Senate Hearings Expose High-End Tax Avoidance


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The recent news that Mick Jagger and the Rolling Stones earned $150 million in worldwide last income year--and paid just 1.6 percent in taxes--has prompted a wave of "Gimme Shelter" jokes in the media. But as a new report released by a Senate subcommittee makes clear, the Stones' tax scheme pales in comparison to the high-end tax avoidance underway on our side of the Atlantic.

In an August hearing, a group of Senators led by the fabulous Carl Levin (D-Mich.) and Norm Coleman (R-Minn.) released a report showing that a small group of wealthy Americans are colluding with unsavory tax professionals to shift as much as $1 trillion to offshore accounts in the Cayman Islands and other tax havens. The report pegs the annual cost to U.S. taxpayers of these tax schemes at up to $70 billion.

The rogue's gallery of tax-avoiding witnesses included Robert Wood Johnson, owner of the New York Jets football team, and television producer Haim Saban. Saban, who achieved notoriety for his "Mighty Morphin' Power Rangers show, owned up to paying tax advisers $50 million to realize $1.5 billion in tax cuts.

Testifying at the Senate hearing, University of Michigan Professor Reuven Avi-Yonah noted that "if the political will existed, . . . we could close up the tax havens overnight or within a week." He's right. In fact, both Avi-Yonah's testimony and the Levin-Coleman report list the steps we ought to take.

In a nutshell, we need to break down the veil of secrecy that hides these tax cheating schemes, by expanding IRS enforcement capabilities and forcing disclosure by the tax-haven countries. In addition, we should clarify the tax code so that transactions whose primary purpose is tax avoidance are automatically treated as illegal shams. With as much as $70 billion a year of our money at stake, such action is long overdue.

The Boston Globe's always-sharp editorial page hits this one on all cylinders here. Other good coverage is from the San Antonio Express-News and the New York Times.
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