TheAgitator.com
The Bellicose Left
Friday, January 23rd, 2009Forget extraordinary rendition or arresting Internet gambling executives, Pulitzer Prize-winning journalist David Cay Johnston argues in Mother Jones that if the laws of another country conflict with those of the U.S., we should just invade them.
Okay, so he’s talking about the Cayman Islands. Still, it’s a pretty astonishing proposal.
In 1983 just 10 percent of America’s corporate profits were funneled through places that charge little or no corporate income tax; today more than 25 percent of profits go through tax havens. The Obama administration could tell the Caymans—now fifth in the world in bank deposits—to repeal its bank secrecy laws or be invaded; since the island nation’s total armed forces consists of about 300 police officers, it shouldn’t be hard for technicians and auditors, accompanied by a few Marines, to fly in and seize all the records. Bermuda, which relies on the Royal Navy for its military, could be next, and so on. Long before we get to Switzerland and Luxembourg, their governments should have gotten the message.
Johnston then seems to get an inkling of just how preposterous his idea is and backs down a bit, just before proposing more bad ideas:
Barring gunboat diplomacy (tempting as it is), there is no reason we cannot pass laws to block financial transactions with tax havens or even, Cuba-style, make it a crime for Americans to visit or do business with them without special permission. Congress could declare the hiding of funds a threat to national security and require that anyone with offshore assets disclose them to the IRS within 30 days and pay taxes, interest, and penalties within 180 days. For the holdouts, temporary special teams in the IRS and Justice Department could speedily pursue civil or criminal charges.
Thanks to Chris Muir for the tip.
Via email, Johnston responds:
Wow, what reactions—many of them full of venom and personal attack, but without any substance on the issues in my article. BTW, for those who make wild guesses and get it wrong, I am a registered Republican and chairman of a corporation I founded with one of my sons.The issue: our federal government forces employees to pay taxes on their wages through a rigorous withholding regime, but Congress lets people with non-wage income and corporations assess themselves with little or no verification and then lets them defer paying their income taxes for decades (with inflation reducing the value collected) and to outright evade taxes, a crime. We have two income tax systems, separate and unequal in their enforcement and reporting regimes. And of course in my Mother Jones piece I am jesting about actually invading the Caymans, as Radley sort of notes, but I am joking not about the need to enforce the law and stop helping calculated cheats get away with their felonies.
I apologize for getting Johnston’s political leanings wrong. I’m not sure the jest of his invasion proposal was all that apparent, particularly given the severity of his actual proposals, which include a possible Cuba-like trade embargo on a country like Switzerland.
I happen to think countries that offer secret banking and tax shelters serve an important function. Their value may not be as apparent to everyone in the U.S., but I’d imagine even a skeptic like Johnston might see things differently if he lived in a country where the government was more callous about how it appropriated its citizens’ possessions (which isn’t to say there’s nothing callous about taking money from taxpayers and, for example, using it to help failed financial houses pay out bonuses to their executives).
It’s also pretty arrogant to think the U.S. government should simply impose its own laws on the rest of the world, be it with military force or by restricting the ability of its own citizens to engage in voluntary trade with the citizens of other countries.
I’m not an expert in financial dealings, but it seems to me that if putting money in offshore accounts is considered a “matter of National Security,” as Johnston argues, then something is wrong.
Sovereign countries have just as much right to make their own laws as we do; and, we have no right to tell them what their laws ought to be. If they conflict with our interest, so be it. It is their right.
It seems to me that if it’s that important that companies don’t stash money in offshore accounts then the IRS should look closer at the US company books that “invest” in those places. No action needs to be taken on the banks or countries who are merely trying to make a buck like everyone else.
Who cares? It’s still one of the more despicable notions I’ve ever heard. Such a hypothetical makes Bush’s cheerleaders look level-headed.
Meet the Newly Empowered Left, same as the former Newly Empowered Right.
**Clean up on isle 5** My head exploded….
A quick link to this tool’s wiki entry reveals an interesting academic career:
Education San Francisco State University (No degree awarded)
Michigan State University (No degree awarded)
University of Chicago (No degree awarded)
Now I’m not one of those guys who figures that if you don’t have an ivy league degree then your opinions aren’t worth jack. But come on, why bother attending three different universities and not graduating? And as much respect as I have for SF State and Michigan State, chances are if you couldn’t get a degree from one of them, you aren’t going to get one from the University of Chicago.
