As Bobby S pointed out, the New York Times wrote an editorial calling for a crackdown on tax cheats -- specifically those that use offshore accounts to hide their earnings from Uncle Sam. The editorial was spurred largely by a tax haven bill proposed by Max Baucus, as a counter the Levin/Obama bill.
Now this tax haven business, and Max' association with it, is something I've been writing about for some time. But basically, here's what's happened thus far. Way back in 2007, Michigan's Carl Levin introduced a bill called "The Stop Tax Haven Abuse Act" (pdf), which would "restrict the use of offshore tax havens and abusive tax shelters to inappropriately avoid federal taxation," only the bill died in committee. Max Baucus' Tax and Finance committee, to be specific. But Max said a proposal was on its way; sure enough, a draft is making the rounds.
So...what's the difference between the proposals? The Levin bill (pdf), which he reintroduced a few days ago, would give pretty robust powers to the US Treasury to combat offshore tax cheats. One of the bill's features is the creation of a list of economic rogue nations -- nations that have overly secretive tax codes intended to enable tax abuse by US citizens. Any transaction to and from one of the listed rogue nations by a US citizen is assumed suspect and investigated accordingly. Noncompliance with US investigations could cause foreign banks to be shut out of the US financial system. In short, the bill intends to end the practice of tax haven abuse by putting pressure on the countries that harbor tax cheats.
Pretty heady stuff, eh? It's the economic equivalent of necon foreign policy! Naturally property rights' mavens are apoplectic -- and probably not without cause -- that it might do unforeseen damage to our trade.Think of all those Swiss Army knives we'd miss out on...
The Baucus bill -- surprise! -- is much more moderate:
The more targeted draft by Senate Finance Committee Chairman Max Baucus would require entities transferring funds offshore to report to the Internal Revenue Service the amount and the account or destination to which the funds are being moved. Baucus, D-Mont., also would extend to six years, from three, the statute of limitations for the IRS to scrutinize tax returns that reported, or should have reported, certain international transactions.
In an effort to deter offshore tax evasion, Baucus would require offshore entities to file foreign bank account reports, known as FBARs, with their income tax returns, not just to the Treasury Department's Financial Crimes Enforcement Network. Under current law, any U.S. resident who has a financial interest or account in a foreign country exceeding $10,000 has to file an FBAR.
Under Baucus' bill, the IRS would require tax preparers to ask a series of questions designed to determine whether an FBAR needs to be filed. The draft also would establish a $10,000 penalty for foreign trusts that fail to file tax returns, and would treat transfers of artwork and jewelry from foreign trust the same way that "marketable securities" are treated under tax law.
The draft would double fines and penalties for underpayment of taxes on certain offshore transactions.
Basically, Baucus' plan gives a few more tools to the IRS to detect tax cheats, and imposes a stiffer fine for violators. Sure, it'd bring in more revenue, maybe make tax cheats sweat a little bit more at night, but does nothing to try and get at the root of the problem. You'd think a compromise should include some of Levin's "nuclear" options -- like his threat to shut noncompliant foreign banks out of the U.S. financial system. That'd be a neat punishment for repeat offenders...
Still, it's early. And I'm no tax code expert. Mark T? Are you there?