The U.S. tax code stands at well over 100,000 pages. All but the hardiest of souls hire professionals to do their taxes for them. Cries for simplification grow every year.
How does Congress respond? By introducing legislation to “amend the Internal Revenue Code of 1986 to classify automatic fire sprinkler systems as 5-year property for purposes of depreciation.”
“House health care bill dangerously expands IRS power,” say a tax law professor and GOP leaders. The Washington Examiner says that “16,500 more IRS agents” will be “needed to enforce Obamacare.” That’s “the biggest expansion of the IRS since World War II,” needed to “to collect, examine and audit new tax information mandated on families and small businesses.”
Governors of both political parties assail the health care bill as a job-killer that will drive up state deficits, increase taxes, and harm the economy. The governors of New York and California warned that “their states will be crushed by billions in new costs.”
The most recent version of the health care bill contains additional tax increases and Medicare cuts. It dramatically increases taxes on investors by adding a new 3.8 percent tax on investment income (much higher than the 2.9 percent previously proposed by Obama), but few newspapers have reported that.
The Washington Post falsely claims that the CBO says the health care bill will save $1.2 trillion over its second decade, but the CBO says the figure is not from it (it’s from congressional Democrats). Amazingly, the CBO, under orders from Democratic leaders, has understated the bill’s cost for the first decade by including the present fiscal year — in which ObamaCare is not yet law and thus has no costs — while excluding its last year from cost calculations. The result was to reduce the projected price tag for the bill from $1.2 trillion to $940 billion.
While the CBO has scored the health care bill as not increasing the federal deficit, thanks to the many tax increases in the bill, it has done so only by accepting many accounting gimmicks that even pro-Obama journalists have admitted are deceptive and conceal the bill’s enormous cost and the fact that it will massively increase the deficit. The New York Times‘ David Brooks, once a staunch Obama supporter, now says the bill’s drafters were “corrupted by power” and calls arguments for the bill “unbelievable” and “insane.”
Earlier, health care cost expert James C. Capretta explained how “Obamacare Is A Budgetary Disaster” that will cost at least $1.4 trillion more than promised.
The Congressional Budget Office, which refused to question Obama’s gimmicks to lowball the cost of his health care plan, nevertheless admits that “President Obama’s policies would add more than $9.7 trillion to the national debt over the next decade.”
There are $3,000,000,000,000 in tax increases in Obama’s budget. But he’s spending money at such a furious pace that the deficit will skyrocket anyway: “The president’s budget would borrow 42 cents for each dollar spent in 2010,” and “double the national debt over the next decade.” Obama recently ran up the largest budget deficit in history, by a huge margin.
The revised health-care bill would add a new 3.8 percent tax on investment income for individuals who make $200,000 or more, and households making $250,000 or more. More importantly, it would also impose many middle-class tax increases, such as taxes on uninsured individuals, on cosmetic surgery, on medical devices, and on certain health care plans.
ObamaCare would reduce medical innovation, raise taxes, drive up insurance premiums, and break campaign promises. It would cut the quality of care, while imposing restrictions that failed when tried at the state level. It ignores advice from experts about how to cut costs.
A retired federal judge says that the tactic congressional leaders are using to rush Obamacare into law violates Supreme Court rulings and the Constitution.
Over at Investor’s Business Daily, Wayne Crews and I make the case against a Value Added Tax. Policy makers have been flirting with the idea as a way to reduce the $1,400,000,000,000 budget deficit.
We argue that a VAT is:
-Complex; it would require roughly doubling the size of the IRS.
-Untransparent; most VATs don’t show up on receipts the way sales taxes do. Taxpayers are clueless as to how much tax they actually pay.
-Vulnerable to special-interest tinkering; politically incorrect goods are routinely penalized with higher rates. Politically favored goods are granted exemptions.
-Prone to increases; 20 out of 29 OECD countries with a VAT have increased their rates since implementing a VAT.
A point we didn’t make is that VATs affect industrial organization. VATs are applied at each stage of the production process. That gives companies an incentive to reduce the number of taxable steps. That means more vertical integration than would otherwise occur. This can decrease the efficiency of the manufacturing process. Which means higher prices and fewer goods. Plus the tax.
