The IRS has finally decided to crack down on an not-well-known but flagrant private equity tax abuse, management fee waivers. State and local tax officials enabled this practice, which lowers Federal tax receipts and thus hasthe effect of shifting the tax burden off the 0.1% of private equity kingpins to small fry like you and me.
Read more...How US policy neglect helped created Puerto Rico’s lousy economy.
Read more...Being a tax haven isn’t all it is cracked up to be.
Read more...As they have for decades, Americans poll in favor of higher taxes on top earners.
Read more...Accounting Control Fraud is one play in the elite playbook; this post argues that Self-Licking Ice Cream Cones are another.
Read more...The best budget policy: Let the government deficit float and spend on programs to produce full employmen and solve our many other problems.
Read more...Offshore banking and tax haven expert Nicholas Shaxson has launched a new blog, Fools’ Gold, to look at issues of ‘competitiveness’ and so-called ‘competition’ between nations. We’ve often taken issue with that policy goal, since it gives precedence to crushing labor as a way of lowering product prices to stoke exports. This approach is dubious for anything other than small economies, since all countries cannot be net exporters. Undue focus on exports as a driver of growth results in increasing international friction, such as the currency wars that are underway now. Moreover, as we have discussed separately, trade liberalization has gone hand in hand with liberalization of capital flows, in no small measure due to US efforts to make the world safe for what were then US investment banks. Yet Carmen Reinhardt and Ken Rogoff pointed out in their study of financial crises, higher levels of international capital flows are associated with more frequent and severe financial crises.
In addition, lowering wage rates reduces domestic demand. In countries like the US, where the domestic economy is much larger than the export sector, lowering internal demand to stoke exports is misguided.
Here we look at a first case study, the real reasons behind the growth and meltdown of the famed Celtic tiger, Ireland.
Read more...This tidbit from HSBC reveals a new low in the standards of banking, which given how low those already are, amounts to an accomplishment of sorts. Perhaps we should create a Stuart Gulliver Award for other instances of creative extreme seaminess. Nominees?
Read more...Some Republican Senators are having a field day, and rightly so, over the fact that Obama’s attorney general nominee, Loretta Lynch, looks to have allowed bank giant HSBC, and more important, its executives and officers, off vastly too easy in a massive money-laundering and tax evasion scheme. And where are the inquisitive Democratic senators to be found?
Read more...TAN, or tax anticipation notes, would way be a for Greece to give itself more fiscal spending wriggle room without violating Eurozone rules. That will likely be necessary if Monday’s meeting in Brussels results in no extension of the current Eurozone bailout.
Read more...In a new paper for the Institute For New Economic Thinking’s Working Group on the Political Economy of Distribution, economist Lance Taylor and his colleagues examine income inequality using new tools and models that give us a more nuanced — and frightening —picture than we’ve had before. Their simulation models show how so-called “reasonable” modifications like modest tax increases on the wealthy and boosting low wages are not going to be enough to stem the disproportionate tide of income rushing toward the rich. Taylor’s research challenges the approaches of American policy makers, the assumptions of traditional economists, and some of the conclusions drawn by Thomas Piketty and Larry Summers. Bottom line: We’re not yet talking about the kinds of major changes needed to keep us from becoming a Downton Abbey society.
Read more...Yves here. This post makes an important and simple point about one big source of the fall in the relative importance of corporate income as a source of Federal tax revenue that is often ignored in official discussions: the rise in the use of pass-through entities.
Read more...Yves here. Nicholas Shaxson’s landmark book on tax havens, Treasure Island, described how the US was the biggest sponsor of what Shaxson called “offshore,” or tax havens and tax secrecy. He tells us how the US is working to keep it that way.
Read more...Yves here. When normally MEGO (My Eyes Glaze Over) inducing tax schemes become a topic of national debate, it’s because despite their complexity, they’ve become too big and ugly to ignore.
Mind you, multinationals already have tons of ways to escape from the tax man, starting with clever transfer pricing so as to claim pretty much all their profits occurred in super low tax domiciles. But the trick that has caused consternation is tax inversions. In crude terms is using mergers as a way to move the headquarters of a company from a higher tax to a lower tax jurisdiction. The acquired company in the lower-tax location becomes the new parent company.
The Treasury Department was so concerned about potential revenue loss that it took measures to reduce tax inversions. This article argues, in effect, that while Treasury may have made it more difficult, that the incentive to enter into inversion remains. The analysis is clever and compelling. It also happens to debunk the argument made by defenders of Antonio Weiss, the Lazard banker nominated to a Treasury post who is fiercely opposed by Elizabeth Warren. Weiss was an important advisor on the Burger King-Hortons merger, the deal that (according to the Wall Street Journal) that led Treasury to put rules in place to combat tax inversions. The defenders argued that the tax rates between US and Canada weren’t all that different, so that the tax considerations weren’t important to the deal. This article mentions the Burger King deal and the difference between US and Canadian inbound divident repatriation tax rates at 10%, more than enough to be motivating.
Read more...Most members of the great unwashed public, when they hear about unfair results of the tax code, like Warren Buffet’s secretary facing a higher tax rate than he does, or private equity and hedge fund barons paying capital gains tax rates on labor income, assume that those outcomes are the result of a combination of the rich getting the tax code changed over time or succeeding in preserving the exploitation of loopholes that should have been closed ages ago.
But there is another category of tax games that are not discussed much in polite company, that of outright abuses. What is disturbing about that behavior is that it has not only become increasingly common, but members of the bar, including those at white shoe firms, are enablers. “Money for nothing” private equity monitoring agreements are a blindingly obvious example.
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