Will Mitt Romney Tone Down the U.S. “War on Offshore?”
By Mark Nestmann • February 6, 2012
I don't spend much time following the U.S. presidential campaign. My assumption is that every candidate will promptly forget everything he promised as soon as he is inaugurated. This is particularly true if the promise is to limit governmental powers or authority. For instance, candidate Obama promised to close Guantanamo Bay prison, end warrantless wiretapping, and limit the application of the Patriot Act. Of course, none of these things actually happened.
One promise candidate Obama did follow through on was to "shut down offshore tax havens." While he hasn't succeeded in doing so, the FATCA law his administration pushed through Congress in 2010 is likely to cut off most access to international financial services by U.S. citizens or permanent residents. (Click here for my most recent post on FATCA).
Now, the offshore financial sector has once again become a campaign issue. This summer, the Republican Party will select a candidate to oppose Obama's re-election in November. And Republican opponents to front-runner Mitt Romney portray him as someone who (boo, hiss) ruthlessly uses international financial centers at the expense of American workers and taxpayers. For instance, in a series of attack ads run by supporters of former Speaker of the House Newt Gringrich equates Romney's offshore dealings with the loss of thousands of U.S. jobs.
Outside of politics, Romney headed up a private equity firm, Bain Capital. And it is the offshore dealings of Bain that have drawn so much criticism. However, it's understandable why Bain uses international financial centers in its business. Basically, it's to shield foreign investors in Bain's private equity deals from paying U.S. taxes for their investments in U.S. companies. There's nothing at all illegal about this arrangement, but it makes for a great mudslinging opportunity.
Nor does this arrangement cost the U.S. economy jobs. Quite the contrary. Foreign investors put millions of dollars at Bain's disposal to make investments in U.S. companies, which in turn employ U.S. workers. Why is this bad?
In any event, I think the fireworks have only started over this issue. If Romney is nominated, count on incumbent Obama to attack the Republican candidate for his involvement in "notorious" offshore tax havens. Obama will point to FATCA as evidence of his commitment to force U.S. citizens and residents "evading tax" in said "notorious offshore tax havens." Of course, he'll ignore the fact that prominent Democrats routinely utilize tax havens for business and investment purposes, including as Bill Clinton, John Kerry, John Edwards, and Robert Rubin.
Incidentally, while I think Romney will get the Republican nomination, I don't support him for other reasons, which mainly relate to foreign policy and civil liberties. Romney opposes any significant reduction in the size of the U.S. military. He also wants to use U.S. military power to achieve U.S. foreign policy objectives, such as attacking Iran to prevent that country from developing nuclear weapons.
On the civil liberties front, Romney proposes wiretapping mosques to help fight the War on Terror. And then there are these gems from Mitt:
"I hear from time to time people say, hey, wait a second, we have civil liberties we have to worry about. But don’t forget the most important civil liberty I expect from my government is my right to be kept alive, and that’s what we’re going to have to do."
"Conservatives believe in providing constitutional rights to our citizens, not to enemy combatants like Khalid Sheikh Mohammed. Not on our watch. A conversation with a would-be suicide bomber will not begin with the words, "'You have the right to remain silent.'”
Still, if Mitt is elected, we might see his administration slightly relaxing the burdens of implementing the FATCA law, along with long-overdue reforms to the U.S. Tax Code. But I'm not holding my breath.
Copyright © 2012 by Mark Nestmann