In recent years more American businesses and wealthy individuals have moved their money into offshore havens and foreign banks to escape the tax consequences at home. The Obama administration sees this as a big problem — possibly more of a “fairness” issue rather than a tax issue — and will soon release extensive plans to curb such tax avoidance practices.
The White House clearly understands this phenomenon of an outward flow of American dollars from multinational corporations and wealthy people. But instead of understanding the root cause, it chooses to punish further this legal albeit unpopular way of keeping money by avoiding to pay American taxes.
The U.S. tax code is several inches thick and not even our Treasury Secretary can explain it. (He’s not known as “Tax Cheat Timothy” for nothing.) There will always be a way to find a loophole no matter how the code is patched up. These corporations and individuals have the means to hire a team of accountants and lawyers to find a way. Trust me.
So American businesses and folks want to keep more money in their bank accounts, but the IRS takes too much. The solution? CUT TAXES! DUH. It’s not to make new laws to prevent tax havens and spend money enforcing them. It’s that easy. So easy that I bet the liberal Democrats in the W.H. and Congress don’t even see it.
What will the President’s plan accomplish? Will it raise more money for the country? Not quite. History has shown that such a plan will have a reverse effect on increasing the treasury. Only when taxes are cut there has been significant fattening of the treasury’s coffers. Additionally, more taxes means less work and less competitiveness. America’s auto industry has already been decimated, what’s next? Will tech giants like IBM and Cisco fall next? Or will it be G.E. and Coke?
It’s unfortunate, but the President is in for an unpleasant surprise, a surprise that’s well-known to anyone who’s studied American economic history.
