SACRAMENTO – Leftists are thrilled with the Biden administration’s plan to root out the scarecrow of tax havens – low-tax jurisdictions where businesses and other investors can keep their money out of the government’s prying hands.
They would have us believe that companies are not paying their âfair shareâ of taxes – and that punishing these crooks will bring global benefits. In particular, Congressional Democrats are now pushing for a tax system overhaul as a way to fund their $ 2.9 trillion social spending program.
“The administration’s strategy is to convince other developed countries to adopt a global minimum corporate tax, while rewriting the United States’ own tax code to eliminate the benefits companies are currently reaping from reserving. their income in tax havens, “said Jordan Weissmann of Slate magazine. .
Some conservatives might support this redistribution effort given that tech companies like Google, Facebook and Apple are in the crosshairs. They shouldn’t let the frustration with the content-moderation policies of these companies let them abandon their long-term opposition to tax increases. After all, businesses don’t really pay taxes – only consumers and workers do.
Let’s put an end to the indignation against tax havens. There is nothing wrong with businesses and individuals shielding their income from governments, which are like organized mobs that can never grab enough income. One need only look at the US government’s $ 28 trillion debt debt to realize that its spending desires are insatiable.
If you think tax havens are immoral, you shouldn’t claim deductions on your tax bill. President Joe Biden apparently thinks it’s wrong for companies to set up their headquarters in low-tax Bermuda, Ireland and Switzerland, but why his Delaware home has so many headquarters social enterprises in the United States? Hint: This has nothing to do with the, uh, beautiful scenery around Wilmington.
California is a notoriously taxed state. In our federalist system, each state can develop its own tax policies, which is why so many businesses are migrating to more favorable climates like Texas and Utah. Such competition is a strength of the American system. A similar process works at the international level.
Tax havens pressure spending governments to limit tax rates, and lower tax rates stimulate economic activity, create jobs and encourage investors to invest more. As economist Milton Friedman put it: “The competition between national governments in the public services they provide and in the taxes they impose is just as productive as the competition between individuals or firms in goods. and the services they offer for sale.
Governments are proposing these anti-tax haven rules simply to prevent businesses from evading their tax snags, allowing them to tax and spend with abandon. The main reason tax havens are good is that they help businesses protect their money from the U.S. government, which already has a lot of revenue (and debt) – and needs to learn how to spend it more efficiently.
Concretely, the policies that crush tax havens are counterproductive. A leading 2018 study by Duke University professor Juan Carlos SuÃ¡rez Serrato found that an IRS rule that increased corporate tax rates for U.S.-based multinational corporations was perverse effect of leading them to reduce their investments and national employment.
On a practical level, too, âoffshore centers allow companies and investment funds to operate internationally without having to comply with several different sets of rules and, often, paying more taxes than what is required. should be due, ânoted Philip Booth of the Institute for Economic Affairs. . “They allow companies to avoid the worst excesses of government largesse and crazy tax systems.”
In addition, the Biden plan will increase taxes on reinsurance companies – the insurance companies that provide insurance to other insurance companies – which will simply reduce the number of available insurance policies and increase the rates for consumers.
Progressives argue that tax havens allow criminal enterprises to hide their ill-gotten loot, but the libertarian Cato Institute’s Daniel Mitchell (who deserves a hat for this quote from Friedman) explains that “the most comprehensive analysis of dirty money finds 28 problem jurisdictions, and only one could be considered a tax haven.
And he adds that tax havens also allow people living in oppressive regimes (such as Jews in some Middle Eastern countries and dissidents in Venezuela or Cuba) “to invest their assets abroad and hide these assets. information to venal governments â.
After examining how the U.S. government spends its money, it’s hard to take seriously the claims of enemies of tax havens, such as Oxfam International: the need to fight poverty and invest in healthcare, education and employment.
Oh please. If poverty eradication depended on the size of government tax revenues, then America (and California in particular) would have solved this problem decades ago. Those who oppose tax havens just want the government to take more money and have more power. This is why I celebrate the wonders of offshore havens.
Steven Greenhut is the West Region Director of the R Street Institute and a member of the Editorial Board of the Southern California News Group. Write to him at [email protected]