The Tax Noose Tightens
Mark Hendrickson teaches economics at Grove City College. He writes the “No Panaceas” blog at Forbes.com and is a contributing editor of the St. Croix Review. Hendrickson’s most recent book is “God and Man on Wall Street: The Conscience of Capitalism” with Craig Columbus.
The political left in America remains obsessed with its grandiose visions of social engineering, increased government control of economic activity, and redistributive “justice.” For them, the state can never have too much power. Incurable spendaholics and, in President Obama’s case, actively pursuing a Marxist economic platform, they never have enough money to spend; hence, they are constantly plotting and striving to confiscate ever-more of the wealth produced in the private sector. With their ravenous and insatiable appetite for more revenues, they behave like a pack of tax predators.
Even as Obama’s approval rating continues to sink, thereby jeopardizing Democratic control of the Senate after next Tuesday’s election, Team Obama has continued to tighten the tax noose around the necks of American citizens and businesses.
First, the pursuit of citizens: On Oct. 26, Bloomberg reported, “The number of Americans renouncing U.S. citizenship increased 39 percent in the three months through September” from the year-earlier period, seemingly due to the intrusive asset-disclosure rules that took effect July 1 under the Foreign Account Tax Compliance Act (FATCA). Obama still hasn’t achieved his ultimate tax fantasy—a UN-imposed and –administered global tax—but FATCA significantly ramped up the administration’s ability to monitor and pursue Americans’ wealth wherever in the world it may be.
Second, the aggression against businesses: Over the last few months, Team Obama has chided, vilified, and harassed American corporations that have been preparing to implement tax inversions—that is, purchasing a foreign corporation and then moving corporate headquarters to the foreign domicile to reduce the corporation’s tax liability. This has led to the nauseating spectacle of the minions of this most un-American of presidents publicly questioning the patriotism of Americans seeking refuge from the tax noose.
The common theme here is obvious: Americans are trying to escape the economic predations of our government. Let that sink in for a minute: For most of our history, America was a haven, a refuge—the place that people from around the world came to in order to escape the predations and oppressions of predatory governments. This was the Land of Opportunity, the place to come to pursue the American Dream—your dreams—in liberty, and get as rich as your talents and initiative would carry you.
Now, under the influence of progressive ideas, we have become politically corrupt and degenerate. Embracing the morally debased ethos that one is entitled to something for nothing in this world, and that it is right and proper for government to provide it even if it has to take property from others, we have approved of the erection of a massive transfer state characterized by an unseemly squabble over who gets what from whom. The government routinely takes the property of its citizens so politicians may buy the support of various voting blocs of individuals and of rent-seeking businesses practicing cronyism, not capitalism. It is this morally and economically bankrupt state, sliding into a creeping tyranny of unelected, unaccountable bureaucracies which American citizens and businesses seek to escape.
Our founders would be heart-broken to see what succeeding generations have wrought. They would grieve that the current political class has turned America into a place where success is penalized, wealth is demeaned, the rich are persecuted, and property rights are disdained. It makes me sad and angry that America has become a place that people and businesses who have prospered feel they need to flee. This isn’t the real America.
Although the trend toward anti-America, the land of creeping tyranny, has been around for a long time, it is getting worse under Obama. A president who understood in American principles and believed in the American dream would seek to reduce the tax burden on individuals and businesses (the optimum corporate income tax rate would be zero percent) to make America more inviting to them, they instead treat them like criminals, enemies, or prisoners. FATCA represents the latest move to strip individuals of the last remaining shreds of financial privacy. The Treasury Department’s heavy-handed efforts to keep businesses from escaping offshore amount to the erection of an invisible Berlin Wall designed to thwart the desire to be free of an oppressive state.
Indeed, the way Team Obama is going about erecting that Berlin Wall is particularly egregious. In late September, Treasury Secretary Jack Lew announced that the Treasury Department has drafted new rules designed to prevent corporations from undertaking tax inversions. This is one of the many ways in which Obama has been making good on his threat to bypass Congress and rule by executive fiat. Essentially, Obama, Lew and the Treasury Department usurped the legislative prerogative of Congress. It is Congress that always (and rightly) has written the tax laws that govern American corporations. One hopes that, after the election, Republicans will have enough backbone to challenge Lew’s new rules in court.
Another disturbing aspect of Team Obama’s maneuvers against tax inversions is its collusion with the unelected bureaucrats, both American and foreign, of the Paris-based Organization for Economic Cooperation and Development. The OECD has a plan called the Base Erosion and Profit Shifting Project that finds ways for national governments to gather and share more detailed information about corporations’ finances. The OECD also has been encouraging member countries not to engage in tax competition (i.e., not to cut tax rates to attract more businesses to their countries) but instead to keep tax rates high.
The OECD role in helping Team Obama to corral American corporations is galling in several respects: 1) It is completely hypocritical for OECD bureaucrats, whose generous salaries are tax-exempt, to plot with governments to avoid reducing taxes on others (although this stance shouldn’t be surprising, since the OECD is funded entirely by taxes collected by national governments, so they aren’t about to bite the hand that feeds them); 2) Foreign-based, unelected bureaucrats, many of them not even Americans, are using our own tax dollars against us to plot strategies to keep our tax burden high (another cynical example of “your tax dollars at work”); 3) The OECD needs to drop the “D”—“Development”—from its name. This multilateral cabal indeed practices “Cooperation” by conspiring with tax-hungry governments to keep business taxes high, but they are clueless about “Development.” By working to keep business taxes high, they are acting contrary to every known economic theory of development. Even Lord Keynes understood that taxes essentially impede development rather than assist it.
Team Obama, which now includes international bureaucrats, continues to tighten the tax noose around the necks of Americans. They are doing everything they can to make it more difficult for Americans to elude the noose. In the long run, this may help our cause: With no place to hide, we may reach critical mass and find enough Americans who realize that we have no alternative but to fight back.