ataxingmatter

Federal Courts, Constitutional Equal Protection and Substantive Due Process, DOMA and the rights of gay Americans

After a number of decisions by federal district courts that have concluded that the so-called "defense of marriage act" (DOMA) violates the federal constitutional guarantee of equal protection, a district court in Hawaii has taken the opposite stance and rejected the claim that the Constitution mandates same-sex marriage in Hawaii.  See Jackson and Bradley v. Abercrombie  (D Ct Hawaii Aug. 8, 2012) (with Hawaii Family Forum as intervenor).

This matters because DOMA and the laws of various states that prohibit same-sex marriage leave same-sex couples in a disadvantaged situation on many tax issues (e.g., married same-sex couples are not treated as married for purposes of the federal income tax) and other legal concerns (e.g., rights of survivorship and decision-making at end of life and rights to adopt).

The Hawaii court's rationale rests on two prongs:  (1) denying the due process claim based on Scalia-type originalism:  since same-sex marriage isn't "deeply rooted in this Nation's history and tradition", it must not be a fundamental right and (2) denying the equal protection claim based on a "rational basis" analysis: since same-sex couples cannot "naturally procreate" the state can legitimately limit marriage to opposite-sex couples that can.

As to the first claim, this notion of "tradition" as the basis for determining what rights we have, or the notion of originalism as the fundamentally correct approach to constitutional interpretation, has always been problematic.  It tends to perpetuate the views of a privileged elite as the only constitutionally protected views, and to discriminate against "upstart" groups that gradually are recognized by society as suffering undue discrimination.   Do we go all the way back to the original founding of the country, or do traditions that are evolving over time come into play?  At what point does something become sufficiently rooted to count--one would think the fact that a majority of Americans now support same-sex marriage should be relevant.   The reliance only on (very) "old" traditions/norms as the basis for due process permits long-ingrained and unfounded prejudices to stand in spite of the Constitution's glimmering promise of substantive due process and equal protection for all.  

It is worth noting that the Supreme Court has long recognized (since Loving v. Virginia) that the blinders early Americans had as to race and the resulting perversions of justice apparently blessed by the Constitution (permitting slavery) and engaged in by the American people  (treating non-whites as inferior, treating marriage between blacks and whites as a crime) can no longer be understood to comport with our evolving understanding of appropriate treatment and therefore of what is required to satisfy the Constitution. 

As to the second claim of a rational basis based on "natural procreation", that is simply an invented logic for the existing discrimination.   "Natural" procreation is, of course, defined a priori as something that gays can't do, even though gays can have sex with people of the opposite sex and then the couple can adopt the child.   People of opposite sex frequently marry with no intent to have "naturally procreated" children.  People of same sex marry with every intent of having children through the use of surrogates and sperm or egg donation, a method that is also used by opposite sex couples that cannot have children through "natural" procreation.  So opposite-sex marriage is neither essential to "natural procreation" nor is "natural procreation" a sufficient or even necessary condition for existing opposite sex marriages.    It is therefore a contrived and arbitrary basis for depriving same-sex couples of the innumerable legal and societal and personal benefits of legal marriage.  The court goes on to justify limiting marriage to opposite sex couples with the idea that a legisalture could rationally conclude that children are better off raised by a parent of each sex, although it acknowledges that there is considerable evidence against this point.  As long as it is debatable, such a "rationality" argument can win if there is not heightened scrutiny--but the Court must at the least demand heightened scrutiny as the standard for these same-sex equal protection issues.

The district judge in Hawaii is staking out the argument that will likely appeal to the right wing on the Supreme Court who  have already indicated a willingness to overturn established Supreme Court precedents when it suits their objectives, from Gore v. Bush (overturning the long-settled law on nonintervention in political questions) to Citizens United (overturning long-settled law on corporate entities inability to influence political campaigns with money).  The question is whetherthe Court will stp up to the plate and clearly proclaim the inappropriateness of applying rational basis analysis to equal protection claims of homosexual Americans, a group that has certainly suffered invidious discrimination as a "discrete and insular minority" throughout most of our history.

