Does it matter that Mitt Romney, the presumptive nominee of the Republican Party for president of the United States, is a huge fan of offshore tax havens?
It should to Americans who take seriously the question of whether this country has the resources to pay for Social Security, Medicare, Medicaid, implementation of the Affordable Care Act and all the other programs and initiatives that Romney and House Budget Committee Paul Ryan, R-Wisconsin, say we can no longer afford.
The truth, of course, is that the United States produces more than enough taxable wealth to pay for every program that Romney and Ryan propose to “reform,” mangle, dismantle or eliminate.
Indeed, a remarkable new study produced for the global Tax Justice Network reveals that at least $21 trillion—yes, that’s “trillion” with a “t”—has been shielded from appropriate taxation in the secret tax havens favored by the super-rich of the United States and other countries around the world.
To put that figure in perspective, $21 trillion is the equivalent of the combined GDPs the United States and Japan.
James Henry, the former chief economist for McKinsey & Company (a top international business consulting firm), produced the report for the Tax Justice Network. Employing data from the Bank of International Settlements, International Monetary Fund, World Bank and governments around the world, Henry came up with what he describes as the “conservative” figure of $21 trillion as a baseline measure of the financial wealth deposited in offshore bank and investment accounts.
Henry says that private wealth socked away in offshore tax havens by billionaires and millionaires who want to avoid paying their fair share at home represents “a huge black hole in the world economy.”
It also represents an opening, should world leaders choose to address the issue, for governments to claw back tax revenues in a time of global economic distress.
“The lost tax revenues implied by our estimates is huge. It is large enough to make a significant difference to the finances of many countries,” explains Henry. “From another angle, this study is really good news. The world has just located a huge pile of financial wealth that might be called upon to contribute to the solution of our most pressing global problems.”
While reasonable people might debate the precise amount of sheltered cash, there is no question that Henry is right. The United States and other countries could go a long way toward balancing their books if they clawed back a fair share of the sheltered largesse.
Unfortunately, as he notes, it is not easy to claw money back from the offshore accounts of the tax-avoiding Mitt Romneys of the world. (Romney keeps millions, perhaps tens of millions, in secretive Swiss banks accounts and the shadowy tax havens of the Bahamas and the Cayman Islands.) As Henry notes, an “industrious bevy of professional enablers in private banking, legal, accounting and investment industries” makes it possible for millionaires and billionaires to move their money offshore.
In addition to the “professional enablers,” however, there are also “political enablers.”
Republicans and Democrats in Washinbgton have been slow to move beyond narrow debates about tax “reform” and toward serious discussions of tax “enforcement.”
But Romney takes a problem and turns it into a pathology. The Bain Capitalist does not just sock money away in foreign tax havens. He favors tax policies that would make it dramatically easier for multinational corporations—and, presumably, their wealthy CEOs—to avoid paying taxes.
The United States needs leaders who will work with leaders of other countries, especially Germany, that are looking for ways to crack down on abusive practices that shelter wealth from legitimate taxation. Barack Obama has not begun to go far enough in this regard, but his criticisms of Romney on tax issues represent a step in the right direction.
If Romney wins, does anyone think the country’s most prominent investor in tax havens would lead the charge to constrain the very tax-sheltering schemes in which he has engaged? Of course not.
This is a serious matter, not just for progressives and Democrats but for conservatives and Republicans who care about the economic stability of the United States.