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Economy

Paradise Papers: How offshore tax havens are worse than you think

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Wilbur Ross

There’s a dirty little secret many ultra-rich people would never want revealed: most of them pay lower percentages in actual taxes relative to their overall wealth than average middle class Americans. No, this is not a call for socialism nor is it a rant about how unfair the system is. Frankly, I don’t blame people for wanting to keep more of the money they earn. However, I do take offense at the lack of transparency they embrace as their efforts to save money also shield their dealings and motivations.

When Joe Blow Billionaire uses a tax haven, it’s smart money. That’s not to say it’s right that they can keep large percentages of their money hidden from the government in ways that middle class Americans cannot, but it’s not their fault the system is broken. We shouldn’t expect them to willingly pay more when they’re given legal avenues to avoid it. Those who complain from a socialistic perspective about the use of tax havens are the same people who would use those havens if they had the money. Ultra-liberal semi-socialist Justin Trudeau, Canada’s Prime Minister, would probably side with anyone who complained about how unfair it was unless they were aware that he took advantage of it himself.

The real problem isn’t that money can be protected for the rich. Where we get into real trouble is when politicians do it. Again, they have the right to protect their money, but they should not be allowed to shield their motivations. When a public official has secret investments, it’s impossible to know if their decisions aren’t being influenced by personal gain or loss.

Public disclosure of investments allows us to know if Senator X has ulterior motives for their actions. Let’s say Senator X has investments in an American sugar company. Americans should know this in case he’s voting on a bill to save sugar subsidies. Conflict of interests are easier to see when all of their money is in public view. When they hide their money offshore, their investments (and therefore their interests) are kept from the people they’re supposed to represent.

An example of this may be coming to light with the recent Paradise Papers release. U.S. Department of Commerce Secretary Wilbur Ross was listed in the Paradise Papers as having a stake in a company that does business with a gas producer partly-owned by Vladimir Putin’s son-in-law. As you can see, it’s already a distant but not completely indirect connection, though one can easily argue that it’s not a close enough connection to get Robert Mueller’s interests piqued. Nevertheless, this is an investment that was previously unknown because it was done through secretive offshore accounts.

We must have a reasonable expectation that the people we elect as well as the people who are put into bureaucratic offices are untainted. Ross has direct influence over trade and manufacturing policy. He should be the last person in DC to be heavily invested in foreign interests hidden from the people. Again, let’s not jump to conclusions or call for President Trump to get rid of Ross, but the fact that questions now have to be asked is a black eye for the Trump administration.

Tax havens are unfair, but that’s not as big of a problem as most believe. The real issue is transparency. Anyone in public office who utilizes offshore accounts or investments to hide their money should be put under the microscope. If we don’t know their private motivations, we can’t trust their public actions.

Further Reading

Trump commerce secretary’s business links with Putin family laid out in leaked files

https://www.theguardian.com/news/2017/nov/05/trump-commerce-secretary-wilbur-ross-business-links-putin-family-paradise-papersRoss, a billionaire and close friend of Trump, retained holdings in Navigator after taking office this year. The relationship means he stands to benefit from the operations of a Russian company run by Putin’s family and close allies, some of whom are under US sanctions.

Corporate records show Navigator ramped up its relationship with Sibur from 2014, as the US and EU imposed sanctions on Russians. The measures followed Putin’s aggression in eastern Ukraine and annexation of Crimea. Navigator has collected $68m in revenue from its Sibur partnership since 2014.

Former liberal who recently realized I've been a #Federalist the whole time. GOP fooled me into hating what I thought was conservatism. Now I see the light.

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1 Comment

  1. Douglas Olson

    November 6, 2017 at 11:22 am

    I will even go one further. If a politician is to have any say on tax policy, particularly income taxes, they need to be transparent on how much an on what income they pay taxes on. For example, if a politician wants to increase the payroll tax but all of their income is from dividends, then the warning bells should be ringing. Right Trump?

    Maybe it is time we stop taxing income at different rates. If we do, and those living off dividend income have to pay the same rate as those paying in payroll taxes, then I would bet that all those rich folks will start complaining about taxes. Right Buffet?

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Economy

House passes tax cuts

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House passes tax cuts

By a 227 to 205 vote, the House passed the GOP’s tax cut package. That was the easy part. Now they have to try to pass a tax cut in the Senate.

If they can pull it off, it would be the first major piece of legislation Congress has been able to put on President Trump’s desk since he took office. After failures with Obamacare repeal, passing these tax cuts is an absolute must. It doesn’t matter whether it was rushed, sloppy, or directly contrary to many traditional Republican policies. They need a bill signed before heading into the 2018 midterm elections.

