11 February 2012

Legal tax avoidance and the nation-state

One good outcome from the Romney candidacy is that it has (at least briefly) focused attention on offshore banking and legal tax avoidance by the wealthy.  Vide these excerpts from a report in The Atlantic:
From individuals, it is clear: you owe taxes from your income and your purchases; you must obey the laws; if necessary, you must go to war; you can elect political officials so that these obligations are tailored more to your liking. The nation-state pledges in turn to give you access to recourse of grievances and to limit the application of violence and harassment to you from official actors. You get rights and responsibilities.

There is, of course, another inhabitant of a nation-state: the corporation. Though originally created specifically as entities that were not supposed to receive the benefits of citizenship, in exchange for which they received the ability to walk away from debts, corporations are getting an improving deal as they move through society as actors, gaining the privileges of individuals while taking on fewer of the obligations associated with being located in a single place.... 

It should be noted that when individuals attempt to place income in foreign bank accounts for these same purposes, they are either arrested for tax evasion or subject to an audit (unless, it seems, they are Mitt Romney caught using offshore tax havens that happen to be perfectly legal). You are probably free of the legal concerns, at least, if you are an individual whose wealth is so significant that it can be arranged into trusts, corporations, funds, and other legal frameworks. In that case, while the benefit to the individual in question might be significant -- qualifying for 0 to 15 percent interest as opposed to 33 to 60 percent, depending on the countries involved -- the responsibility of that individual to pay for offramps and old folks homes is suddenly lifted...

Yet, at the same moment, we have corporations and individuals-rich-enough-to-be-corporations whose money is not fully expected to contribute to any of the projects of the nation-state: security, transportation, health, science. The nation-state whispers to them in a somewhat more tentative voice, "Well, we're willing to negotiate." And as to the rest of us, we're not sure to whom these institutions belong. The nation-state looks the other way as corporate money wends its way from Seychelles to Mauritius to Ireland while lobbyists negotiate special tax rates should the money finally arrive "home" -- but is quick to write checks for all the tax credits it promised... 
Earlier this week, when I tried to chastise President Obama for letting a super-PAC support his re-election bid, I was told that it would be stupid not to take advantage of that tactic.  "Don't take a knife to a gunfight."  "If it's legal, do it."  I wonder if those same sentiments will be echoed here - it's legal (for corporations and the wealthy to avoid taxes), so it's ethically o.k. for them to do so. 

Personally, I don't buy that argument.

9 comments:

  1. Obey the law while you work to change it, if you have an issue with it: that was the substance of the argument when I last saw that thread. This isn't civil disobedience where breaking the law shows the unfairness of it. As Stephen Colbert is demonstrating, the best way to outline the damage is to use it.

    Game this out to November 2012: Obama is outspent and loses. We know from experience that money is a potent factor in elections. A smarter person than me could probably work out how many dollars in advertising equate to an actual vote.

    Who do you think will listen to arguments to shut this down? Obama or Romney/Gingrich/Santorum? Do we hold our nose and allow him to use the legal means to win or do we stand on principle and risk losing?

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  2. These scumbags cry 'too much regulation' out of one side of their mouth and 'hey, it's not like what I am doing is illegal' out of the other. Meanwhile their monopolies grow because no small buisness can compete with slave labor, tax exemptions, and unreported profits.
    Obviously these sociopaths need the micromanagement of an overactive and intrusive government to keep them honest. Either way, I feel that their abuses (as I see them) are negatively affecting our access to life, liberty, and the persuit of happiness.
    And why do shareholders allow their corps to store billions unreported? How do they think they are free and clear of the kharma due from this abhorant behaviour?
    Criminals

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  3. It's interesting how societies - ostensibly founded on the concepts of the rule of law, reciprocity, and civility - so often find themselves at the mercy of lawless, greedy, and unrepentant forces.

    If anyone's interested, The Corporation (trailer) and The Century of the Self (trailer) do a good job of revealing how a "divide and conquer" mentality has enabled corporate "persons" to elevate themselves from the realm of a legal fiction into a very real force in politics.

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  4. If you make that kind of money and don't use these legal shelters you are stupid... or trying to make a point or get elected.

    Until the law is changed... It's still legal. There is not an obvious moral conflict like you have with abortion or something of the sort.

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  5. Not sure if I found this on your blog or not:

    http://www.nytimes.com/2011/11/27/business/estee-lauder-heirs-tax-strategies-typify-advantages-for-wealthy.html?pagewanted=all

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  6. It's funny how intensive tax planning resembles money laundering.

    Probably because it is.

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  7. Maybe this would be an ethical analog to the "Don't bring a gun to a knife fight" argument: Use a foreign tax shelter, and spend every cent of the money you save that way lobbying to close down the foreign tax shelter loophole.

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  8. George from GeorgiaFebruary 13, 2012 at 7:56 PM

    OMG - the obama administration has hired or appointed more tax cheats that any other administration (at least that we know about). And now (NOW?) the left gets indignant?

    Unions have stolen and extorted, and then infused more money into politics then any other category in history, and the left barely raises an eyebrow. (Yes, corporations have free speech. Get used to it.)

    Obama makes a ridiculous, pandering campaign promise to get the votes of the ignorant and the naive, groups who continue to ignore his massive fundraising from some of the richest, gaudiest political money men in the country. And the left thinks Romney is bring too much cash into play? Rmember John Kerry? Remember Algore? Two of the wealthiest senators ever to run? Where were you then?

    Forgive me if I don't give two sh*%s about your selective outrage.

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