This case was defended by the misnamed "Alliance Defending Freedom" (it should be called the "Alliance for Sacrificing Freedom").  Not unexpectedly, the right-wing National Review suggests that this judge paid "more careful attention to the actual Constitution."    William C. Duncan, Federal Court in Hawaii: No Constitutional Right to Redefine Marriage, National Review (Aug. 9, 2012).  What that misses is that the point of constitutional review is to determine what the "actual Constitution" means on these matters.

Let churches and other religious institutions limit the types of marriages they will sanction within their religious walls however they like.  But states, and the federal government, can no longer claim any rational basis for allowing a fundamentalist Christian or other religious viewpoint to determine the rights of those who do not share it.  Not only due process, but also religious freedom and equal protection demand that the Supreme Court recognize a fundamental right of free Americans who happen to be same-sex couples to choose their intimate partners without the interference of the state and to have the same legal protections for that choice as opposite-sex couples.

Romney's tax returns--what we do know (Part VI)

Back when Romney released a single tax return (2010, but not various disclosure forms or gift returns or other related documents that would be of interest, given his assets abroad and assets moved into trusts for children) and parts of an estimated return (2011--still not released in full), various people pored over the returns to glean what could be understood about this wealthiest presidential candidate's assets and tax ethos from such scant information.

The item that hit most people as revealing was the rate of tax paid on Romney's "taxable" income:  a mere 13.9 percent, due in large part to the preferential treatment that rich people's income gets in our tax code since the repeal a few years after the Reagan 1986 reform of the capital gains reform that eliminated the difference in rates between the ordinary income rate on wages and the preferential rate on capital gains.  Romney claims he is proud of paying a lot in taxes, but of course all is relative.  $3 million on $21.7 million of mostly unearned income is most definitely not "a lot" when compared to the percentage of their income most people in the middle class pay (about double that percentage).

Matt Taibbi pointed out recently on his blog that what we know even from only one incomplete return tells us a lot about Romney's tax record.   As he puts it, "there's enough information already for Barack Obama to tell a powerful stsory about wealth and privilege to most ordinary Americans."  Taibbi, Obama, Not Reid, Should Be Taking on Mitt Romney's Tax Record, Taibblog (Aug. 9, 2012) (Hat tip to Yves Smith over at Naked Capitalism).  Taibbi thinks nobody--GOP or Dem--is telling that story so that ordinary folk can understand it because "politicians are still afraid to explain to the American people how exactly it is that many Wall Street firms make their money, because they're afraid to lose access to the crumbs those firms sometimes toss their way."  Id.

Here's the story Taibbi thinks Obama should be more forthright (and courageous) in telling.

The Romney tax returns are a prime example of our increasingly two-tiered bureaucratic system, in which there is one set of rules for poor and middle-class people, and another set of rules for people like Mitt Romney.  . . .  In Mitt's case, the money you and I make to support ourselves is called income and is taxed up to 35 percent, but the money Mitt makes raiding companies with borrowed money and extracting draconian management fees from captive companies that have no choice but to pay them is called "Carried Interest" and taxed at a top rate of 15%.  The ostensible excuse for this outrageous difference is based upon a built-in cultural value judgment, which says that the work Mitt Romney does raiding companies with borrowed money is more valuable than the work ordinary people do laying asphalt or teaching autistic children.  ...In fact, the takeover method espoused by Bain and many private equity firms is a lot closer to the Tony Soprano-takes-over-Davey-Scatino's-sporting-goods-store "Bust Out" model ... than it is to anything like legitimate consulting.  Id. (formatting changed)

Is it so surprising, then, that people of Romney's ilk--born with a silver spoon in their mouths and granted every advantage and opportunity that wealth and access to influential connections from bankers to politicos to business "movers and shakers" can provide--think that they have achieved everything due to their own merit, and hence are rightfully "entitled" to tax breaks, "entitled" to lead, but that ordinary folk shouldn't feel "entitled" to a decent safety net that guarantees them even a minimum of opportunity in the dog-eat-dog world that the plutocrats dominate?  Here's what this week's New Yorker had to say about Romney's sense of privileged entitlement:

[Romney] believes, with shining certainty, in his own success, and , more broadly, in the American Gospel of Wealth that lies behind it:  the idea that rich people got rich by being good, that the riches are a sign of their virtue, and that they should therefore be allowed to rule. Adam Gopnik,  "I, Nephi,"  August 13 & 20 2012 The New Yorker 78, at 86.

