The Economist says U.S. citizens have $20 Trillion stashed away in offshore tax havens, and “The Economist” wants to reform tax laws and bring the money back to the U.S. Judge Andrew Napolitano has a definite opinion about the legality of untaxable offshore accounts.
NAPOLITANO:…bring the money back home where it belongs? It belongs wherever the person who owns the money wants it to be. Let’s get this straight: if you earn $1000 in the United States, you can’t avoid paying income tax on that money by shipping it off to an offshore account, but if you earn $1000 in the United States, pay taxes on it and what’s left after taxes you put in an offshore account and that generates interest, the question is, is that interest taxable in the United States. That’s the dispute.
The Economist argues…in my hypothetical the $1000 is really $20 Trillion, so whatever the interest on the $20 Trillion would be is a huge number and the tax on that is a huge number that the government is not getting.
VARNEY: So do we bring it back?
NAPOLITANO: Of course not. It’s the decision of the person who sent it there. They’ve already paid taxes on it. It’s their money.
VARNEY: But the law says they must declare the interest and the dividends and the capital gains on any assets you have overseas if you are a resident in the U.S.
NAPOLITANO: I understand that. It’s the law. I’m not suggesting you should violate the law. It’s a bad law, because the U.S. has no claim on that…the interest was not generated in the U.S., so they have no right to tax it.
VARNEY: What chance of success would you have in the U.S. if you went out there and campaigned on…I’ve got a Cayman Islands account and I think it’s great. I’m going to put my money over there and you’re not going to touch it.
NAPOLITANO: Do you really think that I tailor my views to their popularity amongst voters? (some chat between Varney and The Judge)
NAPOLITANO: I say once you’ve paid taxes on your money it is yours to send it where you want. If it’s outside the U.S., the government has no claim on the interest it earns….
NAPOLITANO: Now would you let me join the Senate Committee interrogating Bernanke? We’ll have a ball. (this part of the conversation stops at about 3 mins-in. The video is 4:56 long)
Read The Economist article here. The opening sentence:
CIVILISATION works only if those who enjoy its benefits are also prepared to pay their share of the costs.
Stuart Varney and Judge Andrew Napolitano on Offshore Accounts (video)