Posted on 08/02/2002 8:29:05 AM PDT by vannrox
Dear A-Letter Reader: Odds are you've never heard of alternative girl punk band 'L-7.' Their 1997 album 'The Beauty Process: Triple Platinum' contains a song that I nominate for the attitude anthem of the current US Congress: "The Masses Are Asses."
That sums up the congressional view of you and me; that we're ignorant rubes likely to fall for their posturing that passes for lawmaking. My problem is that I've been there, so I know how Capitol Hill pols think and operate, especially in an election year marked by scandal and economic uncertainty. I smell the nervous panic of endangered incumbency.
I'm weary of talking about it, but once again, let's revisit the issue of US corporations that re-incorporate offshore in tax havens -- they're in the news again this week.
First, some basics: 1) a corporation is owned by shareholders and, by law, directors owe a fiduciary duty to maximize return on their investments, including keeping taxes as low as possible. 2) US corporate taxes, complex and compliance costly, are the 4th highest among major nations at about 40%, nearly 9% higher than the OECD average top rate of 31.4%. That makes US companies highly uncompetitive in a global economy.
So scores of former US corporations have moved their legal incorporation to tax free havens such as Bermuda or the Cayman Islands -- to save millions in taxes and boost profits for shareholders.
Keep in mind this tax saving process is fully legal under US tax law. But, intones the sanctimonious Sen. Charles Grassley of Iowa: "It's not illegal, but it is immoral. I think it's also a case of patriotism."
Worse, this is an election year in which too many corporate executives stand exposed as foul repositories of immorality and sins ranging from greed and cupidity to serial dishonesty. These wrongs have hurt many thousands of their shareholders, employees, driving companies into bankruptcy. We all know the litany: Enron, WorldCom, Tyco, etc. etc.
So for the last week, the US House and the US Senate have engaged in target practice, taking pot shots at expatriate companies that have done what the law requires and allows them to do; cut taxes. Both houses adopted amendments banning the federal government from contracting with expat companies, theoretically cutting billions from company earnings.
With hypocritical Democrats in full cry, our MBA president, political weather vain a quiver, joined the mob. Said he: 'I think American companies ought to pay taxes here, and be good citizens.' He was joined by other putative Republican 'leaders,' excluding one who got it right: 'This is easy to demagogue, but it is a complicated issue in tax policy,' said Sen. Don Nickles of Oklahoma, the asst. Senate Republican leader.
On the congressional blacklist is Fruit of the Loom, the underwear makers, seller of US military skivvies by the millions. So all you real Americans, start burning you shorts in protest. And I think we ignorant masses know exactly who needs to be the object of our protests.
That's the way that it looks from here.
BOB BAUMAN, Editor
Judge Hand disagrees....
"Anyone may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one's taxes."
"Over and over again Courts have said there is nothing sinister in so arranging one's affairs as to keep taxes as low as possible. Everybody does so, rich and poor, and all do right, for nobody owes any public duty to pay more than the law demands. Taxes are enforced exactions, not voluntary contributions. to demand more in the name of morals is mere cant."
Honorable Learned Hand, US Appeals Court Justice
From New Hartford, US senator and hog farmer Charles Grassley is continuing his call for federal grants and tax credits to help farmers in Iowa and across the country start manure-to-energy operations. "Using the waste generated by hogs and cattle fed by larger-scale operations for electricity production could eliminate as much as 90 percent of the odor and dramatically reduce problems with runoff," Grassley said.
So the sanctimonious Senator from Iowa has a problem with corporate tax planning, but none at all with raiding 280 million pocketbooks to procure a guano subsidy for the hog famers of Iowa! A true case of Senatorial pork!
Freedom, Wealth, and Peace,
Francis W. Porretto
Visit the Palace Of Reason: http://palaceofreason.com
* * *
The Privacy Factor
Yet Another Reason Why The
Wealthy Are Leaving The USA
http://www.actionamerica.org/taxecon/privfactor.html
Every time another millionaire leaves the United States, the US tax base is reduced proportionately and the remaining taxpayers take another small hit. It is the total of all of those small hits that makes this issue significant. But, there is a side to this issue, in which each expatriation is much more significant and that could be potentially much more devastating. I'm not talking about just the wealthy any more. I'm talking about the super-wealthy. BILLIONAIRES!...
...In the discussion that followed, a whole new light began to shine. This billionaire, who I have reason to believe would rank in the top 100, of the 538 billionaires on the Forbes World's Richest People list, was not on the list at all, because of one reason. He chooses not to be. He chooses PRIVACY. But, as he pointed out to me, that would not be enough, if he were still a US citizen....
...As a US citizen, he would have to report to the IRS annually, ALL of his worldwide earnings, regardless of where in the world the income was generated or where it was banked. That would mean that ALL of the financial information necessary to trace his net worth would be accessible in one place. Years ago, as his net worth approached the level that would have placed him on the Forbes 400 Richest Americans list, he found that scenario to be unacceptable; hence, expatriation. Are you beginning to see where this is leading?...
...The point is, that beyond fear of the IRS and their confiscatory powers, the super wealthy have a far more powerful reason for choosing expatriation - their desire for Personal Privacy....
Foreign Wealth is Leaving Too
...It gets even worse. Because of the IRS implementation, earlier this year, of "Qualified Intermediary" (QI) Regulations, privacy concerned foreign billionaires (and millionaires), who have until recently been responsible for large amounts of foreign investment in the United States, are now moving their investments to more "private" jurisdictions, as well. The reason is simple. The QI Regulations require foreign financial institutions who invest client money in the United States to reveal the true identity of individual investors or lose the right to serve as a "Qualified Intermediary" for US investments. Those billionaires (and millionaires) who want to preserve their privacy are just directing those financial institutions to invest their money elsewhere....
...So now, not only is the IRS driving privacy concerned US billionaires out of the United States, with all of their investment capital and tax base, but they are driving privacy concerned foreign billionaires (and millionaires) to invest their wealth offshore, as well. In today's market, there are many other places where the wealthy can invest their money for a similar risk and return, without having to sacrifice their privacy as part of the price.
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