Can someone with this sense of entitlement and the kind of wealth that makes it practically impossible to identify with the majority of ordinary Americans' struggles and lack of opportunities, possibly lead this country to adopt the necessary reforms to the Reaganomics/Friedmania program of excessive military expenditures, ridiculous privatization efforts, overzealous deregulatory efforts, or the privilege-reinforcing Bush tax cuts?  Not likely.  Romney's tax plan and other programs promise an even heftier dose of the very poisons that set us off on the 2007 financial crisis and resulting Great Recession.  Doubling down on the GOP "cures" will make our economy truly ill. 

Romney is still hiding his tax history (Part V)--Romney vs. Reid

Everyone has by now heard that Harry Reid, the Nevada Democrat who heads the Senate, has reported that a "credible source" who is an investor/former business associate of Romney's at Bain Capital has told him that Romney paid no taxes for ten years.  See Catalina Camia, Harry Reid not backing down on Romney tax claim, USA Today, Aug. 6, 2012.  The statement was first made in the Huffington Post, and then repeated on the Senate floor.  See  Aamer Madhani,   Harry Reid's Accusations Fan Flames over Romney's Taxes, USA Today (Aug. 5, 2012).  Presumably, the source would have to be close enough to Romney that Romney has confided in him, or bragged to him about, his tax results in the past.  (Based on what I've heard as well as some first hand experience with private equity folk and their typical braggadoccio, I'd not be surprised at all that there could have been a bragging match along the lines of--you won't believe what I pulled off for the 10th year in a row--zero federal income taxes!)

Now, if the information is correct, that would be disturbing, even for someone as rich as Romney and able to use sophisticated tax advisers (and we already know, having most of his income in the form of unearned capital gains rather than higher taxed earned wages/salary income).  It would be disturbing because the rich are busy fighting any hint that they should pay tax at higher rates--such as pay tax on their unearned income at the same rate that we who toil daily pay on our earned income--by claiming that they already pay too much in taxes and that it is class warfare on the rich to suggest that parity with ordinary taxpayers would be fair.  Taxes at less than 14%--the rate paid by Romney on his single released return for 2010--is an absurdity for someone making tens of millions a year for doing nothing.  Taxes at zero percent is an obscenity.

But of course, that isn't the only possibility of what the tax returns, if released, might show.  They may reveal even more characteristics of an oligarchic elite that believes itself above the law.  Various prior postings have explored questions that can't be answered from looking at one year's returns--from hobby horse to business horse and passive activities.  Of course, we already know that Romney is not squeamish about abusive tax shelters. (See Part IV of this series on Romney's audit committee approval of Marriot International's Son of Boss tax shelter scam.) The public wants to know, and the public should know before voting for a candidate. 

 Romney's attack dogs in the GOP have taken an increasingly snarling approach that borders on the ridiculous.  RNC chairman Reince Priebus called Reid a "dirty liar".   Catalina Camia, Harry Reid not backing down on Romney tax claim, USA Today, Aug. 6, 2012.  Other Republicans appeared on Sunday news shows, like Sen. Graham (R-S.C.) who said he thought Reid was lying, and Va. Gov. Bob McDonnell on Face the Nation, who decried the "reckless and slanderous charge".  See Eugene Robinson, Warring over tax returns, Washington Post (Aug.  2012).   Romney's own response so far is tone-deaf--that he won't release more returns. To Fox News' Sean Hannity last Thursday he added that "it's time for Harry to put up or shut up.  Harry's going to have to describe who it is he spoke with because of course, that's totally and completely wrong. It's untrue, dishonest and inaccurate.  It's wrong.  So I'm looking forward to have Harry reveal his sources." Sam Stein, Mitt Romney to Harry Reid on Tax Dodge, Huff Post (Aug. 2, 2012, updated Aug. 3, 2012). 

