Archives: January, 2010

A Victory for Fiscal Sovereignty and Human Rights

A Swiss court just threw a wrench in the gears of an IRS effort to impose bad U.S. tax law on an extraterritorial basis, ruling that Switzerland-based UBS does not have to hand over data to the American tax authorities. This ruling nullifies an agreement that the Swiss government was coerced into making with the U.S. government last year.

In typical arrogant fashion, the IRS already has indicated that it still expects acquiescence, notwithstanding Switzerland’s strong human rights policy on personal privacy. The Bloomberg story excerpted below has the details, but it’s worth noting that this entire fight exists solely because the Internal Revenue Code imposes double taxation on income that is saved and invested, and imposes that bad policy on economic activity outside America’s border. But just as other governments should not have the right to impose their laws on things that happen in America, the United States should not have the right to trample the sovereignty of other nations:

The failure by U.S. citizens to complete certain tax forms or declare income doesn’t constitute “tax fraud” that would require Switzerland to disclose account data, the country’s Federal Administrative Court ruled in a judgment released today. …“The prosecutors at the Justice Department are not going to be happy with this opinion,” Namorato said in an interview in Washington. …U.S. Justice Department spokesman Charles Miller declined to comment. …The Internal Revenue Service said in a statement that while the agency hadn’t reviewed the ruling it “had every expectation that the Swiss government will continue to honor the terms of the agreement.” …Switzerland distinguishes between tax fraud, which is a crime, and tax evasion, which is a civil offense.

This battle is part of a broader effort by uncompetitive nations to persecute “tax havens.” Creating a tax cartel for the benefit of greedy politicians in France, Germany, and the United States would be a mistake. An “OPEC for politicians” would pave the way for higher taxes, as explained here, here, and here.

But this also is a human rights issue. Look at what happened recently in the thugocracy known as Venezuela, where Chavez began a new wave of expropriation. The Venezuelans with money in Cayman, Miami, and Switzerland were safe, but the people with assets inside the country have been ripped off by a criminal government. Or what about people subjected to persecution, such as political dissidents in Russia? Or Jews in North Africa? Or ethnic Chinese in Indonesia? Or homosexuals in Iran? And how about people in places such as Mexico where kidnappings are common and successful people are targeted, often on the basis of information leaked from tax departments. This world needs safe havens, jurisdictions such as Switzerland and the Cayman Islands that offer oppressed people the protection of honest courts, financial privacy, and the rule of law. Heck, even the bureaucrat in charge of the OECD’s anti-tax competition campaign admitted to a British paper that “tax havens are essential for individuals who live in unstable regimes.” With politicians making America less stable with each passing day, let’s hope this essential freedom is available in the future.

The Government Should Have Less Power to Tax and Spend, Not More Power to Regulate Speech

Yesterday, The Hill asked various pundits and politicos to respond to the Supreme Court’s Citizens United ruling.  The Big Question (as their periodic feature is called) was, “Will corporate money change campaigns?”  You can read my response here.

Today, that same newspaper invited me to blog some further thoughts on the Citizens United decision.  Here’s what I wrote:

Critics of yesterday’s decision say the sky of American democracy is falling.  Supporters—including myself—say it’s a great day for the republic and a vindication of the freedom of speech.  How can this be?  Are nonprofit think tanks and advocacy groups like my own Cato Institute, the ACLU, the NRA, and many other odd bedfellows who supported Citizens United all in the pockets of Wall Street, Big Oil, insurance companies, and others that President Obama assails as corrupting our politics?  Leaving aside the issue of why the politician who got more of his campaign funding from Goldman Sachs than any other source would be going after the very industries that most support him, the asymmetry in this debate rests on the myth that money is an evil in the political system, and that therefore the American people want so-called campaign finance reform to “clean up” government.

Money is no more an evil in politics than it is in life generally.  Some people may not like mud-slinging attack ads, but some people also don’t like SUVs, the Super Bowl, the Jay Leno Show, and many other things that people spend money on—including donations to Cato, the ACLU, the NRA, etc.  The problem with money in politics isn’t the money, but rather the politics.  So long as the government is powerful enough to dole out tax breaks, subsidies, stimulus funds, regulations, earmarks, and a whole host of other goodies (and baddies), those that stand to benefit (and lose) will spend money on the political process.  The way to get rid of this behavior and spending—which is constitutionally protected in a whole host of ways: freedom of speech, freedom of association, the right to petition the government for redress of grievances, etc.—is to reduce the government’s power to affect so many people’s lives and transform economic incentives for businesses big and small.  Reduce the size of government and K Street will melt away.

Finally, as my colleague Roger Pilon points out, 26 states have minimal campaign finance laws, with no evidence that those states have more corruption—or a more unequal “political playing field”—than states that strictly regulate.  And that’s because the real reason we have campaign finance regulations—the dirty little secret behind the whole convoluted regime—is that it’s an incumbency protection racket.  From the so-called “millionaire’s amendment” that the Supreme Court struck down in 2008 to the limits on corporate and union advocacy that the Court struck down yesterday, McCain-Feingold and all other campaign finance legislation—passed by self-interested politicians—is designed to make it harder for challengers.  After-all, incumbents have the benefit of name recognition, taxpayer-funded travel to and around their home districts and states, taxpayer-funded campaign literature disguised as informational flyers touting all the great things a congressman is doing, and a host of other advantages.

The First Amendment is not a “loophole” for big business and those of us who want freer speech—without bureaucrats deciding who gets to speak when and how much—are not corporate shills.  Free speech is the very foundation of our democracy, and we are stronger today for the Citizens United decision.

