Say ‘no’ to new loop­holes in the tax code

Yuma Sun - - OPINION - BY PETER ROFF

There’s noth­ing wrong with be­ing wealthy. What mat­ters is how one got to be that way. Far too of­ten the eco­nomic elites and the po­lit­i­cal well-con­nected man­age to ex­ploit their power and sta­tus to en­rich them­selves at the ex­pense of the av­er­age tax­payer. It’s called “crony cap­i­tal­ism” and there’s too much of it.

There are some peo­ple who de­scribe these ac­tiv­i­ties as be­ing well within the con­fines of the free mar­ket. They’re not. The play­ing field is not level, peo­ple do not en­joy equal­ity of op­por­tu­nity and, with a gag­gle of lob­by­ists work­ing on their be­half, these faux cap­i­tal­ists in­flu­ence their cronies in govern­ment to twist reg­u­la­tions and laws to their ad­van­tage. As a re­sult, poli­cies de­signed to im­prove the well-be­ing of the av­er­age Amer­i­can worker are bas­tardized into give­aways to big spe­cial in­ter­ests while mem­bers of the work­ing class suf­fer.

There are count­less ex­am­ples of this trend. One of the most trou­bling in­volves (or rather de­volves) from the 2008 fi­nan­cial cri­sis. Sens­ing an op­por­tu­nity to line their own pock­ets while act­ing in con­sort with the govern­ment, in­sti­tu­tions through­out the fi­nan­cial sec­tor be­gan ex­pand­ing the bank­ing in­dus­try, of­fer­ing new prod­ucts and pro­vid­ing lu­cra­tive home loans to more ap­pli­cants than ever be­fore. These de­ci­sions cul­mi­nated in a cat­a­strophic fi­nan­cial col­lapse that threat­ened Amer­ica’s en­tire eco­nomic substructure.

Washington de­ci­sion-mak­ers per­mit­ted the banks to make these de­ci­sions be­cause in­di­vid­u­als and pri­vate busi­nesses have an un­ques­tion­able right to take risks, so long as they’re ready to face the con­se­quences that may come from them. Un­for­tu­nately, this is not where the story ends. The elites un­der­stood their unique po­si­tion within the econ­omy, as­sem­bled their lob­by­ists, and man­aged to ne­go­ti­ate the in­fa­mous $700 bil­lion bank bailouts, in essence, paid for by the Amer­i­can tax­payer.

To this day, sce­nar­ios like this one occur on an all too reg­u­lar ba­sis. For a more cur­rent ex­am­ple, look to the 2017 tax re­form pack­age. Repub­li­cans and Democrats may ar­gue over the ef­fi­cacy of the cor­po­rate tax cuts or what con­sti­tutes one’s “fair share” of taxes, but ev­ery­one can agree the ef­fort did sim­plify the tax code. While that isn’t nec­es­sar­ily a bad thing, the elite have seized on the law’s am­bi­gu­ity to pres­sure the govern­ment for spe­cial in­ter­est ex­emp­tions.

With the ink barely dry on the pres­i­dent’s sig­na­ture, they started an earnest ef­fort to bring loop­holes back. They’ve mo­bi­lized lob­by­ists to res­ur­rect a spe­cial in­ter­est in­sur­ance tax ex­emp­tion, fre­quently re­ferred to as the “Ber­muda tax loop­hole” that pro­vides for­eign in­sur­ers an un­fair com­pet­i­tive ad­van­tage over Amer­i­can com­pa­nies. Through an in­sur­ance tech­nique called “af­fil­i­ate rein­sur­ance,” for­eign in­sur­ance com­pa­nies can avoid bil­lions of dol­lars in U.S. taxes by trans­fer­ring their as­sets to coun­tries like Ber­muda and Switzer­land. This way, elites, and for­eign in­sur­ers get away with pay­ing lit­tle to noth­ing in taxes while mak­ing it even harder for Amer­i­can busi­nesses to com­pete with them and stay afloat.

It was elim­i­nated in 2017, but the big play­ers who used to ben­e­fit want it back. They haven’t been suc­cess­ful so far in their ef­forts to jam it into some piece of must-pass leg­is­la­tion, but they haven’t given up. Lob­by­ists are not the prob­lem — it’s the crony cap­i­tal­ists look­ing for spe­cial deals that de­feat the very pur­pose of tax re­form.

Congress and the White House have an op­por­tu­nity to put their foot down by pre­vent­ing the crony cap­i­tal­ists from putting spe­cial in­ter­est ex­emp­tions back into the tax code, Amer­ica can take a step in the right di­rec­tion to­ward lim­it­ing the elites’ cor­rup­tive in­flu­ence over our eco­nom­ics and pol­i­tics.

What’s re­ally re­gret­table is things like this hap­pen ev­ery day. It might be a tall or­der to fight the elites on ev­ery inch of ground, but Amer­ica needs cor­po­rate wel­fare re­form now just as much as it needed per­sonal wel­fare re­form like what was en­acted in the 1990s. These crony cap­i­tal­ist in­flu­ences should not be per­mit­ted to cor­rode yet an­other facet of the Amer­i­can Dream.

In the United States, ev­ery­one deserves the op­por­tu­nity to suc­ceed, not just the priv­i­leged few.

Copy­right 2019 Peter Roff. Dis­trib­uted ex­clu­sively by Ca­gle Car­toons news­pa­per syn­di­cate. Peter Roff is a se­nior fel­low at Fron­tiers of Free­dom and a for­mer U.S. News and World Re­port con­tribut­ing ed­i­tor who ap­pears reg­u­larly as a com­men­ta­tor on the One Amer­ica News net­work. Email him at Rof­[email protected] Fol­low him on Twit­ter @Peter Roff

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