$100 Billion Tax Fraud: Why isn't this news?

This is not a candidate diary, it's something more important that that.

Regardless of who is elected in 2008, the continuing evasion of personal responsibility by wealthy Americans will mean that working Americans are forced to pick up the bill.  It's dine and and dash for the ruling class. To the money shot.

"Liechtenstein’s LGT Bank, which is owned by the Royal family, has apparently harbored numerous secret accounts which hid the taxable assets of thousands of citizens from around the world. It is my understanding that many U.S. citizens have also hidden assets at this bank, which is a real injustice to the millions of working families in this country who honestly pay their taxes every year.....

Offshore tax evasion produces an estimated $100 billion in unpaid taxes each year.

100 billion US dollars.

Let's put that into perspective.  There are roughly 154 million working Americans. That works out to $650 for for every single working American. For an American working at minimum wage ($5.85), that's 111 hours worth of work. Almost 3 weeks worth of hard labor, forced onto working Americans by the irresponsible behavior of wealthy individuals evading their obligations to this nation.

Sen. Levin said it's about damned time that they be called upon to pay their dues.  Ok, he didn't say damned, but the rest is an accurate paraphrase.  I couldn't agree more, and I'm so dissapointed that I have heard about this from either our newsmedia, or any of the Democratic presidential candidates.

Which is a god damn shame, because you see, one of them partnered up on this with Senator Levin in 2007.

This is the shit that matters, and it's not just that tax evasion shifts the burden of civilization onto people who work for a living. The existence of a shadow financial world means that criminals and terrorists alike can shift their money around the globe, free from the oversight of governments trying to protect their publics. The whole damn thing is criminal.

All missed the point that tax havens are inherently criminal and would go under without the proceeds of crime. As John Christensen, director of the Tax Justice Network, puts it, they are enemy states, pirate islands that have declared economic war on the rest of the world. It's not just that they happen to be used by individual criminals - drug dealers, kleptomaniac African dictators - they are criminal entities themselves that survive by sucking potential revenues out of wealthy and destitute countries alike. If rich citizens obeyed the law, or tax havens ended their secrecy, offshore banking wouldn't exist.

The Lichtenstein affair has generated something of a crisis in Germany, where the revelation that hundreds of prominent business leaders have been cheating on their taxes has shaken faith in capitalism.  In a seperate development, the past few months have seen the Left Party (Die Linke) break out of its stronghold into the East, and become Germany's 5th major party entering into 3 state parliaments.  Even Angela Merkel, nominally a conservative, has spoken out on the issue.

German Chancellor Angela Merkel on Friday once again reminded German economic leaders that they carry a huge responsibility. "Responsible behavior from companies is an elementary prerequisite for a functioning socially-responsible market economy," she said. Minister of the Economy Michael Glos, a conservative like Merkel, told the Sunday tabloid Bild am Sonntag that German managers have to "become aware that they are role models for society." Otherwise, he said, "faith in our market economy will be lost."

Others were a bit more pointed. Interior Minister Wolfgang Schäuble, from Merkel's Christian Democrats, told SPIEGEL "I have zero understanding for this kind of greed. Uncontrolled capitalism, greed and massive losses on speculative investments -- that is a combination that makes people furious." Steinbrück, the Social Democratic Finance Minister, told the online version of the weekly Die Zeit: "It is the elites who are threatening to cause the system to collapse."

All of this over a DVD purchased by the German state security police for  €5 million  ($7.4 million) from a disenchanted employee.  Industrialists, state officials, and others have been brought down by the revelation that they were evading their taxes.  German weekly Der Spiegel has been on this case like a hawk, and today has posted a story suggesting that US authorities have purchased a similiar DVD.

He negotiated with the Americans first, then with the British. He obviously came to some agreement with the Americans, because US tax investigators have apparently hit pay dirt in 50 cases since the summer of 2007.

Say again, what?  

Who are these people?

Why isn't this in the news?

It's about damn time that action be taken, and both of our candidate for President should be raising holy hell about this until those responsible are brought to justice in the court of law.  And their behavior condemned in the court of public opinion.