Weekend Links

  • The G.O.P.’s next move on health care: “The challenge for Republicans is not to try to ‘do’ things just like the Democrats but a little less expensively or with a little less bureaucracy, but to present an agenda of personal and economic liberty as a positive alternative… [Republicans] will have to show that this time they are in favor of something positive. It’s called freedom.”

How Many Libertarian Voters Are There?

In our new study, David Kirby and I round up various estimates on the number of libertarian-leaning voters. Our own calculation, 14 percent, is actually the lowest estimate.

We use three questions on political values from the generally acknowledged gold standard of public opinion data, the surveys of the American National Election Studies, and find that 14 percent of respondents gave libertarian answers to all three questions. But other researchers have used somewhat looser criteria and found larger numbers of libertarians:

For more than a dozen years now, the Gallup poll has been using two broad questions to categorize respondents by ideology about economic and social freedom… Combining the responses to these two questions, Gallup consistently finds about 20 percent of respondents to be libertarian. In 2009 they found 23 percent libertarians, along with 18 percent liberals, 19 percent populists, and 31 percent conservatives (9 percent were unclassifiable).

In a 2008–2009 panel study, ANES asked [two] questions… If we define “libertarian”  as those who believe that the federal government should have less effect on Americans’ lives and do less to influence businesses, we get 25 percent of voters—slightly higher than Gallup’s 23 percent…

Finally, we commissioned Zogby International to ask our three ANES questions to 1,012 actual (reported) voters in the 2006 election… We asked half the sample, “Would you describe yourself as fiscally conservative and socially liberal?” We asked the other half of the respondents, “Would you describe yourself as fiscally conservative and socially liberal, also known as libertarian?”

 The results surprised us. Fully 59 percent of the respondents said “yes” to the first question. That is, by 59 to 27 percent, poll respondents said they would describe themselves as “fiscally conservative and socially liberal.”

The addition of the word “libertarian” clearly made the question more challenging. What surprised us was how small the drop-off was. A healthy 44 percent of respondents answered “yes” to that question, accepting a self-description as “libertarian.”

We summed all that up in this handy but not necessarily helpful graph

This Week in Government Failure

Over at Downsizing Government, we focused on the following issues this week:

Is “Race to the Top” Handwriting on the Wall?

As freedom-minded folks have been celebrating major setbacks for Obama Care, campaign-speech control, and lots of other attacks on liberty, some have been sounding the alarm over the insidious “Race to the Top” contest. A couple of siren blasts I just caught are well worth taking in yourself, one by the Heartland Institute’s Robert Holland and the other by Colorado Board of Education member Peggy Littleton. In particular, the writers think they see the handwriting on the wall in the de facto requirement that states promise to adopt as-yet-unwritten “common” (read: national) standards to compete for RTTT funds.  As Littleton writes:

We already know that the federal government, or at the least consortiums of states, wants to develop assessments to assess the Common Core. The scary progression continues… National Common Core, common assessment, will inevitably lead to a national curriculum.

Is nationalizing – and thereby federalizing – the curriculum the Obama administration’s goal? RTTT sure as heck makes it seem that way, but we should have an even better idea soon: the administration wants Congress to reauthorize the No Child Left Behind Act this year.

And so it may be coming to pass: Perhaps, ironically, because of this week’s revolt against Washington, we might be heading for another power grab by Washington. And this time, we shouldn’t expect anything close to unanimous Republican help fending it off. 

Pottery Barn Rule, Take 27

Last week, Iraq’s independent electoral commission disqualified 511 candidates – most of them Sunnis – from running in the parliamentary elections scheduled for March. Today’s Washington Post reports that Vice President Joe Biden is hurrying off to Baghdad to try to convince the Iraqis to change their minds. U.S. troop withdrawals were supposed to accelerate after the elections were held and a new government seated. But the elections have already been postponed at least once, and the administration is worried that the obvious bias against Sunnis could stoke sectarian tensions.

“U.S. officials are in a precarious position,” the Post story explains:

They are stuck between the government they created and bolstered – a coalition of mostly sect- and ethnic-based coalitions dominated by Shiite Arabs – and politicians who have been branded as loyalists to the dictator deposed during the U.S.-led invasion.

If that weren’t difficult enough, Biden doesn’t want to appear to be pressuring the Iraqis, and Prime Minister Maliki and his crew don’t want to appear to have been pressured. As a senior administration official told the Post:

“[N]o one wants to be perceived as defending the rights of Baathists” and no Iraqi decision-maker wants to be the first to publicly declare that the ruling must be reversed.

It is times like these when I am reminded of Colin Powell’s infamous Pottery Barn rule. Never mind that he never publicly invoked that precise metaphor. Never mind that Pottery Barn has no rule. The point is that the average person understands the simple premise: you break it, you own it.

But what Powell actually told President George W. Bush in August 2002, if Bob Woodward’s reconstruction of the event is to be trusted, is actually more insightful and telling than the shorthand version. And it is particularly a propos with respect to the most-recent election kerfuffle.

“You are going to be the proud owner of 25 million people,” he told the president, “You will own all their hopes, aspirations, problems. You’ll own it all.”

We “own” the Iraqis without wanting to appear to own them. We are responsible for the behavior of the government that we put into power, but without the leverage (or inclination) to compel that government to do as we see fit. And we – all Americans, but especially the troops still stuck in that country – pay the price when they behave in ways harmful to our strategic interests. 

As the teenagers might say, “Good luck with that.”