And indeed, he didn’t.
So we shouldn’t be the world’s policeman, but we should be the world’s taxman?
I believe there’s a word for taking someone’s money at gunpoint.
I believe there’s a word for taking someone’s money at gunpoint.
Taxing?
Jozef: ha!
The intelligent solution would be lower taxes to competitive rates. Of course no one has ever accused the federal government of intelligence. The free market works even when you deny it’s existence.
You know who else invaded a tiny, low-population island to prove a point?
(ok, the Argentinians invaded first)
ahem …
HFS! AYOoYFM?!?
If the right side of the political spectrum is going invade and subvert countries because they won’t support our drug laws, should we be surprised that the left would do the same when it comes to taxes? ‘Cause that’ll better our international image if we invade and violate people’s sovereignty over banking laws rather than terrorism. Everyone has a crusade that is essential to wage against the unbelievers.
Wow, what reactions.
Some of the posters here obviously did not read what I actually wrote as they make assumptions that have no basis in fact and then come to conclusions not supported by facts.
BTW, for those who make wild guesses and get it wrong, I am a registered Republican and chairman of a corporation I founded with one of my sons.
And while I have no college degree (because I skipped fresh/soph work for upper division and graduate courses) I am on the faculty at Syracuse University’s Law School, where I teach third year students how modern live derives from principles developed in the ancient world. My title there is lecturer.
There is nothing wrong per se with having money offshore, as one poster above indicates he thinks I assert. The issue is hiding (and to some extent deferring) income via opaque offshore entities.
But you have to pay your taxes. Like it or not, under Art. I, Sec. 8 of our Constitution, Congress taxes the income of Americans and residents here on a world-wide basis.
The issue I wrote about in Mother Jones, and earlier in the journal Tax Notes, is about the seperate and unequal income tax systems that our federal government imposes on us.
Our government established a rigorous regime to identify the incomes of employees and collect taxes in advance through withholding.
But business owners (and I own one business and am board chairman and part owner of another), landlords and investors are not subject to this regime, have little to none of their income verified and do not have taxes withheld before receipt.
We have two tax enforcement systems, separate and unequal.
Congress lets people with non-wage income and corporations not just assess themselves with little or no verification, it also lets them defer unlimited sums. They can pay their taxes decades from now, when inflaion ha eroded the value.
The dishonest can hide income offshore thanks to the policies of the Caymans and others that help people evade the law. The Caymans authorities cooperate with the US tax police only when a suspect is already well identified.
And of course in my Mother Jones article (and in my Tax Notes column) I am jesting about actually invading the Caymans, as Radley sort of notes at the Reason blog where this began. But I am not joking that we should enforce our laws and enforce them evenly.
Or, here’s a wild idea — we could try to make our corporate tax system much simpler and far less invasive by imposing a corporate flat tax.
Seems a much cheaper option than invasion, if you ask me.
Luckily, Johnston just might be the most ignorant man on the planet and there is no chance of the US attacking (or forcing) countries to change their private banking ways.
Why? Well, a certain wealthiest nation has ruling elite with sizable assets in those “secret” banks. Hard to get support for something that would cascade scandals thru D.C. and cost some powerful people their fortunes.
I was told Hitler had the notion to invade the Swiss for their banks. He didn’t. Maybe someone can illuminate (note, I have not devolved comment into Nazi example…just regular Imperialism).
By the way…with comments like this, I am more certain then ever that Gubmint’s “solution” to the coming failure WILL be war (nuclear). We will protect our way of life even at the sacrifice of our way of life.
@Mike #13
Am confused. Corporate tax IS flat percentage, but it is very high (IMHO and that of most sober economists). What change do you mean by your post? Do you mean simpler calculation?
But come on, why bother attending three different universities and not graduating?
Because you could get a shot at the vice-presidency. Duh.
And my partisan friends still wonder why I see no discernible difference between the left and the right when it comes down to the bottom line.
I was told Hitler had the notion to invade the Swiss for their banks. He didn’t. Maybe someone can illuminate[.]
