“It’s really American to avoid paying taxes, legally”
by David Atkins
David Firestone at the New York Times:
Republicans aren’t just in favor of lowering taxes; now they’re applauding wildly complex efforts by the wealthiest Americans to avoid paying billions in taxes by shipping capital to other countries.
“It’s really American to avoid paying taxes, legally,” said Senator Lindsey Graham, Republican of South Carolina, on Tuesday. [Emphasis added] He was defending Mitt Romney, who, as this morning’s editorial in The Times notes, appears to have the most elaborate history of tax avoidance – offshore tax havens, disputed sheltering mechanisms, complex trusts – of any major presidential candidate in history.
Invest in the Cayman Islands, Mr. Graham seems to be saying. It’s the patriotic thing to do.
That peculiar vision of the American way doesn’t go back very far. Mr. Romney’s financial practices aren’t unusual just because he is one of the wealthiest candidates ever to run; it’s because previous well-to-do candidates would have been embarrassed to admit they had gone so far to enrich themselves at the public treasury’s expense.
As Steve Rattner, the financier who has helped manage Mayor Bloomberg’s money, put it on ABC’s This Week last Sunday, “I actually was with a very prominent private equity guy last night who said he’d never heard of some of the things Mitt Romney has done in terms of putting money offshore, in terms of having a $100 million I.R.A., basically getting an interest-free loan from Uncle Sam on the taxes, on all that money, until he brings it home…”
The $5 trillion in assets held by offshore tax havens costs the federal government $100 billion a year, according to the I.R.S. But when tax-writing committees try to end such practices, they are often shut down by powerful financial lobbyists.
If Mr. Romney were to be elected, it would be his Treasury Department that would be hurt by such tax-avoidance practices, and his I.R.S. that would have to crack down on them. Based on even the little we know about his financial practices, it’s hard to see how he could look his I.R.S. commissioner in the eye.
Digby brought up earlier the fact that it wasn’t so long ago that doing everything in one’s power to avoid paying for civilization and one’s country was deemed unpatriotic. Krugman reinforces the point:
The first thing you need to know is that America wasn’t always like this. When John F. Kennedy was elected president, the top 0.01 percent was only about a quarter as rich compared with the typical family as it is now — and members of that class paid much higher taxes than they do today. Yet somehow we managed to have a dynamic, innovative economy that was the envy of the world. The superrich may imagine that their wealth makes the world go round, but history says otherwise.
To this historical observation we should add another note: quite a few of today’s superrich, Mr. Romney included, make or made their money in the financial sector, buying and selling assets rather than building businesses in the old-fashioned sense. Indeed, the soaring share of the wealthy in national income went hand in hand with the explosive growth of Wall Street.
Not long ago, we were told that all this wheeling and dealing was good for everyone, that it was making the economy both more efficient and more stable. Instead, it turned out that modern finance was laying the foundation for a severe economic crisis whose fallout continues to afflict millions of Americans, and that taxpayers had to bail out many of those supposedly brilliant bankers to prevent an even worse crisis. So at least some members of the top 0.01 percent are best viewed as job destroyers rather than job creators.
Did I mention that those bailed-out bankers are now overwhelmingly backing Mr. Romney, who promises to reverse the mild financial reforms introduced after the crisis?
To be sure, many and probably most of the rich do, in fact, contribute positively to the economy. However, they also receive large monetary rewards. Yet somehow $20 million-plus in annual income isn’t enough. They want to be revered, too, and given special treatment in the form of low taxes. And that is more than they deserve. After all, the “common person” also makes a positive contribution to the economy. Why single out the rich for extra praise and perks?
What about the argument that we must keep taxes on the rich low lest we remove their incentive to create wealth? The answer is that we have a lot of historical evidence, going all the way back to the 1920s, on the effects of tax increases on the rich, and none of it supports the view that the kinds of tax-rate changes for the rich currently on the table — President Obama’s proposal for a modest rise, Mr. Romney’s call for further cuts — would have any major effect on incentives. Remember when all the usual suspects claimed that the economy would crash when Bill Clinton raised taxes in 1993?
Republicans have defined blind jingoism as patriotism for so long that they’ve forgotten what patriotism actually means. Someone should remind Lindsey Graham and Mitt Romney that this is what patriotism used to look like, particularly during wartime:
That’s still the true face of wartime patriotism. Back in the 1940s, a super-rich vulture capitalist who hid all his money from Uncle Sam in offshore island accounts without actually producing anything of value wouldn’t be considered a candidate for President. He’d be a candidate for a punch in the nose from a World World II vet and his/her family.
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