Obama cracks down on overseas tax loopholes.

Obama cracks down on overseas tax loopholes
President’s two-part plan calls for hundreds of new federal tax agents

Okay first let me translate the title from “newspeak” to English: “Obama finds new way to rob Peter (aka taxpayers) to pay Paul (aka the huge federal deficit he helped create).

Don’t misunderstand me, if there are businesses that aren’t paying their fair share by all means spank their asses. What seems to be lost in this crusade against capitalism is the lack of responsibility on behalf of the government. Read on and I will elaborate on the topic of taxation and reckless spending.

From the MSNBC article (highlighted in bold):

WASHINGTON - President Barack Obama vowed Monday to "detect and pursue" U.S tax evaders and go after their offshore tax shelters. In announcing a series of steps aimed at overhauling the U.S. tax code, Obama complained that existing law makes it possible to "pay lower taxes if you create a job in Bangalore, India, than if you create one in Buffalo, New York.”

The president said he wants to prevent U.S. companies from deferring tax payments by keeping profits in foreign countries rather than recording them at home and called for more transparency in bank accounts that Americans hold in notorious tax havens like the Cayman Islands.

Well so far I don’t have a real issue with the concept of eliminating the ability to avoid paying ones fair share of taxes (other than the whole system is an abomination but that is for another post).

It continues:

"If financial institutions won't cooperate with us, we will assume that they are sheltering money in tax havens and act accordingly," Obama said.

Now this I have a problem with, even murderers are afforded the presumption of innocence and cannot be compelled to aid in their own prosecution. It seems that barring any evidence of criminal wrong doing these companies should not be penalized.

The president, who hammered on this issue during his long campaign for the White House, said at a White House event that his plan would generate $210 billion in new taxes over 10 years and "make it easier" for companies to create jobs at home. Over a decade, $210 billion would make a modest dent in a federal deficit expected to swell to $1.2 trillion in 2010.

Good, Obama has found a way to recover almost a fifth of what he has spent so far. I do so wonder where he will find the rest. I’m thinking those who believed the other promises he hammered on about in the campaign might be unpleasantly surprised to find the middle class has become the new group of “fat cats”.

Under the plan, companies would not be able to write off domestic expenses for generating profits abroad. The goal is to reduce the incentive for U.S. companies to base all or part of their operations in other countries.

I think this may have the unintended consequence of driving up costs of more than just the tax burden. Losing the ability to write down expenses is rarely reflected as a profit loss and more often is passed on to the consumer.

He said the government also is hiring nearly 800 new IRS agents to enforce the U.S. tax code.

Great, expand the most inefficient and wasteful of all agencies. This expansion will no doubt offset a portion of the taxes gained by this program. I can think of nothing more ominous than growing the size of the federal government, except perhaps growing the size of the IRS.

Congress is expected to resist significant portions of Obama's plan.
The administration is not seeking to repeal all overseas tax benefits. Obama called his proposal "a down payment on the larger tax reform we need to make our tax system simpler and fairer and more efficient for individuals and corporations."

If this were only true. The tax system is indeed unfair with the top 5% of earners paying 90% of the taxes. The unfortunate part is that what Obama sees as fair is a system where the top earners are paying a great deal more. This will serve as a great incentive to excel, I have no doubt.

"Nobody likes paying taxes, particularly in times of economic stress," Obama said. "But most Americans meet their responsibilities because they understand that it's an obligation of citizenship, necessary to pay the costs of our common defense and our mutual well-being."

I rail at the concept that “taxes are our responsibility”. There is a price for freedom and citizenship, this I agree with, but that price is not oppressive, suffocating taxation which stems from a governments inability to show some restraint. Not every government program is a necessity, not every issue worthy of the burden of taxation. The idea that taxes are used exclusively to pay for our "common defense" and "well-being" is ludicrous and insulting. If that were the case I imagine we would not even be discussing taxes.

Here is where the issue of responsibility comes in. Nowhere in this useless rant is the concept of fiscal restraint even mentioned. I get it, lets get the tax cheats but how about we start reducing the size of the federal government and thereby the tax burden it represents to each and every one of us.

Government needs to look upon taxation as a hardship being thrust upon a benevolent population. We are willing to suffer for worthy causes but we are not obliged to do so. When they view taxes in real terms and not as abstract ideologies they may be more hesitant to indulge in such wasteful spending at our expense.

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