Tax havens and the public good

Note that I do not condone violation of the law. Furthermore, U.S. expats have reason to keep their money outside the U.S. (they have to live). Hence, these thoughts are really directed to U.S. taxpayers who are resident in the U.S. and keep their money outside the U.S.

FATCA is motivated largely by an attempt to make it hard for U.S. taxpayers to keep their money in foreign countries. But, why would any U.S. resident (expats are a different issue) want to keep their money outside the United States?

There is only one answer: tax rates in other countries are less. The United States taxes corporations (at least in theory) at one of the highest rates in the world. The easiest way to end the use of the so called “tax havens” would be to lower U.S. tax rates. At lower tax rates, U.S. tax payers would have:

1. No incentive to leave their money outside the United States; and

2. Every incentive to to avoid the bureaucratic costs of keeping their money outside the U.S.

It’s simple:

The United States should just lower tax rates – let that money come home!

History has demonstrated that when tax rates are lowered, governments take in more tax revenues. But, this if of course too logical for the Levins, Obamas, and Geithners of the world to understand.

Don’t follow through with FATCA – the Berlin wall of the financial system.

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