WASHINGTON--Last week, the IRS brokered a deal that requires UBS, Switzerland’s largest bank, to turn over the names of roughly 4,450 Americans who deposited over $18 billion into secret accounts to allegedly avoid paying American taxes.From 2002 to 2007, these accounts reportedly cost the treasury $300 million a year in lost revenue. And this, apparently, is just one layer of a very large problem.
Three years ago, the Senate Permanent Subcommittee on Investigations said wealthy Americans who hide money abroad evade paying $40 billion to $70 billion in taxes each year.
Instead of hiking taxes on the high-earners paying nearly half their income in taxes--as President Barack Obama proposes--the government should nail the super rich who are not so earnest.
He should also aggressively pursue their enablers.
The budget Obama sent to Congress envisions “identifying $210 billion in savings over the next decade” from taxes gained through money hidden in secret offshore accounts by wealthy Americans and through other efforts, IRS Commissioner Doug Shulman told a Senate committee in March.
That’s a good start. And so is this: In June, a Seattle grand jury indicted three people who allegedly helped New York Jets owner Robert Wood Johnson IV, Hollywood media mogul Haim Saban and several other wealthy clients avoid paying more than $1 billion in capital gains.
Prosecutors said Mr. Johnson and Mr. Saban were misled into believing their use of financial secrecy rules in Austria and the Isle of Man were legal.
New York businessman Jeffrey Chernick had no such illusion.
Last month, he pleaded guilty to hiding more than $8 million in UBS and other Swiss banks to avoid paying federal income tax.
He was aided by foreign bankers who sometimes traveled to the United States dressed as tourists to advise him on how to evade paying his fair share of taxes, Mr. Chernick admitted in federal court.
Getting these scofflaws to pony up the money they owe is not only a matter of tax justice; it could also rescue Democrats from a bog they’ve slipped into.
Increasing the tax rate for people who earn more than $1 million a year is the cornerstone of President Obama’s plan to pay for the national health reform he wants Congress to pass.
This prospect has given Republicans, who turned a surplus into a record deficit while they controlled the White House and Congress, an opening to sanctimoniously complain that Democrats are soaking the rich to pay for their health care plan.
The president backs a House bill that would hike by 5.4 percent the federal income tax on those earning more than $1 million a year. This surcharge would be in addition to the extra taxes the wealthiest Americans will have to pay, if as promised, Democrats let the Bush-era reduction of the top tax rates expire after 2010.
When combined with other federal, state and local withholdings, these new tax bites would produce a combined tax rate of more than 50 percent in 39 of the 50 states.
People earning more than $1 million in eight of these states--Oregon, Hawaii, New York, California, Rhode Island, Maryland, New Jersey and Vermont--would pay more than 55 percent of their income in taxes.
As the Republicans flail about to keep their troubled party afloat, the Obama administration should not throw the GOP this tax-hike issue lifeline.
Asking the wealthiest Americans to pay nearly $6 of every $10 they earn in taxes likely will push more of them into the arms of corrupt financial advisors--and it might just give Republicans a leg up in this nation’s political wars.