Reid also released a statement Thursday night:

As I said before, I was told by an extremely credible source that Romney has not paid taxes for ten years. People who make as much money as Mitt Romney have many tricks at their disposal to avoid paying taxes. We already know that Romney has exploited many of these loopholes, stashing his money in secret, overseas accounts in places like Switzerland and the Cayman Islands.

Last weekend, Governor Romney promised that he would check his tax returns and let the American people know whether he ever paid a rate lower than 13.9 percent. One day later, his campaign raced to say he had no intention of putting out any further information.

When it comes to answering the legitimate questions the American people have about whether he avoided paying his fair share in taxes or why he opened a Swiss bank account, Romney has shut up.  But as a presidential candidate, it’s his obligation to put up, and release several years’ worth of tax returns just like nominees of both parties have done for decades.  Id. (in update portion).

Now, folks, Romney has it backwards.  It's not Reid who needs to "put up or shut up."  It's Romney, as Robinson noted in the Washington Post article cited above.  We have a strong journalistic tradition of believing that confidential sources of scandalous information should be protected.  And we have a very strong presidential campaign tradition of tax return releases--started by Mitt's father George's release of 12 years of returns.  Romney can make the speculation circulating around his refusal to release returns become a "tempest in a teapot" with a simple gesture--release the last ten years of his tax returns, as various Democratic reps on the Sunday talk shows noted in response on the Sunday talk shows.  Aamer Madhani,   Harry Reid's Accusations Fan Flames over Romney's Taxes, USA Today (Aug. 6, 2012).    In fact, one commenter on the HuffPost story cited above notes that Romney called on Ted Kennedy to release back returns in the Senate race (which Kennedy did) with the language that "doing anything else would be taken as the Senator hiding something."  (Just more proof of Romney's flipping nature...) and another commenter has the need for the returns exactly right:

Isn't it funny that if a person is being considered for a federal job she/he has a credit check run and in doing so the IRS is contacted to ensure there are no tax problems.  Wouldn't it be prudent for the people of the United States to have the same prior to "hiring" someone to lead the country[?]

Aside:  Huff Post also notes that Romney's founding of Bain Capital is tainted in a way that should matter deeply to U.S. voters, because he actively sought out investment from notorious oligarchic families that were funding death squads in El Salvador.  See the extensive discussion (and cites to additional resources on this issue) in Ryan Grim & Cole Stangler, Mitt Romney Started Bain Capital With Money from Families Tied to Death Squads, Huff Post (August 8, 2012).  Romney acknowledged that Bain had investors from El Salvador, but claimed that investigation showed no links to criminal activity, an assertion that is almost impossible to believe, since these families that admittedly funded Bain's startup were also notorious for supporting right-wing activism and reported in the media in 1981 as supporting death squads, prior to Bain's founding..

ID theft as basis of systemic IRS tax refund fraud problems

Early in 2012, the IRS and Justice Department announced a major crackdown on identity theft and enforcement efforts against tax refund fraud.  See IIRS, Identity Theft Crackdown Swweps Across the Nation: More than 200 Actions Taken in Past Week in 23 States, IR-2012-13 (Jan 13, 2012).   However, the IRS, which hasn't been a perennial favorite funding target of GOPers in Congress and has had to operate with too few staff and resources to do its job well, has continued to fail to keep up with the criminals who commit tax fraud.  A recent report by the Inspector General for Tax Administration suggests a range of problems. TIGTA, There are Billions of Dollars in Undetected Tax REfund Fraud Resulting from Identity Theft (July 19, 2012) (Ref. No. 2012-42-080). See also Richard Rubin, IRS may lose $21 billion in identity fraud, study says, Bloomberg.com (Aug. 2, 2012).

