U.S. Senate Finance Committee chairman Max Baucus plans to introduce a bill that would give powerful tools to U.S. tax agencies in their battle against offshore tax evasion. But wait, isn’t it part of being an American to evade taxes? Whether personal or business, small or large scale, getting out of paying your taxes is as much a stapel party conversation as complaining about paying them. So what’s the big deal?
According to a congressional report, the big deal is that the U.S. government loses $100 billion in tax revenue every year to individuals and corporations using foreign accounts. With the economy, the housing crisis and all of the other issues facing the Obama White House, that kind of money cannot be overlooked. The bill would work to stop “offshore tax havens” through increased IRS reporting requirements and encouraging tax preparers to find and report wrongdoing.
So the people who hide $100 billion in taxes for offshore accounts are supposed to stop hiding money because the IRS is asking them to be more specific on some forms? Somehow I am skeptical that this will put much of a dent in the already sophisticated tax evasion tactics of people who know how to use bank accounts in other countries.
And then asking the people who prepare those forms to rat out the people with that money? People with millions of dollars pay specific people to do their taxes for good reasons, and they pay them well. Tax preparers for the very wealthy are not going to start turning in their clients because the IRS wants them to.
President Barack Obama supported more aggressive legislation by Senator Carl Levin along the same lines. Levin's bill emphasizes penalties, like increasing the penalty for anyone who does not disclose an offshore holding/ transaction to $1 million. Now that has teeth. The Baucus bill penalties are much smaller.
Getting as much of the estimated $100 billion that should be part of the White House wallet is a great idea, one that can't happen soon enough. A bill of any kind is a solid step forward. But at the pace the Federal government often walks, the step should have more teeth.