Watch Speaker of the House Paul Ryan make his plea before Congress:

Further Reading

BREAKING: Voting Results Are In From Tax Reform Bill Vote

http://www.dailywire.com/news/23678/breaking-voting-results-are-tax-reform-bill-vote-ryan-saavedraThe House of Representatives passed a massive tax reform bill on Thursday aimed at cutting taxes for businesses and individuals, which is a major step in the Trump administration’s effort to overhaul the tax system.

The bill, which passed with “227 votes in favor and 205 against,” had to survive opposition from several House Republicans as 13 of its members ultimately voted against the plan.

House Passes Tax Bill

http://www.nationalreview.com/corner/453803/house-passes-tax-billMinutes ago, the House passed its version of tax reform, which expands the standard deduction, shrinks the amount of individual tax brackets from seven to four, and cuts the corporate tax rate from 35 percent to 20 percent. The vote was 227–205, with 13 Republicans voting against the bill and no Democrats voting for it.

All but one of the Republicans who voted against the bill represent California, New York, or New Jersey, states with high income-tax rates whose residents could be affected by the elimination of the state-and-local-tax deduction. The onus now falls on the Senate to pass its version of tax reform, and on Republicans to negotiate the differences between the two bills.

House easily passes $1.4 trillion tax cut

https://www.washingtontimes.com/news/2017/nov/16/house-easily-passes-14-trillion-tax-cut/No Democrats backed the bill.

“This is the most irresponsible bill I will have been confronted with in 37 years,” said Rep. Steny H. Hoyer, a Maryland Democrat who said the massive deficits — as much as $2 trillion, when interest costs and other extensions are included — are a betrayed of what Republicans have long argued for

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Economy

Ron Johnson opposes tax plan, says it favors corporations over other businesses

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Ron Johnson opposes tax plan says it favors corporations over other businesses

Senator Ron Johnson has a point. He’s the first Republican to officially declare his opposition to the Senate’s tax plan, citing evidence the plan greatly favors corporations while continuing with oppressive taxes on sole proprietorships, limited liability companies, S corporations, and partnerships whose owners pay taxes based on individual income tax rates for the owners rather than the corporate rates.

In an interview with WSJ, Senator Johnson was clear with his opposition to the plan:

Republican Sen. Ron Johnson Opposes GOP Senate Tax Package

https://www.wsj.com/articles/republican-sen-ron-johnson-opposes-gop-senate-tax-package-1510777290“If they can pass it without me, let them,” Mr. Johnson said in an interview Wednesday, adding that the plan unfairly benefits corporations more than other types of businesses. “I’m not going to vote for this tax package.”

In addition to his concern about the details of the Republican proposal, he also complained about a process that he said has been closed to his input and also misleads the public about the nature of the tax overhaul.

“I don’t like that process,” Mr. Johnson said. “I find it pretty offensive, personally.”

The Senator from Wisconsin is correct in his assessment. This makes one wonder why GOP leadership didn’t take this into account before they started promoting it as a pro-growth plan. The majority of businesses in America will not qualify as true corporations and therefore will not receive the big tax breaks promised by its champions. In fact, many businesses will end up paying more under this plan.

Could it be that the GOP simply hoped nobody would call them out on this little detail? Yes. Though the number of businesses that qualify is lower than the number that don’t, the corporations that do qualify employ more total Americans. This means that when viewed through a lens of overall economic growth, it’s still a beneficial plan for most Americans in that it will increase the number of jobs available and make room for increased wages. Nevertheless, the millions of Americans who will be hurt by this are not an insignificant minority.

Can it be fixed? Probably not. To do so would mean reworking a huge chunk of the overall bill in order to keep it from being so massive of an overall revenue cut that the government would run into shortfalls. Of course, they could always cut expenses rather than passing a massive budget, but that doesn’t seem to be on the GOP’s agenda anymore. Perhaps it never was.

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Economy

Progressives’ new ‘state bank’ as the rocky road to serfdom

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Why does a bank robber rob banks?

“Because that’s where the money is.”

Or so goes the legendary response by the infamous bank robber Willie Sutton (who later denied ever saying it).

So why is the new progressive Governor-Elect of New Jersey (a former Obama Administration Ambassador to Germany and Goldman Sachs executive named Phil Murphy) proposing a “state bank”?

Why, maybe that’s because taxpayers are where the money is?

Can Gov.-Elect Murphy Make a Go of His Public Bank? – NJ Spotlight

http://www.njspotlight.com/stories/17/11/12/can-gov-elect-murphy-make-a-go-of-his-public-bank/Gov.-elect Phil Murphy often told a story on the campaign trail about how, as a relative newcomer to statewide politics, few people in New Jersey had even heard of him before he jumped into this year’s governor’s race. After his victory last week, the same could be said about one of Murphy’s core fiscal-policy proposals — a plan to launch a state-run public bank in New Jersey. The type of financial institution envisioned by Murphy would take state-government funds now deposited in accounts with large commercial banks, including those based overseas, and use them to back low-interest loans that would serve the public’s interest in New Jersey, including student debt, infrastructure investments, and small-business lending.

