Virgin Islands have come under scrutiny for being a magnet for criminal tax evaders; individuals who want to take advantage of the territory’s 90 percent tax savings, but don’t want to make it their primary home.

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The Freeman has an article by an expert from Bermuda about the importance of giving taxpayers an escape option to curtail the greed of the political elite:

The Declaration of Independence had it exactly right: “He [King George III] has erected a multitude of New Offices, and sent hither swarms of Officers to harass our people, and eat out their substance.”

Today, the United States makes George III look like a piker.

…The U.S. governments—federal, state, and local—find that extracting 35–40 percent of incomes is not sufficient. They need more to continue their march toward the perfect welfare state…

The EU countries are even worse, with governments raking in around 50 percent of national output. Even Louis IV of France would now be viewed as a benevolent uncle compared to that. The U.S. and EU governments intrude on the financial lives of citizens in every conceivable way, from taxes to regulations to absurd laws that shape and control their citizens.

…Thomas Paine, who wrote of “the greedy hand of government, thrusting itself into every corner and crevice of industry,” would be astounded at today’s situation.

…There are a number of countries, disparagingly called tax havens (or offshore financial centers), most of them small and insignificant, such as Bermuda, Monaco, Liechtenstein, and Cayman, that are allegedly sabotaging the grandiose plans of the United States and the European Union to create their utopian welfare states…

The greatest enemy of the modern State is not the terrorist, criminal, hoodlum, or even the foreign aggressor; it is the citizen who simply wants to keep his own income or to protect his own wealth. “Need” is defined as getting your hands on other people’s money, and greed has come to mean the natural desire to protect your own property and assets from sequestration by governments.

…Tax competition compels governments to think more carefully before spending the public’s money and frees entrepreneurs for greater access to investment funds. Contrary to common belief, low-tax jurisdictions do not siphon off capital from high-tax areas, but allow a better and more effective means of making investment decisions.

The Bible established a tax rate of 10 percent, known as the tithe. That should be enough for governments. There is little hope for optimism on that score.

Low-tax countries are an affront to high-tax countries that believe they have a right to tell the rest of the world how to live. So high-tax countries try to force their tax regimes on everyone else. That is financial imperialism.

http://www.thefreemanonline.org/featured/the-new-financial-imperialism/#

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In an amusing coincidence, Secretary of State Hillary Clinton and I were both in Latin America this week offering fiscal policy advice. But it won’t surprise you to know that Mrs. Clinton’s suggestions are radically different than the advice I provided. She spoke in Ecaudor and, according to an AFP report, said it was time for “the wealthy across the Americas to pay their “fair share” of taxes in order to eliminate poverty and promote economic opportunity for all.” She also claimed that “her appeal to overhaul tax systems did not amount to “class warfare” and was instead recognition that the “winner-take-all-approach” was a drag on progress.” The AFP story concludes with Mrs. Clinton asserting, “We can’t mince words about this. Levels of tax evasion are unacceptably high.” 

By contrast, in my remarks to the Fundacion Libertad in Panama and the Chamber of Commerce in El Salvador, I explained that academic research shows that better tax compliance is best achieved by lowering tax rates and eliminating inefficient and corrupt spending programs so that taxpayers have more confidence that their money is not being wasted. But let’s touch on something even more important than economics. I also made a moral argument about the danger of giving national tax authorities too much power and information – especially in a region where governments oftentimes are the source of oppression, expropriation, and tyranny. Simply stated, there are some things that are more important than obeying tax laws. This Center for Freedom and Prosperity video explains that so-called tax havens are an extremely important refuge for people who are subject to persecution and other forms of government malfeasance. 

Let’s consider some Latin American examples. Imagine a political dissident in Venezuela. Huge Chavez has turned that country into a thugocracy and opponents of his sinister regime are vulnerable to having their assets expropriated (and worse). Thankfully, many Venezuelans are able to protect themselves from socialist tyranny by putting their money in Cayman, Panama, or Miami (the U.S. is a tax haven for non-U.S. people). But if Mrs. Clinton got to make the rules, tax havens would no longer exist and Chavez would be empowered. 

Or what about families in Mexico, who rightfully are afraid that if they keep their money in the country and report it on their tax returns, corrupt bureaucrats in the national tax office will sell their names to kidnapping gangs and suddenly their children will be kidnapped and they will have to deal with the horror of getting a ransom note accompanied by a child’s finger. Fortunately, many Mexicans can guard against this horrific possibility by placing their assets in Cayman, Panama, or Miami. But in Mrs. Clinton’s ideal world, those options would not exist and many more people would experience the nightmare of vicious crime. 

And consider the plight of Argentineans. A few years ago, the nation’s venal government stole the private pension assets of the people. This is in addition to radical currency devaluations that have wiped out a big chunk of people’s savings. Prudent Argentineans have avoided these forms of back-door thievery by moving funds to Cayman, Panama, and Miami. In the Orwellian world envisioned by Mrs. Clinton, however, tax havens wouldn’t exist and governments would have carte blanche to engage in bad policy. 

This is not the first indication of Mrs. Clinton’s government-über-alles mindset as Secretary of State. Let’s remember that she urged class-warfare tax policy for Pakistan and more recently said Brazil was a role model for soak-the-rich tax policy (a strange assertion since the top tax rate there is only 27.5 percent). If nothing else, at least we can give her credit for being consistent. 

But if I have to choose between Mrs. Clinton’s consistent statism and protecting the liberty and freedom of oppressed and persecuted people, it’s no contest. Politicians and senior government appointees all over the world act as if folks in the private sector are nothing more than serfs and peasants who have an obligation to pay ever-higher tax burdens, so we should be happy that so-called tax havens offer a refuge – even if we don’t live in failed states such as Venezuela, Mexico, and Argentina. Actually, since Obama is trying to turn us into Greece, maybe this issue will be important for Americans even sooner than we think.
http://www.breitbart.com/article.php?id=CNG.34c2d1e015a4313d8a5326dff93b6f02.901

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I think it is very nice when left-wing groups publish reports that make the case for pro-market policies A recent example is a report from the Center for International Policy, which wants to demonize so-called tax havens, but their report shows that the United States is actually the biggest beneficiary of tax haven policies, with more than $2 trillion of non-resident deposits in American financial institutions. This augments a report from another left-wing group, which found that Delaware is the world’s best tax haven. In other words, America’s tax haven policies (sadly, only available to non-resident aliens) are enormously beneficial to U.S. financial markets. It’s also worth noting, though, that even non-U.S. tax havens benefit the American economy. As this Treasury Department chart illustrates, Caribbean banking centers have about $2 trillion invested in America’s economy. The left-wing groups would like to destroy tax competition and set up a global tax cartel, sort of an “OPEC for politicians,” but the numbers they have reported underscore how important it is for American policymakers to preserve the open flow of capital and why tax havens are great news for the U.S. economy. Which is exactly what we argued in our video on the Economic Case for Tax Havens.

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