Well, Hitler didn’t invade the Swiss because it would have cost him his entire army and gained him nothing. The Swiss are not to be fucked with. The Cayman Islands and the Bahamas lack that military structure for defence.
Posters, Hitler is way way way off the point. Try reading the article, available free at
http://www.motherjones.com/news/feature/2009/01/fiscal-therapy.html
@#15: Actually, the federal income tax on corporations is graduated. See26 U.S.C. § 11(b).
Ever notice all those pro-choice supporters who rattle on endlessly on about the importance of a constitutionally protected right to privacy suddenly vanish if someone suggests that right should extend to one’s finances or employment as well as to one’s sexuality?
I have to say I agree with David on this one. First, the piece Radley quoted is one small and unimportant part of the article. While he could have said it better, it’s pretty obvious that he’s not serious about advocating the invasion of a country.
Second, it’s one thing to argue about tax rates but his main point is that the tax rules are different for the rich and the poor. What is so libertarian about allowing the tax abuses that the rich have been able to rig into the system to continue? If anything I would expect that you agree that tax system should be more equal.
‘he hiding of funds a threat to national security ‘
I could see this being used against lots of people- drug dealers, people who work for cash, etc…
not good.
Pete,
Taxation is one group of individuals claiming the authority to steal from another group of individuals. No amount of tweaking the specific amounts stolen can alter the fundamental truth that taxation is theft backed by force.
Do you have a citation to a single Tax Court case, Federal Court of Claims case, Treasury Regulation, Revenue Procedure or Internal Revenue Code section to support this assertion?
Are you talking about deferring gains on property until the property is sold (which could be never) and the step-up in basis on inheritance of appreciated property? Your phrasing is nice and vague, but you’re going to have to be more specific if you don’t want folks to think you’re completely full of shit.
Perhaps what he should have said was “The government should stop doing business with companies that avoid paying taxes through the use of off shore tax havens.” This would not require that the US invade or threaten another country. It would also leave companies free to engage in the practice of using tax havens. It would just put a price on doing so.
Second, it’s one thing to argue about tax rates but his main point is that the tax rules are different for the rich and the poor.
Indeed. But I don’t think he’s campaigning to get rid of the so-called “progressive” tax system, do you? Or to abolish the EITC?
I actually do agree with the gist of Johnston’s article, though including the “Invade the Caymans” section after 8 years of Bush was profoundly stupid. However, Johnston seems to feel that our government, which is controlled by the very wealthy, has some kind of interest in shifting the tax burden from the middle class to the very wealthy. And most of the problems he cites are caused by government. So reading the article, I keep coming back to the same question: Why tax income at all? It’s a system that is counterproductive, unfair to the middle class, and rife with abuses by the wealthy and connected, not to mention that it flies in the face of the fifth amendment, regardless of what percentage is taken.
Apologizing for getting his leanings wrong doesn’t include removing the word “left” from the title? Huh. Interesting approach to admitting fault, there.
The tax rate should be equal…0% for everybody.
oops. sorry about the weird html :/
Hey, Johnson: I haven’t paid a dime in income tax or even filed a return since 1977, because I don’t work for you or anyone else but me, and I don’t let others vote on what my values are. I’m an American, and I will die in one of your prisons — simply because you and your kind have nuclear weapons and I don’t — before you will ever see anything I produce laid at your feet under threat.
Go fuck yourself.
Might makes right. Shut up and feel the boot of the American Empire!
Pete @ #32:
I’d say that a majority of Americans would not agree with the amounts they were asked to pay if you put it to a vote (excluding Massachusetts, of course).
And this is a problem because….?
To John Jenkins, I have written two bestselling books that explain the techniques that allow people to defer reporting income (and I am NOT talking here about realizing capital gains only when you sell), a 7,000-word front page NYTimes piece back on Oct. 13, 1996, and numerous articles on little known devices. Both Free Lunch and Perfectly Legal are in paperback and at public libraries.