New Jersey already has the third-highest state and local taxes in the nation (behind only its neighbor New York and nearby Connecticut), thanks to a double whammy in an income tax and high property taxes generally credited with supporting the largesse of generous salaries and benefits for legions of public-sector employees.

One problem is where that state bank will get its money. The progressive Governor-Elect Murphy declares, “That’s our money!” Yet there is no thought to returning it to overtaxed taxpayers — not when there’s votes to buy and a money pot whose bottom is not yet visible. Because when Murphy and his progressive do-gooder allies use the first-person plural pronoun, they are referring to the government and not the people.

As politicians in the bluest of the blue states learn that promising endless “free” stuff, particularly when it’s paid for by political opponents and disfavored constituencies, is a recipe for getting elected, perhaps attacking liberals and progressives for wanting to raise taxes will no longer be a winning campaign argument. Not when many voters are net recipients of government monies, meaning, they simply don’t pay taxes. However, a “state bank” could cause numerous undesirable effects beyond taxes to infinity, beyond encouraging inflation.

Consider how banks work, and then consider the very premise of Murphy’s “state bank” is that it would step in where greedy conventional for-profit banks supposedly fail “to serve the community.” The suspicion here is that the state bank will be giving “low-interest” loans to people or businesses which otherwise are not getting loans on the terms they want, or at all.

When you seize the money earned and saved by the homeowner with an 800 FICO score, to underwrite a loan for his deadbeat neighbor in foreclosure who’s got a 520 FICO score, you aren’t being generous or compassionate. You are creating a moral hazard, and an immoral condition.

The second problem arises from a fundamental misunderstanding of — no, it is a fundamental disregard for — how a conventional bank works. A bank makes loans, because it makes money off the interest. It must put the capital to use. However, there’s the risk of nonpayment, of borrower defaults. Banks “fail” when they suffer too many nonperforming loans. No one wants to talk about this, because it involves acknowledging that the collateral is bad, that the bank made a mistake, that it issued a mortgage worth more than the underlying collateral to a bad credit risk on even worse terms (like the infamous no-income-no-assets-no-problem mortgages).

The lesson of the last decade’s housing bubble and nonperforming mortgages (of which many still are on the books of the largest lenders) apparently is going to be ignored for as long as there is a large supply of “marks” available to shoulder the eventual burden. So we can expect that the New Jersey state bank — and its copycats in other states, of that you can be certain — will soon start making bad lending decisions to borrowers of either questionable credit risk or otherwise connected to various “social justice” initiatives.

Then, when the loans start to “go bad” and go into default, you can expect the state bank to start playing “winners and losers” when deciding whose collateral to go after. Your car dealership may be seized, while the marijuana farm may be allowed forbearance on its defaulted loan. And just think what mischief can be made by politically-connected local prosecutors who can use their “discretion” to choose whom to investigate and prosecute, all to serve a progressive political agenda whose singular goal is to transform the society.

Taxpayers across America should shudder at the thought of government-run banks. Because those banks would be deploying our capital, raised from taxes and from government debt, often sold to foreign bond buyers like the Russians and Chinese. But without the nasty profit motive — which in plain English also amounts to old-fashioned accountability to savings account depositors like you and me — to ensure loan officers only make loans most likely to be repaid, the state bank is likely to accomplish only three things.

A new set of winners: tomorrow’s sellers of assets at inflated prices due to the availability of new credit for car loans, home loans, college loans and small business loans, often with no regard for the terms or creditworthiness of the borrower (and perhaps little to no expectation of repayment).

A new set of losers: Since the premise of a state bank is, we are told, to serve the poor and often first-generation immigrants or members of traditionally-underserved “minority” communities, we can expect the debt and wrecked credit scores from defaulting loans to be shouldered by these same groups. Tomorrow’s college students may be in greater debt than the current generation’s. More people may end up renting, as bad credit is no guarantee of affordability against inflated and rising home prices.

The result? Another generation headed for practical indentured servitude. The difference? This time, the lender will be the government.

A second set of repeat losers: These will be the owners of anything which can be indirectly collateralized to cover those loans. We’re talking property owners and the middle-class income producers. Future tax streams can — and in all likelihood must — be “securitized” to cover delinquent loans.

Again, the party able to place liens on stressed property owners for unpaid taxes? The government.

The rich white guy ex-Goldman Sachs may be able to escape checking his privilege while playing Robin Hood. The reality is that he’s playing the Pied Piper, but only as long as he plays the tune called by his decidely unmerry band of progressive, envious knaves, rejects and scalawags who now threaten to turn New Jersey today — and your state tomorrow — into a land of serfs beholden to the do-gooder lords of the manor.

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