The TIGTA report suggests that identity thieves may end up claiming as much as $21 billion in fraudulent tax refunds over the next five years. Examples include $3.3 million in refunds sent to a single address in MIchigan listed on more than 2000 different tax returns and more than 300 direct deposits totaling almost half a million sent in to a single bank account.  There was one bank account that received 590 deposits totally more than 909 thousand dollars. 

The agency responded that it has changed its screening filters to address the issues raised and taken several steps to address tax-related identity fraud, which has been concentrated in Florida. The TIGTA report had a series of recommendations, including better use of third party information and limits on tax refunds being sent to the same bank account.

Bloomberg.com also reports a harsh assessment of the IRS's effort to provide Tax Identification Numbers (TINs) to non-US residents.  See Richard Rubin, IRS Allowed Fraud in Rust to Issue ID Numbers, Audit Says (Aug. 8, 2012).  (For a similar audit report issued by the Deputy Inspector General for Audit on July 7, 2011, see here.) The rush to serve resulted in allowing fraud to go undetected, with examples of almost 16,000 TINs going to a single address in Phoenix and $52.5 million in refunds for nonresident TINs going to just four addresses in Atlanta. In 2011, the IRS processed almost 3 million tax returns from nonresidents and sent almost $7 billion in tax refunds in response.  But their rush to provide numbers and process returns meant they made mistakes, apparently with some supervisors actually discouraging employees from taking the time to root out fraud, according to the IRS inspector general.  The IRS has announced that it is reinforcing its procedures to ensure the integrity of the program, including a requirement that original identification documents be submitted with applications for TINs.

 See also See Siobhan Hughes, IRS Managers Discouraged Examiners from Rooting Out Fraud, Wall Street Journal (Aug. 8, 2012).

Romney is still hiding his tax history (Part IV)

As I noted in several prior posts about the reasons that multiple years of the Romneys' tax returns are essential to evaluating Romney as a presidential candidate, the fact that Romney has adamantly refused to release returns other than the 2010 actual return (and the 2011 estimated return) is a cause for concern.  Since the established norm is that presidential candidates release 8-12 years of returns, Romney's insistence on not disclosing other returns appears arrogant and disrespectful of voters and suggests that there may be one or more items in those returns that he doesn't want voters to know about.  The prior posts included some information about items that could be better assessed with more returns and related information to review, including among others: passive activity losses, questions of whether certain items are hobbies or can legitimately be classed as business expenses, foreign bank accounts, tax shelters, offshore companies, income from Bain Capital, and effective tax rate.  Much speculation has centered on the fact that Romney has accounts in various tax haven jurisdictions (Cayman Islands, Bermuda, Singapore) as well as bank accounts in jurisdictions that have been noted for banking secrecy and the accompanying tax evasion possibilities. 

Since the US began cracking down on Swiss bank account holders who had avoided their reporting responsibilities, this latter issue has gained considerable visibility.  It turns out that many Americans had multi-million dollar accounts abroad that weren't reported and on which they weren't paying taxes.  With the breakthroughs facilitated by whistleblowers that threatened an avalanche of information about other bankers, other accounts and other accountholders, many of those lawbreakers came forward to participate in voluntary disclosure programs through which most could pay a penalty and a settled amount for taxes and avoid criminal prosecution.  So US taxpayers (and voters) want to know--did the Romneys participate in that disclosure program.

 Ed Kleinbard (former chief of staff of the Joint Committee on Taxation and currently at University of Southern California) and Peter Canellos (former chair of the New York State Bar Association Tax Section and current private practitioner) have raised another important issue that would be revealed more clearly with additional tax returns--Romney's participation in abusive tax shelter activity.  See Kleinbard & Canellos, Romney's Role in Tax Shelter Raises Questions, CNN op-ed (Aug. 8, 2012).   The authors note that Romney's limited release of tax returns doesn't "dispel the legitimate concerns that arises from hints buried in his scant disclosure to wealth."  But they note that a "relevant line of inquiry" is "what exists in the public record regarding his attitude toward tax compliance and tax avoidance."  So they decide to see what that might be.  They find something troubling--his acceptance of abusive tax shelter activity by large multinational corporations when he headed Marriott International's audit committee and approved the company's involvement in a Son of Boss deal, a transaction undertaken purely for tax purposes to create artificial losses that would then be used to offset real gains from business activities and thereby substantially reduce the company's tax bills.