Update I've cut 9 sentences that seemed to be upseting the Obama crowd.  Hopefully, we can talk about the issue raised in the diary, instead of having a candidate pissing match now.

•  Donuts for my dirty mouth?

  Or tips for bringing attention to this story?

  by ManfromMiddletown on Mon Feb 25, 2008 at 05:08:22 PM PDT

  •  Nah.

    But if you're going to take potshots, you ought to at least go after all the candidates, eh?

    Personally, I'm in favor of a battalion of heavily-armed auditors parachuting into offshore tax havens ...

    by tovan on Mon Feb 25, 2008 at 05:11:55 PM PDT

  •  Tipped

    I'm less concerned about Obama not appearing to make this an issue than ...  Well, with the issue generally.  And I believe that both candidates have spoken out against corporations off-shoring wealth to protect it from taxation.

    Something is amiss here ...

    The global economic elite -- this stateless class of super-rich with no loyalty except to the money -- are really in a fine position these days, where ours looks increasingly more difficult.

    I get the feeling that our country is just being strip-mined.  After they are done with it, they'll just hop on their private jets and move off to Dubai.  (Halliburton already did.)

    by bink on Mon Feb 25, 2008 at 05:12:35 PM PDT

    •  "The global economic elite"

      is a perfect description, and "stateless" describes them perfectly.  No loyalty, no patriotism (except for little lapel pins), and no compassion.  The strip mining analogy is pretty good, too.  But not just our country, everywhere except for the few enclaves that these, to use edscan's term, maggots thrive in the rotting carcasses of the masses off of whom they feed.

      There is, of course, historical precedent for this.  The elite of the Roman Empire finally consumed the last rotting corpse and finally starved into savagery.  The Roman Catholic Church almost ended with the same fate, but, oddly enough, the Reformation occurred and saved them from themselves by forcing them to compromise to at least some extent.

      Tsarist Russia found out about the hard way, but oddly the maggots were still flies when their demise came, only to give rise to another species of maggots that destroyed the Soviet Union.

      And then there is now.  Unchecked wealth, with no constraint, is a fantasy that we all would love to experience.  I caution you that actually attempting to live out a fantasy is a certainty for disaster.  But who would not like to be in the situation that the couple in Georgia found themselves in this weekend?  Sometimes it happens, but the tendency towards maggottry is already hinted to, with the Mercedes-Benz reference.

      I guess my point is that, when such a huge disparity in wealth exists, there is potential for bad things to happen.  When all of those folks are holed up in Dubai, London, Manhattan, Monte Carlo, and a few others, a tremendous vulnerability results.  What if there are no workers to extract what little oil is left?  What if no one is willing to grow grain?  Methinks that gold is pretty, and money is nice, but neither can slake a thirst nor fill a belly.

      I have got to quit reading edscan.  I have come to the conclusion that he is a savant that makes me think too much.  As a matter of fact, I had a huge headache after I read his entry this evening.  By the way, if you have not added him to the Recommends, please do so.  He deserves it as a cult hero.  Warmest regards, Doc.

      by Translator on Mon Feb 25, 2008 at 05:59:39 PM PDT

    •  There is a thought about this from

      Benj. Franklin on another thread.  Tips and recs appreciated.  Warmest regards, Doc.

      by Translator on Mon Feb 25, 2008 at 08:45:22 PM PDT

  •  This is an important issue...

    but it's obviously less important to you than teeing off on Obama. Kinds of makes the rest of the diary seem questionable.

    by davewill on Mon Feb 25, 2008 at 05:27:59 PM PDT

    •  Glad to see that you're focusing on what's

      important here.

      Because questioning the veracity of my well linked diary, because you don't like that I've called the Senator out really shows that you have your priorities straight.

      It's Obama that matters, not the millions of Americans getting shafted by this whole affair.

      by ManfromMiddletown on Mon Feb 25, 2008 at 05:37:52 PM PDT

      •  The first first sentence says,

        "This is not a candidate diary, it's something more important that that." The last two-thirds is an anti-Obama rant. What are we supposed to think? Why do you think we will give you credibility?

        by davewill on Mon Feb 25, 2008 at 05:46:34 PM PDT

        •  I've cut the 9 sentences that seem to be

          offending the Obama crowd.

