The 1 percent took home 45 percent of all income gains during the Clinton Administration, 65 percent of income gains during the second Bush Administration and a whopping 93 percent of income gains during the Obama Administration–so far.
Faced with estimated losses of $100 billion in offshore tax cheating, in 2010 the 111th Congress passed a law known as the Foreign Account Tax Compliance Act, the aptly-named FATCA, which intends to curb the epidemic of tax evasion by the mega rich, through the use of offshore tax havens, also known as Secrecy Jurisdictions. Unsurprisingly, this law barely passed with mostly the support of Democrats in Congress.
No observer of recent American politics could miss that Republicans hate taxes. Yet, surely law-and-order-loving Republicans don’t desire to coddle criminal s– or do they?
The passage of FATCA has caused affluent tax-evaders to spit out their martinis across the globe as they decried the supposition that they–the non-little-people–needed to actually pay taxes for the benefits they derived as Americans. They let it be known among their employees–the Republicans in Congress–that they wanted it repealed ASAP.
Formerly, the IRS had been forced to accept the voluntary enforcement that came from a law called Qualified Intermediary (QI). Under that program, banks such as Swiss giant UBS — which joined the program in 2001–were supposed to maintain records that detailed the foreign holdings of their U.S.-citizen customers. The voluntary QI program was so feeble that UBS was forced to admit in 2009 that, by the way, it had fraudulently concealed $780 million in deposits by its U.S. “taxpayer” clients.
FATCA attempts to address offshore tax evasion in three ways:
1) Foreign financial institutions must tell the IRS the names of U.S. citizens who hold accounts with them. That includes balances, deposits and withdrawals. Any U.S. bank that is asked to send money to a foreign institution that does not comply, must withhold 30% of gross payments.
2) Any U.S. Citizens who hold foreign accounts with a value greater than $50,000.00 must report them to the IRS. Anyone who neglects to mention their foreign accounts, or foreign-held stock or stock certificates or who lowballs the value of those accounts by 25% will face a penalty of 40% of the actual value of the accounts or securities. This law also extends the statute of limitations to 6 years.
3) The FATCA law also slams shut a sneaky loophole that allowed fat cat Americans to practice tax evasion by using a special “dividend” trick.
Of course, unpatriotic fat cats who had wanted to benefit from their American citizenship and the safety it provides for themselves and their families have cried bloody murder over this law. With no evidence whatsoever to back it up, they have whined that the law will cost too much to implement, that it will not gain as much money as expected and a lot of other tripe.
How often do bank robbers successfully argue that laws against robbing banks are just too expensive for them? Since when have criminals — which is what these tax-evaders are–succeeded in arguing that it’s easier to let them commit their crimes? The Republicans have always gotten into a later of joy at the idea of sending poor people to jail for stealing a loaf of bread. Now that their tax-loathing base is in the bulls-eye, they are arguing for leniency.
The critics of the law are the usual suspects. A group that represents American fat cats living the high life overseas, called American Citizens Abroad (ACA), has joined with Koch-brothers-backed groups such as Freedom Works to decry the law. Though Tax Havens appeal to the mega rich chiefly because they levy no taxes on ex-patriot Americans, groups such as the ACA and Freedom Works claim that FATCA will harm affluent Americans because it requires them to actually pay taxes instead of escaping them entirely.
“The FATCA legislation treats all Americans with overseas bank accounts as criminals, even though most of them are honest [sic], hard-working individuals who happen to be living and working or retired abroad,” Jacqueline Bugnion, ACA Director, said. In fact, most affluent Americans have structured their income as capital gains, which would be taxed at 15 percent – as was seen with 2012 Republican Presidential contender Mitt Romney [who actually only paid 13.7 percent in the one year of income tax returns he revealed]. Yet, even 15 percent is too much and thus the explosion in tax-haven abuse in the past two decades.
Faced with the actual teeth in the FATCA law, Republicans such as Sen. Rand Paul have introduced legislation (S. 887) to repeal the parts of FATCA that are actually effective, such as the non-voluntary portions that prevent foreign financial institutions from ignoring it. The Koch-brothers-funded “Center for Freedom & Prosperity” organization gave Sen Rand Paul a greasy hug for his efforts to protect his fellow fat cats.
Sen Paul sent out a “Dear Colleague” letter to his fellow affluent-loving Republicans with the following message: “[FATCA] will force U.S. financial institutions to provide the bank account information of private customers to foreign nations, [thereby] diminish[ing] U.S. privacy protections.” Ignoring the illegality the law addresses, Sen. Paul appears to prefer enabling the super wealthy to escape all U.S. taxation–thereby shifting the tax burden of our country to middle-class taxpayers and the poor.
When H.R. 2847 passed the House of Representatives by a slim margin of 217-to-201 in 2010, it garnered 211 yes votes by Democrats, 6 yes votes by Republicans, with 166 Republicans voting no and 35 Democrats also voting no.
Since that historic passage, the forces on the right have swarmed the law and made it a hot topic on yachts across the globe. Its opponents have dubbed it the “worst law most Americans have never heard of”. Republican Senators such as Rand Paul, Heritage Foundation president and former senator Jim DeMint, Sen. Mike Lee and Sen Saxby Chambliss sent a letter to Treasury Secretary Jack Lew, asking him for relief from the teeth in the law. The full force of the law will take effect in July of 2014 and it remains to be seen if the defenders of the 1% will prevail or not.
IRS – “New Tax Law Provisions Enacted to Combat Abusive Tax Shelters” [http://www.irs.gov/Businesses/New-Tax-Law-Provisions-Enacted-to-Combat-Abusive-Tax-Shelters]
American Citizens Abroad [http://en.wikipedia.org/wiki/American_Citizens_Abroad]
“FATCA Will Have Devastating Impact on American Expatriots” [http://m.freedomworks.org/blog/jborowski/fatca-will-have-devastating-impact-on-american-exp]
CF&P Welcomes FATCA Repeal Bill from Senator Rand Paul [http://freedomandprosperity.org/2013/press-releases/rand-paul-fatca-repeal/]
Final Vote Results for Roll Call 90, which passed H.R. 2847, including FATCA [http://clerk.house.gov/evs/2010/roll090.xml]