Senator Levin has announced his intent to look into some Americans' use of Liechtenstein's banks as tax havens. See Allison Bennett, Tax Havens: Leving to Investigate Liechtenstein Scandal: Says US Citizens Hid Assets in LGT Bank, 90 BNA Banking Report 364 (Feb. 25, 2008).
A whistleblower released records from the bank, and has called attention to the long-running tax haven's "wealth management" wealth. See e.g., Liechtenstein's Friendly Bankers, Editorial, NY Times, Feb. 25, 2008; Eric Pfanner, Liechtenstein looks to move beyond bank fraud, NY Times, Feb. 23, 2008; Carter Dougherty, Tax Scandal in Germany Fans Complaints of Inequity, NY Times, Feb. 18, 2008.
Germany is tired of its citizens using the small nearby state to evade German taxes and may institute unilateral measures if the OECD isn't able to persuade Liechtenstein to become more transparent.
A confidential German finance ministry briefing paper supplied to The New York Times by a ministry official outlines several unilateral measures that it says would be “worth considering” against Liechtenstein. Those include eliminating tax deductions for business expenses incurred in Liechtenstein and imposing fees on money transfers to the principality, according to the paper. Several experts said Germany could also impose a new legal requirement, known as reversing the burden of proof, on its own citizens who do business with Liechtenstein. Carter Daugherty, Germany Prods Liechtenstein on Fighting Fraud, NY Times, Feb. 21 2008.
The US should note the indignation that ordinary German citizens are feeling about the abuse of the country's trust by the elites who have socked their money away in Liechtenstein.
[There is] a new narrative in German politics: the betrayal of the elites, who have spent the last decade calling for a painful reform of the welfare state, even as they apparently avoided paying their fair share. Carter Dougherty, Tax Scandal in Germany Fans Complaints of Inequity, NY Times, Feb. 18, 2008.
That "betrayal of the elites" is essentially what has been happening here since the marketarian fallacy and Reagan "revolution" began in the 1980s. Elites have been trying to convince everyone that they will all be better off as the elites get richer, depending on "trickle down" to those who aren't in the income and wealth stratospher of the top quintile (and the top quintile of that quintile). So they argue for tax cuts--or even better, they say, zero taxation on their capital gains, so that they can do the world a good turn with their continuing entrepreneurial activity (without explaining, as they seldom acknowledge, that owning capital assets is not really a creative entrepreneurial activity). And they argue for welfare cuts--saying that the "entitlement" programs have to go because they are throttling growth.
Neither tax cuts on capital gains nor elimination of programs that give the poor the opportunity to develop human capital make sense for broad-based growth that can sustain democracy. The US seems to be waking up to this. About time.
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