Center for Freedom and Prosperity
Date: September 26, 2012
To: Supporters of tax competition, fiscal sovereignty, and financial privacy
From: Andrew Quinlan and Brian Garst
Re: The Radical Agenda of Anti-Tax Competition Forces
Opponents of tax competition have long argued that the need to combat tax evasion justified aggressive and counter-productive policies designed to eviscerate tax competition, financial privacy, and fiscal sovereignty. Coming off of recent legislative successes, such as passage of the Foreign Account Tax Compliance Act (FATCA), and taking advantage of big spending politicians on the hunt for more revenue, these groups are growing in strength and have been emboldened to push an even more radical agenda.
As part of an effort to dramatically expand the size and scope of governments at both national and international levels, organizations such as the Tax Justice Network (TJN), Citizens for Tax Justice, FACT Coalition, New Rules for Global Finance, Business for Shared Prosperity, Wealth for the Common Good, American Sustainable Business Council, The Main Street Alliance, and Business and Investors Against Tax Haven Abuse, among others, are waging an aggressive campaign to erode financial privacy rights, hinder tax competition, and fill government coffers with ever more resources extracted from the private sector in order to fund a statist agenda.
The Plan to Increase Taxes
Statists have always advocated for high taxes as a matter of “fairness,” but what we’re seeing today is a constant moving of the goalposts, redefining the idea of fairness to encompass ever higher taxes and ever more government spending. This is a convenient rhetorical tool, as once a public is sold the emotional argument of growing government for ostensible reasons of fairness, they don’t need to be re-convinced after each successive expansion of the state. There’s always more “unfairness” in the world to solve, and thus always more need for government.
A typical example of this approach can be seen in a recently released report by TJN, titled “The Price of Offshore Revisited,” which portrays all cross-border financial activity as illegitimate and untaxed.1 If you bank offshore, it must be to avoid taxes or to hide income, according to the reports authors. Using this self-serving assumption of the illegitimacy and untaxed nature of every dollar invested overseas in so-called tax havens – referred to as “pirate banking” – the report breathlessly estimates at least $21 trillion in “missing” dollars that needs to be “put to use.”
You read that correctly. They believe that money belongs first to government and that money in the productive sector of the economy is not being “put to use.” Rather, some government bureaucrat could better allocate resources than private individuals, entrepreneurs, investors and businesses.
As shocking as this argument is, they make little effort to hide it. At a recent event titled, “United States: A Tax Haven,” and sponsored by New Rules for Global Finance, the Heinrich Böll Foundation and the FACT Coalition, an entire panel of anti-tax competition forces openly discussed the supposedly dire need to get more money into the hands of politicians and bureaucrats, and made it clear that they see eliminating tax competition and financial privacy as a key way to do it.2
To illustrate the single-minded tenacity with which they pursue more taxes, and how little the tax hikers care about the economic destruction left in their wake, Jack Blum, Chairman of Tax Justice Network, admitted that FATCA – which threatens foreign financial institutions with stiff penalties if they don’t comply with burdensome new reporting rules and otherwise act as deputy US tax collectors – is a “draconian law,” but said that he supports it anyway as a “very positive development.” This is a law that is estimated to raise not even one billion per year in additional revenue for the US, but which will impose costs many times that amount, both on the affected international institutions, and also on the American economy. A “very positive development,” indeed.
Attacking Tax Competition
The event began with journalist Leslie Wayne discussing Delaware’s competitive practices, a topic she covered in a recent article for the New York Times titled, “How Delaware Thrives as a Corporate Tax Haven.”3 Among Delaware’s list of apparently questionable practices is being “so eager to attract businesses that the office of its secretary of state stays open until midnight Monday through Thursday,” a factoid which she repeated at last month’s event, along with the shocking realization that “Delaware officials go around the globe promoting Delaware as a place to do business.” Why, it’s almost like they want people to prosper!
Delaware’s real crime, as Ms. Wayne makes clear in her article, is that it attracts business, using a so-called “loophole,” from other states that “are desperate for tax dollars.” But tax competition is no loophole, and the fact that it upsets profligate politicians is a feature, and not a bug.
The attacks on tax competition came in many different forms. For instance, Rebecca Wilkins of Citizens for Tax Justice favorably cited the definition of “tax haven” used by Nick Shaxson, a radical anti-tax competition activist, as being “a jurisdiction that tries to attract business by creating a stable financial and economic system – an environment where it makes it easy to avoid the rules and regulations that would apply to them in their home jurisdiction.”4 You read that correctly, they really think it’s bad to offer a stable financial and economic system to attract business! In this view, if one nation has bad regulatory policies, no other nation can offer a better alternative as that would be providing a means for “avoiding” the bad regulations. It thus comes as little surprise that Wilkins also referred to Delaware as a “parasite” taking revenue “out of the system,” as if the fruits of private labor properly belong in the hands of tax collectors.