          It was not the last 2/3rds of the diary.

          You're really not helping yourself by attacking my credibility.

          by ManfromMiddletown on Mon Feb 25, 2008 at 05:58:17 PM PDT

•  wonder why tax records havent been forthcoming?

  by TAPayne on Mon Feb 25, 2008 at 05:11:28 PM PDT

•  Important issue, reccomended, but

  "What K-street got your tongue?" seems completely baseless. If you're at a loss why BO doesn't mention this issue or this piece of legislation, at least don't make shit up to fill the gap.

  by Bob Love on Mon Feb 25, 2008 at 05:12:15 PM PDT

  •  The problem is that

    since Sen. Obama keynoted for the Hamilton Project,  Rubinite front group aimed at attacking economic populism in the party, he's had an amazing change of heart on several issues.

    For example, he voted against CAFTA in 2005, but voted for free trade with Oman, a nation with a record of chattel slavery in 2006 after he had done his keynote speech.  And Rubin's son Jaimie, has been one of Obama's principal fundraisers.

    The question remains, why hasn't Obama been talking about this?

    Note that my statement was phrased as a question, in order to imply uncertainty.

    by ManfromMiddletown on Mon Feb 25, 2008 at 05:17:37 PM PDT

    •  Go read the link.

      pay attention, all the way to the last line.

      Maybe it's because it was legislation to close a lucrative loophole for the rich that died, like so many good ideas do, in Washington.

      by zic on Mon Feb 25, 2008 at 05:21:44 PM PDT

      •  I did

        but the question remains, why isn't he talking about this now?

        It certainly looks like this is going to be breaking into the global media in the near future.

        Yet, this legislation that he coauthored doesn't mesh with his whole cooperation theme.  You can't cooperate with people who refuse to play by the rules, because they can't be trusted.

        by ManfromMiddletown on Mon Feb 25, 2008 at 05:24:44 PM PDT

        •  sorry.

          And I'll repeat myself -- good idea that died.

          Too much money to be lost.

          And I rec'd your diary, thank you.

          by zic on Mon Feb 25, 2008 at 05:27:09 PM PDT

    •  Here,

      I'll make it easy.

      by zic on Mon Feb 25, 2008 at 05:23:44 PM PDT

      •  Thank you for linking to the article

        that I've already read, and linked in the text of my diary.

        It was tremendouly helpful, because I lack the ability to click on the hyperlinks that are in the text of my own diary.

        by ManfromMiddletown on Mon Feb 25, 2008 at 05:26:08 PM PDT

        •  tired and anxt ridden, today.

          sick of the candidate wars.

          sick at heart for my country.

          wanting to bash heads for all the idiocy out there.

          Deep breath.

          by zic on Mon Feb 25, 2008 at 05:28:20 PM PDT

          •  Same here

            just frustrated that this isn't focusing on the issue, and why the media and candidate aren't talking about it.

            by ManfromMiddletown on Mon Feb 25, 2008 at 05:39:05 PM PDT

    •  That information

      would have been far preferable to the information-free "What K-street got your tongue?" Why not tuck it into the diary?

      by Bob Love on Mon Feb 25, 2008 at 05:46:01 PM PDT

      •  At this point

        I'm not going to included it, because I've cut the 9 sentences that seemed to be pissing people off.  So it's not relevant.  Hopefully, this will put thingss back onto track.

        by ManfromMiddletown on Mon Feb 25, 2008 at 06:08:03 PM PDT

•  Maybe they are writing up

  warrents as we speak? This could break this election wide open. And the trouble is, the Bush Justice Dept. can hold this information and use it at will.

  by Owllwoman on Mon Feb 25, 2008 at 05:12:51 PM PDT

  •  Somehow I doubt that.

    I imagine that it's probably a situation of backroom deals that allow those implicated to pay back a discounted amount on that they owe, and it does nothing to prevent this in the future.

    by ManfromMiddletown on Mon Feb 25, 2008 at 05:22:30 PM PDT

•  How about Huckabee in the Cayman Islands?