To David Nieporent, the concept of progressive taxation is what gave birth to the idea of democracy 2,500 years ago and every classic worldly philosopher, even John Locke, wrote in favor of the idea (which is not to say our current system, which is progressive up to about $10m of annual income and then the tax burden begins to fall until those making an average of $173m pay a lower total federal tax rate than those making $50,000 to $75,000. You can see this in this table, which the Bush Administration said was reasonable and did not quibble with in any way:
http://www.nytimes.com/packages/khtml/2005/06/05/national/20050605_HYPER_GRAPHIC.html
To Mike T, I guess it depends on whether you believe people should be allowed to break the law with impunity and whether the laws should be equally enforced. You or I may not like a particular law, but imagine a society in which the police could stop al persons fleeing the scene of a crime except those in limousines. Would you support a law that treats a bank robber who drives from the scene and another who gets into a limo differently? That is, effectively, what some of our tax rules due, as I have shown again and again by studying what the law actually says and how various pieces of it link (or fail to link) together.
to Boyd Durkin, I am sure the subtitles of my books will come as a surprise to you. The Free Lunch subtitle is “How The Wealthiest Americans Enrich Themselves at Government Expense and Stick You With The Bill.”
But laws can be changed. Congress, during both Dem and Rep control passed a number of laws based on my reporting that closed loopholes and inequities. The massive 1,800-page Congressional report on Enron was prompted by my revealing that Enron did not pay taxes and how it pocketed almost a billion dollars in taxes that customers of its electricity utility were forced by law to pay but that it never turned over to government because of how a law was written. This also resulted in a new Oregon law to make sure taxes collected from rate-payers actually get paid over to government or are returned to customers. (The utilities are fighting that law, including one owned by Warren Buffett).
Again, like or hate our tax system, the issue I was raising had to do with unfair and unequal treatment and how government rules favor sophisticated cheats. The Caymans invasion should be read in the same manner as Jonathan Swift’s “A Modest Proposal.”
And to those who think we can do nothing, tune in to Tavis Smiley tonight on PBS, where I talk about how we can get a government that is responsive to all the people, not just those with lobbyists on their payroll and tons of money for campaign donations.
Cite?
Locke, in § 140 of the Second Treatise, wrote
Using the word proportionate would seem to indicate that Locke was an advocate of either a per capita tax or a flat tax (either each person pays a portion or a portion of each unit of currency is paid, depending on how you read it). I don’t think that Locke can reasonably be read to promote a progressive income tax system.
As for the ancients, are you talking about the levying of eisphora? That was levied only for war expenses, not the general income of the city-state so I am not sure how it gave birth to the idea of democracy (especially since Athens was a democracy before it was first levied).
Mr. Johnson-
“How The Wealthiest Americans Enrich Themselves at Government Expense and Stick You With The Bill.”
isn’t this what happens with large govt? isn’t this why wealth is increasing around govt centers? For me, the opposition to the IRS and rampant entitlement programs is that ultimately, taxation always enriches people with connections to those collecting the taxes.
I find it interesting that you seem to support our current system of taxation vs scrapping it. Any system that requires accountants and lawyers to figure it out is a sham. ‘Closing loopholes’ doesn’t help us- it just gives the govt more money to waste.
“I am jesting about actually invading the Caymans,” writes David Cay Johnston. I’ll take him (assuming that it is him posting) at his word on this one, and that he is in fact hyperbolic.
This happened, around one year ago, when the German Intelligence Service encouraged and bribed a Lichtenstein bank employee to steal data and turn it over to the German government. That point bears worth repeating: the German government actively encouraged and bribed a Lichtenstein national to commit was was effectively treason (banking is Lichtenstein’s largest industry by far).
The legality of this action is still under question (in Germany), but what is more telling is the response. Rather than questions of economic sovereignty or the simple act that a foreign power inciting treason is well defined as casus belli, pretty much everyone has been quiet. So adament are they to apprehend the guy who tries to save a couple of bucks on his paycheck that they are willing to sacrifice international law in order to pinch a few tax exiles. Brave new world, indeed.
1. Locke believed that most workers and farmers had such meager incomes that they could not pay tax. That is, to be sure, a modest distinction, but it is still taxation based on ability to pay.
2. I do not, Marty, support our current system and how you get that idea boggles the mind.
I have repeatedly stated in my best-selling books, repeatedly on national television and in hundreds of lectures and interviews, as well as my Tax Notes column, that that our system is an indefensible mess and that we need to move to a system designed for the world in which we live, not the economy that began to ebb in the late 20th Century. Keep in mind that income taxes are a minority share of the taxes we pay.