The State’s Ferocious War Against Us

Recently by Bob Bauman: Small Fish Fry, Big Ones Wiggle Off theHook

      That headline is an old saying, to which the traditional reply is: "Sure enough. I cheered up and it did get worse."

But these days, I am not sure how much worse it can get.

In the last 14 years here at the Sovereign Society I have had the sad duty to chronicle and warn about the Leviathan state's ferocious war against free market economics, and especially against your freedom to bank, invest and do business offshore.

This unrelenting war has been led by the leftist Democratic Party in the U.S., including President Barack Obama, the U.S. Internal Revenue Service (IRS), the European Union, the Organization for Community and Economic Development (OECD) and its Financial Action Task Force (FATF), as well as the United Nations.

Each of these big spending, high taxers, for their own, and for common tax hungry reasons, has joined in a coordinated attempt to crush offshore financial havens which they see as nothing more than centers for massive tax evasion.

Their attacks have reached the frenzy level in the last year or two as the worldwide recession has reduced tax revenues and in America the deficit and national debt have become hot political issues.

Looking for more tax monies President Obama (he of the trillion dollar deficits) and his radical left allies in the U.S. Congress, led by U.S. Senator Carl Levin (D-Mich), and aided and abetted by the IRS, are constantly devising new ways to curb offshore financial activity and abolish financial privacy.

To wit:

1) IRS Pre-Crime Plans

In remarks to the National Press Club on April 6th, our old friend, IRS Commissioner Douglas Shulman, revealed a startling “look forward” plan in which all of the information you use in preparing your annual IRS Form 1040 (W2, 1099, mortgage and bank interest) would be submitted automatically to the IRS every day in real time throughout the year.

IRS bureaucrats with this expanded snooping power and new sc-fi technology want to audit your financial activity on a daily basis. After a massive upgrade in technology, Shulman insisted the IRS would be able to "pre-calculate" what the IRS expects it should receive from you in taxes and reject any return that doesn’t comply with its pre-determination.

This claim from a bloated agency that over 20 years has spent hundreds of millions of taxpayer dollars on its multiple inconsistent computer systems that still don't work!

If you wish to know how this nutty idea might be applied, check out the alarming movie Minority Report, based on a short story by Philip K. Dick.

In the movie, set in the year 2054, a specialized U.S. government "pre-crime" police force sees into the future and stops criminals in their tracks, arresting them before they commit a crime; sometimes before they even think about committing a crime.

When I saw the movie I hopefully thought: "It can't happen here."

Wrong again, Bob! It already has.

2) Your Friendly Local Informant

Under one lucrative IRS program you can make big money snitching on your friends and family who might be engaged in tax cheating by filing an IRS Form 211.

IRS cash for snoops started in the 1960s, but the rules were changed to give whistleblowers get up to 30% if the IRS collects $2 million or more. The average payout is reportedly about $24,000. The record year was 2000, when $10.8 million went to those who ratted out tax cheating friends, family and coworkers. About 10,000 informants claim IRS rewards each year.

In the past the IRS claimed to have 1,000 “controlled informants,” people who regularly inform on others for pay. Some of them are accountants. (Doesn’t that give you a warm fuzzy feeling?) Michael Levine, a retired U.S. Customs and DEA officer, said that in 2005 there were 15,000 informants on the federal payroll. No doubt that number has been upped since 9-11, 2001.

Now the IRS is stepping up its use of paid informants. Last week a Pennsylvania in-house accountant who tipped off the IRS that his employer was tax cheating received a $4.5 million IRS whistleblower award. The IRS made certain the case got plenty of media coverage.

George Orwell's 1984 Big Brother would have understood and applauded.

3) Your Papers Please

You thought those groping TSA bullies were difficult to deal with at airports?

Or you thought it was not bad enough that the U.S. Congress, following the historic example of Nazi Germany, Soviet Russia and apartheid South Africa, has imposed an exit tax on those who wish to end their U.S. citizenship.

A new government report released last Monday claims that the IRS could collect billions in owed taxes by blocking delinquent Americans from getting or using U.S. passports until they settle their alleged IRS debts.The Government Accountability Office, at the request of Congress, released a study examining how the government could leverage the U.S. passport process to recover unpaid taxes. The GAO found that in fiscal 2008, Americans who received passports owed a collective $5.8 billion to the IRS and could owe much more, since that estimate only factored in one year’s worth of passport recipients.

The GAO said that if Congress wants to collects taxes with the help of the State Department, it would have to authorize denial of passports and authorize the IRS to share tax data.

Have you ever received an IRS notice of intent to levy on all your bank accounts based on $2.50 they claim you owe, or on late filing of a Form 941, self employment tax?

No doubt many travelers might owe a small amount of back taxes without even realizing it. The GAO report showed that only a small percentage of those who received passports in 2008 were delinquent.

Add to the "not bad enough" list the fact that the previous Democrat controlled Congress imposed a near impossible reporting system in the so-called HIRE Act, which contained an onerous and illogical section billed as the "Foreign Account Taxpayer Compliance Act," (FATCA). My colleague, Mark Nestmann, explained this legislative monstrosity. You can read it here to refresh your memory and rekindled your anger.

4) Stretching the Tax Laws

Just as the all-powerful President Obama has decided what laws he will or will not enforce the IRS is considering stretching the meaning and intent of an existing law to suit their voracious appetite for more taxes.

To augment the widening IRS investigation into banks suspected of helping offshore tax evasion by Americans, the U.S. Justice Department (DOJ) is considering a novel punishment: imposing a severe monetary penalty on banks the law heretofore reserved for individual Americans.

The penalty is for a violation of failing to file annually by June 30 with the U.S. Treasury a "Foreign Bank and Financial Accounts" (FBAR) report. The top failing to file penalty is 50% of the account balance for each year of violation, a level that can leave tax evaders owing more than what their unreported accounts held.

Now the DOJ, hoping to add the scalps of Credit Suisse and HSBC to their previous UBS trophy, according to court papers and statements by the banks, is exploring how and whether it could apply the 50% penalty to the offshore banks, if it can be proven that they helped to or themselves violated American tax laws.

FACTA (see above) already has driven many offshore banks to drop existing American clients and refuse new ones, but that only imposes a 30% tax on uncooperative offshore banks.

If this latest law stretching 50% tax idea is adopted it should push most other offshore banks into the anti-American column. Query: Does this mean the U.S. will demand a combined 80% tax on offshore banks? Just asking, folks.

Reprinted with permission from the Sovereign Society.

Robert E. Bauman is a former Member of the United States House of Representatives from Maryland, (1973–1981). He is also a former federal official and state legislator; Member, Washington, DC Bar; Graduate of the Georgetown University Law Center (1964) and the School of Foreign Service (1959), Washington, DC. Robert currently serves as legal counsel for the Sovereign Society.