  "Having a purpose is where it starts...knowing that there's something that we're setting out to do and not letting anything get in the way." Was he talking about is campaign or tax shelters?

  by wanderindiana on Mon Feb 25, 2008 at 05:26:41 PM PDT

•  He has brought it up

  It's on Obama's website under Fiscal Issues:

  End Tax Haven Abuse: Building on his bipartisan work in the Senate, Obama will give the Treasury Department the tools it needs to stop the abuse of tax shelters and offshore tax havens and help close the $350 billion tax gap between taxes owed and taxes paid.

  And tax shelter abuse is incorporated in his stump speeches and he brought it up numerous times in debates often using the Cayman Islands to illustrate his point.

  by dougdilg on Mon Feb 25, 2008 at 05:27:50 PM PDT

  •  That's one sentence

    and it doesn't even mention his support for the 2007 "Stop Tax Haven Abuse Act."  

    It's not a plan, and it doesn't even point to the legislation he sponsored to show what he would do.

    by ManfromMiddletown on Mon Feb 25, 2008 at 05:43:57 PM PDT

    •  The bill is out there if you want to see it.

      IIRC, the gist is that it would create a presumption that a subsidiary is a "controlled subsidiary," so that any income from that sub is immediately attributed to the US parent corp.  Normally, a US parent only pays taxes when the sub dividends its earnings back to the parent.  The effect of the presumption is to collapse the two entities, so that money made by the sub is immediately taxable to the parent.

      I haven't looked at the merits, and this is complicated enough stuff that I don't even know I could w/o lotsa research, but I think that's the idea.

      by burrow owl on Mon Feb 25, 2008 at 05:57:12 PM PDT

      •  As I understand it

        the refernce to $100 billion by Senator Levin is on personal income tax evasion of the highly illegal variety.  Not the more garden variety acounting fraud that allows corporations to get more money back from the government than they put in.

        by ManfromMiddletown on Mon Feb 25, 2008 at 05:59:51 PM PDT

•  Not 100% clear if the reference is to tax losses

  from U.S. revenues or worldwide, from the quote.

  The other tricky part is the distinction between conduct which is already illegal (such as not reporting income from secret foreign bank accounts that belong to you) and conduct which is unreasonable, but legal gamesmanship of existing tax laws (such as elaborate corporate and trust structures that push income from intangible assets like life insurance and investment income and intellectually property into the off shore side of the ledger).

  One of the big breakthoughs in the first type of fraud came when a subpeona forced MasterCard and Visa to reveal owners of debit cards backed by accounts in tax havens.

  Progress on the latter front seems most likely to come about from a reform of international taxation of corporations entirely to something like the sales formulas used in interstate taxation.  (A more radical approach would replace corporate income taxes with a tax on the market capitalization of publicly held securities on a revenue neutral basis.)

  Another key point to understand is that a great deal of untaxed income in foreign tax havens is income earned in the U.S. securities markets that is then laundered by foreign entities to appear foreign.  Tax havens can't exist unless the countries they deprive of taxes allow tax haven entity to own their assets.

  by ohwilleke on Mon Feb 25, 2008 at 05:30:05 PM PDT

  •  Sounds like worldwide, and also sounds like

    it's current bill that's being deferred.  So to get to a real number for US evasion, we'd have to split the US portion out and then present value the tax revenues that are being deferred.  So it's bound to be a much smaller number, although that's not a reason not to attack the strategy.  Fraud is fraud, regardless of the amount involved.  I guess that's the auditor in me talking.

    by burrow owl on Mon Feb 25, 2008 at 05:47:36 PM PDT

•  I recall Kerry talking about this in '04,

  and I also recall people I respected saying it would be difficult to make work.

  by burrow owl on Mon Feb 25, 2008 at 05:38:50 PM PDT

  •  The Germans have been quite effective in

    apprehending those that have broken their laws, and are currently considering whether to extend the prison sentences for tax evasion in order to prevent this in the future.  Why can't we do the same?

