Over a week ago I predicted in an editorial that there would be continued attacks on financial privacy and tax competition, noting that attacks on Romney’s financial holdings were “part of this ongoing effort to undermine tax competition and make it easier for politicians to pursue onerous tax-and-spend policies.” I even singled out the Tax Justice Network as working on the front lines to end privacy and raise taxes.
The next wave of attacks has come sooner than even I could have predicted.
The Wall Street Journal is reporting on new claims by TJN of trillions and trillions in “unreported offshore wealth,” part of their continued campaign to demonize low-tax jurisdictions and those who legally bank there. Near as I can tell, the report actually makes little effort to confirm the status of the money in question, but rather assumes that anything moved out of high-tax nations is “illicit” and “unreported,” even when it’s the after tax earnings of investors. This is why Dan Mitchell was cited in the piece as comparing the figures to some estimates of climate change. CF&P’s Andrew Quinlan was also quoted as observing that “Tax Justice Network and other opponents of tax competition assume that all earnings belong first to governments, which is why they seek to prevent even legal wealth management techniques if they result in less money for spend-happy politicians.”
Contrary to TJN claims, investing overseas is not “illicit,” and prohibiting cross-border activity would mean a reduction in the trillions of foreign investment currently contributing, despite the best efforts of policymakers, to the U.S. economy, much of it coming from the very jurisdictions criticized by TJN. Multi-national businesses that earn money overseas likewise often choose to redomicile so as to escape the double taxation of America’s worldwide taxation system, which places US based companies at a competitive disadvantage when operating overseas.
As nations following the high-tax, welfare state model preferred by TJN continue to disintegrate before our eyes, we can expect even more of these desperate attempts to combat globalization and trap capital within political borders. The proponents of big government will never be allowed by their ideology to accept that excessive spending is to blame for the global debt crisis. If there’s not enough tax money to pay for their giveaways, why then they just conclude that somebody must be illegally hiding it all somewhere. But they have only themselves to blame. If they want to attract investment, they need to enact reforms to free their economies from the twin burdens of excessive tax rates and overbearing governments.