Yesterday my colleague at CEI, John Berlau, released a statement about the recently announced deal between Swiss bank UBS and the IRS. It is being reported that the bank may end up turning over at least a portion of the over 50,000 names just to get the U.S. off its back. As it seems, any agreement reached in this case will be the result of UBS being bullied by the IRS to divulge its customers names simply because it says so. The potential slippery slope is evident. In this scenario, the Federal government can persuade foreign companies to ignore the laws of their home nations basically by force. Berlau makes the point that I have been making in all of my blog posts on this issue, that advocates of civil liberties:
“should be alarmed by the U.S. government’s sweeping disregard of privacy interests in its demands to the Swiss”
These actions by Federal authorities are setting a bad precedent for the privacy of American citizens. When the government can demand to know every detail of your financial life, what is there to stop it from exerting control over it? In addition, as I have said in past posts (and here), the disregard for the sovereignty of fellow nations exhibited by these demands is also concerning. I agree with Berlau in his assessment that being in a similar situation, the U.S. might not be so willing to allow American companies to ignore its laws in order to acquiesce to another nation’s demands.
If UBS stood firm by making an agreement that doesn’t violate Swiss law or the privacy rights of those U.S. citizens, maybe long-standing privacy protections will hold up for now. But it is doubtful this is the case. It is more likely that UBS has capitulated, at least to a degree, and the slope begins to slide into scary territory. Unfortunately, some will frame this in class warfare terms, and declare that we should have no sympathy for folks with secret Swiss bank accounts. Because its unfair, accordng to the feds, that they are cheating and getting out of paying taxes like the rest of us have to. Except for the fact that we don’t know if that is completely true, and maybe the question we should be asking is whether the taxes we pay are fair at all.
Lawyers for the U.S. government and the Swiss bank UBS AG have announced that they have reached a deal on releasing to the US the names of UBS account holders. No new details of the agreement have been released, other than what was previously speculated on a week ago.
I will be watching for and examining details that are released. Whatever deal is reached, the Obama administration’s conduct in the case, disregarding both privacy interests and the sovereignty of other nations, has been deplorable. It has set a precedent that could endanger U.S. competitiveness as well as civil liberties throughout the world.
As Fred Smith and I had explained in a Washington Times op-ed, after UBS, with the Swiss government’s full cooperation, turned over the names of 250 customers suspected of violating U.S. tax laws, the U.S. government turned around and asked for a whopping 52,000 names. The Swiss government objected to such a fishing expedition as violating the nation’s privacy laws.
Switzerland rightly argued that such a large volume of names could not be justified by probable cause or “reasonable suspicion,” a condition of the tax treaty Switzerland had negotiated with the U.S. In addition, such a fishing expedition goes against the spirit of the Fourth Amendment of the U.S Constitution, which protects Americans from “unreasonable searches.” A forensic analysis commissioned by UBS from Alix Partners (scroll down the right side of this page to open the PDF) found that many international students, diplomats, and Americans who work in Switzerland – and banked in Switzerland by necessity — could have been swept up in this dragnet.
It’s far from clear if the shoe were on the other foot, and a foreign country were to demand the names of 52,000 customers of an American bank, the U.S. would have complied. The United States Model Income Tax Convention of 2006, used as a template by the U.S. to negotiate tax treaties, states that no country should be required to honor “a request in which a Contracting State simply asked for information regarding all bank accounts maintained by residents of that Contracting State in the other Contracting State, or even all accounts maintained by its residents with respect to a particular bank.”
Previous reports had indicated that UBS would surrender 5,000 names, a large amount but still less than a tenth of what the U.S. had originally called for. It will be important to scrutinize if there is indeed “reasonable suspicion” for however large the volume of names that are released. American civil liberties advocates on whatever side of the political fence should be alarmed by the U.S. government’s sweeping disregard of privacy interests in its demands to the Swiss, and should encourage their home country to never treat privacy and another country’s sovereignty so cavalierly again.
Today, Wall Street Journal reports that a Miami court has set meeting Friday between the IRS and UBS to look at where they are in settlement negotiations over the case of the IRS demanding that the Swiss bank turn over the names of more then 50,000 U.S. citizens alleged to be tax evaders.