    Are Americans less able to enforce our laws than the Germans?  Or just less willing to punish those who break them?

    by ManfromMiddletown on Mon Feb 25, 2008 at 05:42:01 PM PDT

    •  It could be related to the systems at work;

      the American international tax system is markedly more complicated than most European systems.  IIRC, Europeans have territorial tax systems; Germany only taxes money made in Germany, while America taxes worldwide revenue regardless of where it's made.  We then have a complicated set of credits and deductions to mitigate the double taxation effects.

      So while it may be easy for Germany to pinpoint abusive schemes (money made in Germany, then "smuggled" out of the country), it's harder for American authorities to do the same.  An American would doubtlessly have some decent arguments as to why and how that money found its way to this or that tax haven.

      by burrow owl on Mon Feb 25, 2008 at 05:51:25 PM PDT

      •  This is personal income,

        not corporate income that we're talking about here.

        And as for the ease of pinpointing the abusers, here's a suggestion.

        Announce that the tax haven either release the names and transfer records of US citizens to tax authorities (as is required of US banks when the deposity earns interest) or face a severing of financial contacts inclduing the prohibition of transfers to or from the tax haven.

        by ManfromMiddletown on Mon Feb 25, 2008 at 05:55:57 PM PDT

        •  These are sophisticated investors,

          so don't be surprised if we are talking about corporate income.  That said, the principle is basically the same for individuals and corporations.

          by burrow owl on Mon Feb 25, 2008 at 05:59:31 PM PDT

          •  Read the

            Der Spiegel pieces in reference to Germans investing in "foundations" in Lichtenstein that benefit their own families.  

            Although corprations are legally held to be citizens, as I am aware they rarely have children.

            by ManfromMiddletown on Mon Feb 25, 2008 at 06:01:26 PM PDT

•  US$ 100 billion

  isn't that like worth 3 Euros now?

  by A Handsome Man on Mon Feb 25, 2008 at 05:42:20 PM PDT

  •  about 67 billion euros <nt>

    by ManfromMiddletown on Mon Feb 25, 2008 at 05:47:32 PM PDT

•  Here's an article

  from January which was written after Obama brought up this issue in the January 5th New Hampshire debates.

  http://www.politifact.com/...

  by dougdilg on Mon Feb 25, 2008 at 05:42:22 PM PDT

  •  And from the Cayman Net News

    via TaxJusticel.Org:

    In virtually every speech or debate Mr Obama refers to Ugland House on South Church Street in Grand Cayman, a building that houses thousands of corporations, calling it "the biggest tax scam on record."

    To Mr Obama, it is nothing more than a haven for thieves and cheats.

    "You've got a building in the Cayman Islands that supposedly houses 12,000 corporations," he said during a January 5, 2008, debate in New Hampshire. "That's either the biggest building or the biggest tax scam on record."

    Indeed, many thousands of companies, many of them subsidiaries of well-known US corporations, are registered at Ugland House and other offices in the Cayman Islands.

    They include Coca-Cola, Procter & Gamble, General Motors, Intel, FedEx and Sprint.

    Of course, it is easy to focus on the Cayman Islands, with its absence of corporate tax, or any direct taxation for that matter, as the principal culprit and lose sight of the underlying reality that it is the US tax code that makes it possible for such companies to use the Cayman Islands as a tax shelter in the first place.

    Mr Obama happens to be the co-sponsor of legislation that would crack down on offshore activities by US corporations and individuals. The Stop Tax Haven Abuse Act would target an estimated $100-billion annually, including $30-billion from corporations.
     
    According to published financial reports, Coca-Cola alone saved $500-million in US taxes in 2003 through foreign subsidiaries. Its Cayman company controls syrup-producing facilities in Ireland.

    We can be fairly certain that Mr Obama's declared attitude at this stage is likely to be mirrored in the approach to be taken by ‘President Obama'.

    by dougdilg on Mon Feb 25, 2008 at 05:51:00 PM PDT

    •  Notably, I doubt Coke is up to shenanigans;

      they probably have a legit reason for their offshore subsidiaries, a positive side effect of which is tax deferral.  The tough part is segregating the abusive schemes for the legitimate business plans.

      by burrow owl on Mon Feb 25, 2008 at 05:54:00 PM PDT

•  Good reporting, please continue

  This is an under-reported story here on Kos, but its big news in Europe, and it could be made into a big story here about a whole class of Tax-evading Americans.  Please do a more concise and complete summary for those less-informed, and updatw when you can.