A key troubling public manifestation of Romney's apparent insensitivity to tax obligations is his role in Marriott International's abusive tax shelter activity.

*** From 1993 to 1998, Romney was the head of the audit committee of the Marriott board.

During that period, Marriott engaged in a series of complex and high-profile maneuvers, including "Son of Boss," a notoriously abusive prepackaged tax shelter that investment banks and accounting firms marketed to corporations such as Marriott. In this respect, Marriott was in the vanguard of a then-emerging corporate tax shelter bubble that substantially undermined the entire corporate tax system.

*** [T]he government initiated legal challenges that resulted in complete disallowance of the losses claimed by Marriott and other corporations. *** [T]he government brought successful criminal prosecutions against a number of individuals involved in Son of Boss. ***

In his key role as chairman of the Marriott board's audit committee, Romney approved the firm's reporting of fictional tax losses exceeding $70 million generated by its Son of Boss transaction. His endorsement of this stratagem provides insight into Romney's professional ethics and attitude toward tax compliance obligations. (emphasis added)

 So Romney as "businessman" (his claimed primary qualification for serving as President) was happy to sign off on tax scam transactions intended to benefit his corporation at the cost of ordinary taxpayers who are called upon to make up the difference in higher rates of borrowing by the federal government or higher taxes.  Can Romney hide behind the excuse of--Oops, I was just an unsophisticated board member who relied on tax advisers and couldn't be expected to understand such complex transactions and tax issues?  No way.  As Kleinbard and Canellos note in their op-ed:

In his key position as head of the board's audit committee, Romney was required under the securities laws and his fiduciary duties to review the transaction. In fact, it has been publicly reported that Romney was the Marriott Board member most acquainted with the transaction and to whom the other board members turned for advice. This makes sense because aggressive tax-driven financial engineering was a large part of what Romney (and Bain) did for a living. For these reasons, it is fair to hold him accountable for Marriott's spurious tax reporting. 

*** [Romney] had an insider's perspective on the motivation and lack of substance in the transaction, as well as the financial sophistication to understand the tax avoidance involved. Romney failed in his duties to Marriott and its shareholders and acted to undermine the fairness of the tax system. (emphasis added).

These issues are critically important to Romney's purported qualifications to serve as president.  A man who is willing to bend/break the rules in order to make more money for himself and his elite buddies doesn't belong in the White House.

Corporations Don't Need More Tax Breaks

If you listen to the corporate lobbyists, and the right-wingers who plead their cases for them in Congress and in the media, you'd think that corporations are so heavily taxed that it is threatening their ability to continue to conduct business and be competitive in world markets. But is that really the case? This blog has often pointed out two obvious shortcomings in the corporate whine: first, the corporate statutory rate of 35% is honored in the breach--most corporations pay actual tax rates so significantly lower than 35% that the statutory rate is an illusion; and second, as far as global competitiveness is concerned, the corporate tax rate is the only significant tax that US corporations pay, whereas most other countries have both corporate income taxes and VAT taxes, often paid at each transactional stage of production.

A site called "NerdWallet" provides considerable information based on analysis of the financial statements of companies, providing greater transparency for investors and, lucky for us, for those of us interested in tax facts.   See, e.g., the NerdWallet study, Top Companies Paid 9% Tax Rate (July 24, 2012).

Because tax provision includes both domestic and foreign, current and deferred taxes, NerdWallet researched further to find how much was actually paid by these American companies to the U.S. federal government in the most recent tax year.  By dividing the current portion of federal taxes by pre-tax income, NerdWallet was able to calculate the percentage of these companies’ earnings that was paid to the U.S. government. For the ten American companies with highest earnings in the most recent fiscal year, this number averaged 9%. NerdWallet Study (emphasis added).

