Attacks on the Wealthy
Attempts to Cripple Tax Havens
March 4, 2000
The Clinton administration plans to ask Congress for broad new powers for what they claim is to combat money laundering by drug kingpins. Those powers include the authority to ban financial transactions between United States banks or brokerage houses and off-shore financial centers, administration officials have announced.
Under the thin guise of attempting to make it hard for drug traffickers to funnel their profits through American banks, the Clinton administration is asking for vast new powers in their continuing concerted attack upon wealthy Americans who shelter much their wealth in offshore tax havens. The proposed laws would allow the Treasury Department to ban transactions between US financial institutions and individual foreign banks or even entire foreign countries. The claim that it is to fight criminal money laundering is a flimsy excuse, at best. Since professional money launderers can easily route their illegally obtained funds through any combination of tax haven and non-tax haven nations prior to transfer into the US, this proposed legislation is clearly aimed at punishing those countries that refuse to open their banking records to the US Internal Revenue Service.
But, just like the Health Insurance Portability Act of 1996 (26 USC 877(a)(1)), that seeks to tax the income of expatriate Americans for ten years after they renounce citizenship and the Immigration and Nationality Act (INA) of 1996, (8 USC 1182(a)(10)(E)), that prohibits these so-called taxpatriates from ever returning to the US for any reason, both of which are individually responsible for the exodus of BILLIONS of DOLLARS of investment capital (see Tick-Tick-Tick - The Economy Bomb), this legislation too, promises to drive even more investment dollars and the jobs they represent out of the United States. History has shown repeatedly, that as countries make it more difficult for investors to legally transfer money offshore, more and more wealthy law abiding citizens, justly fearing that the day is fast approaching when they will become economic prisoners of their own government, decide to move the majority of their wealth out of the jurisdiction of that repressive government. As far back as Nazi Germany and through many other repressive regimes up to recently tightened banking laws in certain Pacific Rim countries, we have seen that scenario repeated. The more difficult the government makes it to take money out of the country, the more wealth actually leaves the country. That is exactly the effect that we are seeing as a result of the attempted tightening of US laws concerning offshore investment.
Although information from tax haven countries is very scarce, the little information that is getting out now indicates that the number of expatriate Americans that are applying for citizenship or permanent residence in certain popular tax haven countries more than doubled in the two years following the passage of the previously mentioned acts. Keep in mind that the vast majority of expatriates are wealthy. When they leave, it is the remaining less affluent taxpayers who have to make up the difference in those lost taxes, not to mention the jobs that are lost to other countries.
The administration's weak excuse for asking for these vast powers is based upon the Bank of New York money laundering scandal, where the government alleges that about US$7 billion in Russian funds were funneled, only some of which may have been derived from illegal activities. In fact, the Wall Street Journal reported that only about 7% of that money appears to have been illegally derived. Keep in mind that most dirty money has been thoroughly laundered long before it reaches the United States. This legislation will only present a minor inconvenience to money launderers. It is obvious that they are not the real target of this proposal.
Treasury Secretary Lawrence Summers announced the proposed legislation in a speech to bankers on Thursday, March 2, 2000. Among the vast powers that this legislation would grant his department is the authority to forbid transactions between US financial institutions and foreign financial institutions or even entire countries. If a foreign government upheld it's financial privacy laws, the Treasury Department would have unilateral authority to simply prohibit US financial institutions from dealing with that country's banks, without the approval of either Congress or the courts. US banks and businesses would be required to collect detailed information on all foreign transactions and compare it to acceptable PROFILES. Reminiscent of the FDIC's simmering Know Your Customer rule, US banks would be required to send Suspicious Activity Reports (SARs) to the Treasury Department detailing transactions that do not fit an acceptable PROFILE. This proposal is clearly aimed at crippling banking in nations with strong bank privacy laws and forcing them to repeal those laws, so the IRS can have access to their files. It should be noted that all such prior attempts have had exactly the opposite effect.
In spite of the administration's smoke and mirrors, it should be obvious to even the casual observer that the real objective of this proposed legislation is to eliminate so-called "harmful tax competition" that is driving capital out of high tax countries like the US and advance the "uniformly high tax" agenda of the Organization for Economic Cooperation and Development (OECD). Because this proposal seeks to advance such world government ends, it is already receiving bilateral support on Capitol Hill. The unlikely allies include the Chairman of the House Banking Committee, Representative Jim Leach, (R-IA) and Senator Charles E. Schumer (D-NY).
It is imperative that you contact your Congressman and Senators today and tell them that when this legislation reaches their chamber it should be soundly defeated, because we do not need any more misguided legislation passed that will only serve to drive more US investment capital out of the country, regardless of the excuse that they use. The more they tighten their grip, the faster investment dollars will leave the United States and the more burden will be placed upon those less affluent citizens who remain.
The time has come to end the abusive tax and finance laws that are forcing law abiding Americans to take their money elsewhere. The time has come to replace the punitive Income Tax, that by its very nature, will always be fraught with inequities. The time has come to abolish the IRS and their intrusion into the private lives of honest law abiding citizens with and their Gestapo tactics.
Nothing less will ever end the abuses of the IRS and now, the Treasury Department.
2000 John Gaver
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