  Also, you may note that as more readers read your diaries about a serious subject, you'll get more criticism for every line that's mere rant with no substance, like that "K-Street" line.  Otherwise, good work!

  by Hjiorst on Mon Feb 25, 2008 at 05:47:25 PM PDT

  •  Tax evaders = Non-citizens

    Anybody who wants to become a citizen of Aruba, Lichtenstein, or any of the other tax-haven countries, in order to avoid paying taxes here should be given a choice between paying back-taxes or being permanently stripped of their American citizenship, and being 'repatriated' to the tax haven of their choice. These people are not American citizens--These people are shirkers.

    by exsimo2 on Mon Feb 25, 2008 at 06:23:13 PM PDT

•  We are attriting trillions PER YEAR

  $100 billion isn't squat.

  by Paul Goodman on Mon Feb 25, 2008 at 05:47:50 PM PDT

  •  Wiemar

    When our inflation rate hits Wiemar levels, even the trillions of dollars we are expending now will become somewhat meaningless. I guess that is one way to get rid of the national debt. It will be a bitch to be on a fixed income, however--not that the elite non-citizens who are dodging our taxes give a fuck about that.

    by exsimo2 on Mon Feb 25, 2008 at 06:14:28 PM PDT

•  Just the tip of the iceberg

  David Cay Johnston from the NY Times is a great source on the systematic abuse of our income tax system. For example: I.R.S. Letting Tax Lawyers Write Rules

  The Internal Revenue Service is asking tax lawyers and accountants who create tax shelters and exploit loopholes to take the lead in writing some of its new tax rules.

  The pilot project represents a further expansion of the increasingly common federal government practice of asking outsiders to do more of its work, prompting academics and other critics to complain that the government is going too far.

  They worry that having private lawyers and accountants draft tax rules could allow them to subtly skew them in favor of their clients.

  His book Perfectly Legal : The Covert Campaign to Rig Our Tax System to Benefit the Super Rich--and Cheat Everybody Else is absolutely infuriating.

  by terabytes on Mon Feb 25, 2008 at 06:01:19 PM PDT

  •  Perfectly Legal is

    great book, that I've read, and given as a christmas present.

    It isn't just tax havens.  I think we'd be shocked if we had accurate estimates from the GAO about how much money the government is not collecting that it should be.  And of course that means that the people who do pay have to pick up the bill.

    Framing it in that light avoids aggravating working class voters who are paying too much in taxes.  But it's not because of big government.  It's because the wealthy aren't paying their bills.

    by ManfromMiddletown on Mon Feb 25, 2008 at 06:04:12 PM PDT

  •  The IRS just shot down a pet scheme

    of tax lawyers out to save taxes for their super-wealthy clients.  It was a pleasant surprise, especially since the tone of the letter written by the country's top 80 law firms was so damn whiney.

    by burrow owl on Mon Feb 25, 2008 at 06:13:52 PM PDT

•  Sentence of the season:

  I've cut 9 sentences that seemed to be upseting [sic] the Obama crowd.

  Self-censorship = Mission Accomplished

  by valion on Mon Feb 25, 2008 at 06:19:29 PM PDT

•  Saint Reagan...

  ...taught us that taxes are bad, evil, and to be avoided.

  The US lost the idea that you get what you pay for, and that taxes yield government services (maybe not so much the past 7 years, but generally so). We lost the idea that capitalism is a privilege with responsibility, as is a Democracy. Europe hasn't lost that yet.

  Perhaps more of that Forbes 400 list should listen to Warren Buffet, who has asked that his taxes be raised and who doesn't take advantage of carried-interest and offshore account loopholes.

  Reagan fucked us with his rhetoric. It will be decades more before the country truly believes that government can work for them.

  The lesson is don't hire people to run the government who believe that government can't work. The will run a self-fulfilling prophecy.

  by Gravedugger on Mon Feb 25, 2008 at 06:54:05 PM PDT