But it got even worse. Wilkins later attacked tax competition between governments as “a terrible thing,” and repeated the nonsensical accusation that it promotes a “race to the bottom.” In reality, tax competition promotes efficiency and restraint, pressuring governments to focus on only those core services necessary for the functioning of a free and prosperous society, instead of draining resources out of the productive sector to fund every vote-buying scheme that power-hungry politicians are able to imagine.
How They’ll Spend Your Money
Jo Marie Griesgraber, Executive Director of New Rules for Global Finance Coalition and moderator of the Tax Haven event, said the mission of New Rules is to “promote global justice through the regulation of international financial institutions.” Simply put, they want to extract as much money from the private sector as possible so that politicians and bureaucrats can then spend it on a wish list of statist programs. In fact, underlying the entire discussion was an abhorrent belief that resources are best put to use by governments, as opposed to the private sector, and that most if not all of the world’s problem could be solved if only taxes were higher and governments had more money to spend.
Panelist Liane Schalatek of the Heinrich Böll Foundation, an organization affiliated with the German Green Party, said that there is “a lot of money needed for the realization of the Millennial Development Goals,” a United Nations list of vague policy objectives typically used to justify a catalog of radical left-wing policies, and a need to fund “global public goods,” such as “combating climate change.” Jack Blum, also a former John Kerry staffer who famously fabricated the claim that tax havens result in $100 billion of lost revenue to the Treasury each year5 – a claim still repeated today – then bemoaned that there was “no revenue for anything.” Just how many more trillions will it take to satisfy their greed?
The wish list of spending programs offered by the anti-tax competition organizations offers just a hint at an answer to that question. The American Sustainable Business Council wants to “ensure that taxpayer dollars are spent on American-made renewable energy systems, including solar, wind, geothermal, and biofuels.” Wealth for the Common Good wants to “build a more just economy,” including a “minimum safety net that is adequate enough to allow all members of our society to live in dignity.” Jubilee USA, a member of the FACT Coalition, wants to cancel sovereign debt of developing nations. Calls to dump an endless stream of funds into the Special Climate Change Fund and the Least Developed Countries Fund, global redistribution funds created under the auspices of fighting climate change, are also frequently heard. And after all these things are done, it’s certain a new set of demands will quickly arise.
The Tax Justice Network report declares that governments are “starved of resources,” but optimistically asserts it has successfully “located a huge pile … of untapped financial wealth.” But being relatively unmolested by government is not the same thing as being untapped. The so-called tax havens often operate way-stations temporarily collecting savings from around the world until they are invested in productive projects – real economic projects that would be expected to take a back seat to the political priorities of elite global bureaucrats and the special interests pushing anti-tax competition organizations.
In order to increase the amount of other people’s money that politicians are able to spend on redistributive policies, these organizations want to dismantle all rights to financial privacy, eliminate tax competition between governments, and deny the ability to of taxpayers and institutions to escape bad policies. It’s hard to describe these arguments as anything other than madness. Unfortunately, the class-warfare based, tax-and-spend philosophy upon which they base their agenda is shared by the nation’s highest elected officials and appointed bureaucrats, and is cheered on in both the news media and popular culture.
Despite the increasing openness of their true agenda, the public is still often sold a different view. Calls for higher taxes and reduced financial freedoms are typically made with references to “fairness.” But as their own rhetoric demonstrates, they view “fairness” as an ever adjustable threshold to be used to fund an endless stream of government spending projects. The true purpose of anti-tax competition policies, in other words, is to finance a radical agenda too unpopular to be implemented without the force of government and political subterfuge.
1“The Price of Offshore Revisited: New Estimates for Missing Global Private Wealth, Income, Inequality and Lost Taxes,” available at http://www.taxjustice.net/cms/upload/pdf/Price_of_Offshore_Revisited_120722.pdf
2Full video of the event is available at http://www.new-rules.org/events/3-nr-event/407-us-a-tax-haven
3“How Delaware Thrives as a Corporate Tax Haven,” available at http://www.nytimes.com/2012/07/01/business/how-delaware-thrives-as-a-corporate-tax-haven.html
4Wilkins cited Nick Shaxson’s book, “Treasure Islands: Uncovering the Damage of Offshore Banking and Tax Havens”
5See Congressional Research Service Memorandum, http://www.freedomandprosperity.org/files/blum-crs-ltr.pdf