A press release about the study notes just how much corporate taxation has shrunk as a source of revenue in the US, as corporations pay lower rates than ordinary Americans.

A new NerdWallet study found the 10 most profitable U.S. companies paid an average of just 9% in federal taxes last year. These low rates are particularly shocking given that the official tax rate is 35%. The study also revealed that more than half of the 500 largest U.S. companies paid a lower tax rate than the average American.  NerdWallet press release (July 30 2012).

NerdWallet also has a very useful tool for seeing what each major corporation of the top 500 actually pays in taxes, available here. You can scroll through a list of corporations to select a particular one of interest, and the tool will show the actual rate of taxes paid to the U.S. government, the compensation paid to the CEO, and the average compensation for the company's employees, as well as the multiple of the CEO compensation to the average employee compensation. For example, the tool provides the following information for several of the largest of the 500 corporations.

 1. Exxon Mobil Pre-tax Earnings: $73.3 Billion Actual Taxes Paid: $1.5 Billion (2%)

2. Chevron Pre-tax Earnings: $46.6 Billion Actual Taxes Paid: $1.9 Billion (4%)

3. Apple Pre-tax Earnings: $34.2 Billion Actual Taxes Paid $3.9 Billion (11%)

4. Microsoft Pre-tax Earnings: $28.1 Billion Actual Taxes Paid: $3.1 Billion (11%)

5. JPMorgan Chase & Co Pre-tax Earnings: $26.7 Billion Actual Taxes Paid $3.7 Billion (14%)

LIBOR manipulation and tax shelter (er-financing) transactions--all in a day's fees for the banksters

Boston Review published a story by a former Citi employee that reveals the everyday machinations engaged in by banksters to help their high-wealth clients evade income taxes through creating tax shelters that appear to satisfy legal requirements.  See Omer Rosen, I, too, have messed with LIBOR: toying with the immutable laws of finance, Boston Review (July 30, 2012).

In the case reported in the article, the bankster was told that his "tax transaction" had to be a "financing transaction", so he needed to demonstrate that an above-market fixed rate (that worked only because the deal was a tax evasion deal so the taxes saved made up for the too-high rate) was theoretically a good business deal because the too-high fixed rate might end up lower than potential high LIBOR rates.  So the bankster toyed with different scenarios for hypothetical LIBOR rates, creating ones that made the financing transaction look feasibly prudent even though everybody involved knew it was not a winner as a financing and was only a winner (if you overlooked the illegality) as a tax evasion technique.

These are the "too big to fail" banks that we are still coddling and that the Tea Party right-wingers in Congress want to coddle even more by repealing the minimal reforms put in place through Dodd-Frank.  When will we start putting them in jail, rather than coddling them?

Does the Tea Party support Tax Dodgers?

Andrew Leonard's July 27 article in Salon, Tea Party Shields Tax Dodgers, looks at the way Jim DeMint and Rand Paul are carrying water for the big banks--suggesting that Treasury shouldn't be implementing the "FATCA" legislation passed as part of the HIRE act because it might cost the big banks some paperwork they'd rather not do.

Here's the issue with FATCA. It requires banks to report on substantial accounts held abroad--more than $50,000 for individuals or more than $250,000 for entities.

The Treasury believes it can generate almost $9 billion in additional tax revenues through the implementation of FATCA over the next ten years. But Paul, DeMint and other right-wingers have complained about the cost to banks to carry out the law. As Leonard puts it,

FATCA isn’t about making life hard for expatriates. It is targeted at big players who are moving huge amounts of cash overseas for the specific purpose of avoiding their U.S. tax obligations. And Rand Paul and Jim DeMint are defending these upstanding members of the 1 percent by carrying water for banks who want to avoid the paperwork costs involved in ferreting out the tax dodgers.

Is that how the Tea Party wants this country to be run — in the best interests of the richest Americans and the banks?