As I have said in past posts on this issue (in which I have been admittedly hard on UBS-but with a purpose), and as UBS seems to now be reiterating, turning over those names would be in contradiction of Switzerland’s banking privacy laws and its legal view of tax evasion. Banks in Switzerland are not required to ignore their country’s banking secrecy laws simply because another nation requests them to do so. This is a sticking point for the IRS, who is using the DoJ to try and get after UBS. Another factor in the fight to get UBS to crack is the growing pressure from other nations and international NGOs like the Organization for Economic Cooperation and Development (OECD) with its agenda, and Financial Action Task Force (FATF) with its “retaliatory measures,” mentioned in earlier posts. These groups are using the straw men of money laundering and terrorism to force Swiss capitulation. It has reached a point of absurdity. Aside from the U.S. government’s attempts at intimidation, the German government even suggested placing Switzerland on the international blacklist. I guess “Everybody Hates Switzerland” now, until they can get their hands on that money.
Of course, the average citzen is not concerned about the rights of those who can afford to have swiss bank accounts. Although they should be. This not only raises concerns about financial privacy, it also raises concerns about sovereignty, civil rights, and a host of other things. A person’s financial records should be considered as sacred as their medical records. However, we may soon be entering an era where both are collected and archived by the government. Only a person who believes Stalin was an OK guy would think that was a good idea.
I revoke my previous apology to the Swiss, and reiterate my previous disapproval. As evidenced by the latest outcome in the U.S. tax case involving UBS, we have moved beyond troubling and into something much worse.
...the world’s largest wealth manager in terms of assets, agreed to pay a $780 million fine and disclose information about some of its clients to settle a landmark U.S. tax case.
As I said in my older post: “In direct contradiction to their own legal view of tax evasion. Even though some may argue that this is moot because the U.S. does not consider a financial transaction as something beholden to privacy rights, the Swiss do–and besides, the U.S. view is wrong. A person’s financial records should be considered as sacred as their medical records.”
And with an eye toward history, let us not forget:
One issue of the time that reinforced the passage of this law [Swiss Banking Secrecy Act] came during the era of Hitler when a German law stated that any German with foreign capital was to be punished by death. Swiss banks were watched closely by the German Gestapo. It was after Germans began being put to death for holding Swiss accounts that the Swiss government was even more convinced of the need for bank secrecy.
Reading the comments on left-leaning blogs, you hear cheers and a tinge of jealousy about the whole thing. No matter if UBS did or did not help people avoid U.S. taxes, I cannot read this without envisioning a slippery slope argument. If the current climate continues, it won’t be too far-fetched to imagine laws like that of WWII Germany criminalizing and imprisoning people for choosing where to put their own money. And I won’t even mention the new Treasury Secretary. Oops
Treasury Secretary Nominee Timothy Geithner’s failure to pay four years’ worth of self-employment taxes for Social Security and Medicare is absolutely astonishing. And as more details are released, Geithner’s actions seem even more disturbing.
According to the New York Times, Geithner still didn’t correct the same type of error for some years, even after the Internal Reveue Services flagged him for the failure to pay the taxes in other years. To have him leading the department that manages the IRS would be a slap in the face to the millions of self-employed Americans who fulfill their responsiblities to correctly asses their tax burdens.
These disturbing details paint a picture of a nominee who hasn’t been fully vetted. As I have written in the Washington Examiner and the American Spectator, unlike previous Treasury Secretary nominees, Geithner had not distinguished himself as a corporate leader or as an academic economist. His only significant policy accomplishment has been his role in the Bush-Paulson bailouts.
And disturbing details are emerging about his misjudgments in this policy area as well. According to the Bloomberg wire service, Geithner pushed for Citigroup to take over the operations of Wachovia Corp. at taxpayer expense, even after Wells Fargo’s offer to purchase the firm without taxpayer backing. Had Geithner prevailed, who knows how much more trouble the financial system would be in given Citigroup’s current financial troubles.
President-Elect Barack Obama has nominated many well-qualified candidates to serve in his administration, and, despite some policy disagreements, CEI scholars have praised his choices for posts in the Securities and Exchange Commission, the Federal Communications Commission, the Department of Housing and Urban Development, and the Department of Agriculture. But in this choice for the Treasury Department, the Obama transition team members clearly dropped the ball. In an effort to please some on Wall Street and keep the bailouts going, they glossed over their nominee’s credentials and judgment.
Geithner’s errors and/or misjudgments make him unfit to serve as Secretary of the Treasury. His nomination should be withdrawn, and, if this does not happen, should be voted down by the Senate.
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