A nail in the coffin for the U.S. in the future is the ubiquitous use of offshore bank accounts by the 1%.  It’s not just banking for the rich elites either, as many companies like General Electric incorporate overseas.  The common goal is to avoid paying U.S. taxes.  It’s a similar goal for European companies that want to avoid paying taxes to the E.U. (GE avoids them both).  Whether companies or individuals, the effect is the same: to keep a country’s infrastructure running and the worker bees moderately happy as good and healthy consumers, taxes are paid by the 99%, not the 1%.  While governments struggle to keep their heads above water in these lean times for the 99%, more money is hidden beyond their tax horizons by the 1%.  The problem is not big government—the problem is the rich elites who socialize costs and privatize profits.

The GOP candidate, Mitt Romney, is not the most egregious practitioner of this art of legally swindling the U.S. government and thus all American citizens in the 99% that pay taxes.  Nevertheless, he is the symbol of a social disease that he has no desire to cure.  Transfer of wealth from middle class to rich elites has probably existed since human beings morphed the social structures characteristic of nomadic hunters and gatherers into a more sedentary and agrarian social organization.  Nevertheless, in the last quarter of the 20^th century and the first decade of the 21^st, the gulf between rich and poor has been widening at an alarming rate.  That most of the 1% is doing exactly what Mittens is doing and often congratulates him for being a smooth operator is no justification.  Why the 99% would vote for someone who symbolizes exploitation of the middle class and poor is beyond me.

An article by Adam Davidson in the NY Times Magazine last Sunday (“Caymans, Here We Come”) highlights the points I’ve summarized above.  (Mr. Davidson is the co-founder of NPR’s “Planet Money,” a podcast and blog.)  As is my custom, I read his last paragraph before the rest of the article.  The last two sentences made me read the rest of the article.  “Economists generally agree that the best tax system would be simple and strict, offering little incentive to lobby for loopholes.  The big problem, of course, is that many of the people and corporations with the most influence over Congress don’t want it that way.”  The implication is that the situation will probably never change.  It’s guaranteed not to change any time soon if Mr. Romney captures the presidency and the GOP both houses of Congress.  These are the representatives of the 1%; by buying elections with Super PACs (thanks to the Supreme Court) and pumping money into their lobbyists, they will guarantee that the gap between the 1% and 99% steadily increases.  Any politician can be bought, even Democrats.

In fiction, authors often treat offshore accounts and incorporation overseas as plot devices that characterize villainy.  In my sci-fi thriller Evil Agenda, for example, the arch-villain Vladimir Kalinin aka Rupert Snyder loses considerably when a U.S. task force breaks into his account in the Cayman Islands.  What is scary about Davidson’s article is how easy it is to set up these offshore accounts and incorporate overseas.  “…because a 2010 McKinsey & Company report estimated the world’s financial assets at about $200 trillion, somewhere around 10 percent or more of the world’s wealth is effectively invisible.”  Adding to the horror is that this is not villainy—it’s all legal!  Nevertheless, as Davidson points out, maintaining a watchful eye on all the international legalities involved requires a legal staff that costs more money than a member of the 99% can ever afford.  In other words, an arch-villain like Kalinin can do it, but you and I can’t.  The 99% struggle with their 1040 forms; the 1% can toss those forms in the wastebasket.

Davidson goes on to talk about FATCA, the Foreign Account Tax Compliance Act, which will be enacted next year.  Here “foreign financial firms will have to proactively identify every American account holder with assets more than $50,000 and report details about their financial activity or face a significant penalty.”  Before you start singing the Hallelujah Chorus, though, read Davidson’s caveat:  “By the time Fatca [sic] is in full force, in 2017, truly wealthy individuals and corporations will almost certainly have used their resources to find more intricate loopholes.”  In particular, many countries have not agreed to become unpaid agents for the U.S. IRS.  In any case, FATCA is too little and too late, especially if Mr. Romney is elected.

Revising and reshaping of the American tax code into something that is “simple and strict” will probably never occur in my lifetime.  The 1% have no vested interest in doing so and the 99% are powerless to insist on it.  The situation probably has to become much worse before the middle class rises up and demands true tax reform.  Electing Mitt Romney as president will, of course, make the situation much worse, but he can only do so much damage.  They say the only sure thing is death and taxes.  Members of the 1% are mortal (death is the grand equalizer), but they won’t pay taxes.  And you won’t ever see Mittens leading the charge against offshore accounts and companies incorporating overseas.  He can’t retire on presidential benefits.

And so it goes….

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This entry was posted on Thursday, August 2nd, 2012 at 4:00 am and is filed under Capitalism Without Control, Government Waste & Inefficiency. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.