Wednesday, June 04, 2014

Too Many Millionaires In The Class War Against American Democracy?


No one likes the tax collector; no one ever has. But the anti-IRS hysteria generated by Fox News, Rush Limbaugh and Congress' richest (and most crooked) Member, was way beyond the ginned up Tea Party Scandal merited-- even by right wing standards of hollow victimology and martyrdom. But it was never very difficult to figure out why they worked so hard to undermine the IRS and delegitimize its authority-- and slash its budget. The pigs at the trough, who still-- teabaggers or not-- call the shots for the GOP and for the Republican wing of the Democratic Party, knew the big crackdown on tax cheats was coming. Writing for the A.P. yesterday, Stephen Ohlemacher helped explain just how real the IRS crackdown on offshore tax cheats like Mitt Romney and Darrell Issa is about to get. Until their crooked accountants figure something else out, it's about to get a lot harder to use overseas accounts to hide income and assets from the IRS-- a step, albeit maybe just a small one-- towards what Thomas Piketty must happen to keep democracies from disintegrating entirely.
More than 77,000 foreign banks, investment funds and other financial institutions have agreed to share information about U.S. account holders with the IRS as part of a crackdown on offshore tax evasion, the Treasury Department announced Monday.

…Nearly 70 countries have agreed to share information from their banks as part of a U.S. law that targets Americans hiding assets overseas. Participating countries include the world's financial giants, as well as many places where Americans have traditionally hid assets, including Switzerland, the Cayman Islands and the Bahamas.

Starting in March 2015, these financial institutions have agreed to supply the IRS with names, account numbers and balances for accounts controlled by U.S. taxpayers.

Under the law, foreign banks that don't agree to share information with the IRS face steep penalties when doing business in the U.S. The law requires American banks to withhold 30 percent of certain payments to foreign banks that don't participate in the program-- a significant price for access to the world's largest economy.

The 2010 law is known as FATCA, which stands for the Foreign Account Tax Compliance Act. It was designed to encourage-- some say force-- foreign financial institutions to share information about U.S. account holders with the IRS, making it more difficult for Americans to use overseas accounts to evade U.S. taxes.

"The strong international support for FATCA is clear, and this success will help us in our goal of stopping tax evasion and narrowing the tax gap," said Robert Stack, deputy assistant treasury secretary for international tax affairs.

Under the law, U.S. banks that fail to withhold the tax would be liable for it themselves, a powerful incentive to comply. U.S. banks are scheduled to start withholding 30 percent of interest and dividend payments in July, though recent guidance from the Treasury Department gives U.S. banks some leeway on timing as they gear up their systems.

The withholding applies to stocks and bonds, including U.S. Treasurys. Some previously owned securities would be exempt from the withholding, but in general, previously owned stocks would not.

Private investors who use foreign financial institutions to facilitate trades also face the withholding penalty. Those private investors could later apply to the IRS for refunds, but the inconvenience would be enormous.
A couple months ago ace Bloomberg reporter David de Jong broke the story about Wyoming resident Amy Wyss, the daughter of Switzerland’s second-richest man, Hansjoerg Wyss, being outed as a billionaire in a Senate report on offshore tax evasion. She had transferred $1.8 billion from Goldman Sachs Group Inc. to Credit Suisse. By shifting the assets on paper from the U.S. to Switzerland, Credit Suisse obfuscated a decline in asset inflows at its private-banking unit, possibly misleading buyers of the bank’s stock, the Senate panel said.
Credit Suisse counted the funds as new assets under management, a move it only should have made after receiving a signed agreement from the customer, according to several executives interviewed by the subcommittee. The bank classified about 4.3 billion Swiss francs ($4.6 billion) of the family funds as net new assets, raising the total inflow to 5.8 billion Swiss francs for the first quarter of 2012.

At the end of that year, the bank reclassified another 900 million Swiss francs of the Wyss’s money, even though most of it hadn’t been invested, the report says. Rolf Boegli, former chief operating officer of the Swiss private banking operation, said the funds “would be a great favor for our division,” according to an e-mail cited in the Senate report.

Credit Suisse Chief Executive Officer Brady Dougan called Boegli’s e-mail “disturbing” and “very objectionable,” according to the Senate report. Dougan said the decision to reclassify assets based on a desire to help the appearance of the private banking division’s financial condition didn’t seem to follow the bank’s principles.

