Toying with the Tax Code
As Tax Day looms large for millions of Americans, those who skirt their tax obligations and the peddlers who aid and abet this unpatriotic class of tax evaders are forcing honest taxpayers to pick up the slack and shortchanging their home country.
As the top Republican on the Senate Finance Committee, which holds legislative and oversight responsibilities over the federal tax code and the Internal Revenue Service, I take very seriously efforts by some pretty sophisticated players to undermine the nation’s tax laws. Some smart people are making some not-so-smart decisions to take advantage of the system by sheltering income or re-locating their corporate headquarters in name only to avoid paying their fair share in taxes.
An increasingly popular financial practice among primarily affluent individuals involves establishing off-shore banking accounts. While it is perfectly legal to set up an account overseas, it is not legal to do so for the primary purpose of hiding assets from the IRS. A cottage industry has cropped up to peddle tax shelter and offshore accounts that make it easy for people to dodge the IRS. These shelter peddlers are helping Americans to camouflage their assets overseas. The IRS estimates as many as 12 million Americans have established such accounts, shortchanging the Federal Treasury by $70 billion. It’s difficult for the IRS to track such off-shore accounts because virtually no paper trail exists and tax haven countries protect the privacy of depositors.
While I have a long record of working to rein in an over-zealous IRS, I’m equally outraged by Americans who engage in deception to shirk their tax responsibilities. It’s time to end the cat-and-mouse game between the big-time financial wizards who peddle tax shelters and the IRS. For two years the Senate Finance Committee has been working to shut down shady shelters on a case-by-case basis. I’m currently working on bipartisan legislation that aims to bring greater transparency to the system to give the policy makers and enforcers a better understanding on what’s happening in the marketplace. Our bill would require an independent tax advisor to provide an opinion regarding tax shelters. Currently, the peddler’s opinion may be used as a defense against shelter-related penalties. Our legislation also would cast a wider accountability net to include investment bankers and other financial advisers, not just accountants and lawyers.
At any point in time, tax cheats deserve to be caught and face the full consequences of the law. In another tax scheme, it’s especially troublesome to discover at this point in our history that some American corporations are setting up shop in name only in low-tax countries to avoid U.S. taxes. As the United States works to come out of a recession, faces a depressed stock market and engages in an economic and military war on terror, I find it immoral for any U.S. company to re-locate solely for the purpose of avoiding federal taxes owed to Uncle Sam. This is a time the country must pull together. It seems some companies don’t have their hearts in America if they aren’t willing to pitch in their fair share and pull together.
This practice is known as corporate expatriation. Consider Ingersoll Rand, a manufacturing company which boasts it produced the jack hammers that were used to carve Mount Rushmore. It left the U.S. for Bermuda last September and now pays less than $28,000 in taxes to Bermuda instead of its $40 million tax tab to the United States government.
Iowans know I am a tax cutter who would like to see taxpayers keep more of their hard-earned money. By that I mean enacting lower tax rates, not toying with the tax code to avoid payment. I don’t want to see a system where there are different sets of rules for different sets of folks. Moving one’s corporate headquarters overseas for legitimate business purpose is fine. But when it’s done in name-only to escape federal taxes, it tells me that the company doesn’t have its heart in America.
What’s even worse, some of the companies who have set up fictional headquarters overseas are adding insult to injury. They are profiting from fat government contracts, yet won’t pay their own fair share to keep America strong. That’s why I’m pushing an additional bipartisan bill in the Senate to rein in such unpatriotic corporate expatriations.
I won’t sit idly by and watch tax cheats fleece America. My message to those who toy with the tax code to avoid paying their fair share is simple. Proceed at your own peril because the game is over. I’m setting the traps to help catch off-shore tax cheats once and for all. Contrary to the views of some in Washington, I’m confident the IRS is capable of walking and chewing gum at the same time. In other words, providing taxpayer service and enforcing the tax laws are not mutually exclusive.