Wyss called it “the bank’s problem” in the interview with the Swiss newspaper and said it didn’t concern him.
A year earlier De Jong had written that crooked billionaires were already fleeing tax havens as their accountants told them what was in store.
Billionaire Dmitry Rybolovlev, Russia’s 14th-richest person, and his wife, Elena Rybolovleva, have been brawling for almost five years in at least seven countries over his $9.5 billion fortune.

In a divorce complaint originated in Geneva in 2008, Rybolovleva accused her husband of using a “multitude of third-parties” to create a network of offshore holding companies and trusts to place assets-- including about $500 million in art, $36 million in jewelry and an $80 million yacht-- beyond her reach.

She has brought legal action against the 48-year-old Rybolovlev in the British Virgin Islands, England, Wales, the U.S., Cyprus, Singapore and Switzerland, and is seeking $6 billion.

The suits provide a window into the offshore structures and secrecy jurisdictions the world’s richest people use to manage, preserve and conceal their assets. According to Tax Justice Network, a U.K.-based organization that campaigns for transparency in the financial system, wealthy individuals were hiding as much as $32 trillion offshore at the end of 2010. Fewer than 100,000 people own $9.8 trillion of offshore assets, according to research compiled by former McKinsey & Co. economist James Henry.

“For a lot of people, it’s not just the objective of not paying taxes,” Philip Marcovici, an independent Hong Kong-based tax lawyer and board member of Vaduz, Liechtenstein-based wealth adviser Kaiser Partner Group, said in a telephone interview. “It’s the objective of obtaining the human right to privacy and seeking confidentiality about their financial affairs.”
There ya go… so now ya know. We often write about how revolting it is the with the Republican Party already exclusively serving the interests of the ultra-wealthy, to see corporate shills like Steny Hoyer, Steve Israel, Debbie Wasserman Schultz and Rahm Emanuel crushing the aspirations of working class candidates and recruiting wealthy self-funders. I was excited to see Lee Drutman writing on the subject for the Sunlight Foundation yesterday after he read Nicholas Carnes’ new book, White-Collar Government. While Members of Congress, he writes, "sure hear from a lot of millionaires outside of Congress, they also hear from many millionaires inside Congress too-– namely, themselves. (More than half of sitting members of Congress now have $1 million or more to their names).
The book’s thesis is simple and straightforward: If you elect mostly wealthy representatives, you’ll get policy that represents the interests of the well-off. Or, as Carnes puts it in the converse logic: “[T]he shortage of people from the working class in American legislatures skews the policy-making process toward outcomes that are more in line with the upper class’ economic interests.”

About two percent of members of the U.S. Congress came from a working-class occupation. About three percent of the average state legislature and about nine percent of the average city council also come from a working-class background. But more than half (54 percent) of U.S. citizens are in working-class jobs. Something is off. And this distortion has real effects on policy.

White-Collar Government documents what you might have already guessed: that working-class representatives tend to be more concerned about working-class issues. They have more progressive voting records, and they introduce more progressive economic legislation.

Carnes suggests that one reason for their comparative lack of success is that few other members of Congress-- and for that matter, relatively few people in Washington-- share that same progressive economic worldview because they just can’t relate to those concerns. They’ve always had it relatively easy, and never lived paycheck to paycheck. Carnes asks a very good question: “What happens when a social group has few or no advocates in our policy-making process, when almost no one in government truly understands the group’s needs or perspectives?” The answer, of course, is that they fare poorly.

Finally, there is the question of what to do about it. Carnes’ suggestion is straightforward: Get more working-class people to run for office. Of course, there are challenges. As Carnes notes, “What little evidence there is suggests that blue-collar workers are underrepresented not because of some deficiency on their part, but because of discouraging circumstances, like the high cost of running a campaign, the practical burdens associated with holding office, and the gate-keeping decisions of party leaders and interest groups.”

Running for Congress is insanely expensive. To be taken seriously as a candidate, you need to raise significant sums of money. I suspect this simple fact keeps many working class aspirants out of politics. Rich people tend to have rich friends who will support them. Working class people, not so much.
And that's where Steve Israel, Steny Hoyer, Wasserman Schultz and Emanuel come in-- undermining working class candidates and instead promoting wealthy conservatives to a point where the Democratic Party today is heading to where the GOP was when I was a kid, while the Republicans are heading straight towards over fascism.

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