59 State Tax Notes 251-280 (January 24, 2011):
Lee Sheppard, one of America’s top tax journalists, writes:
Congress is completely corrupt, much as it was in the late 19th century, except that we have no Theodore Roosevelt to fight the corruption. The recent Supreme Court decision in Citizens United cements the obvious corporate control of the political process. It is ironic for the president to complain about it, when he, like his opponents, has been bought and paid for by the banks.
The corruption is not just financial but philosophical. The entire ruling class, regardless of party affiliation, has been persuaded to see the world through the eyes of the investor class. The shorthand for this is “free markets,” but markets are never really free, and investors prefer to have them rigged in their favor. And as the meltdown has shown, it is not true that what benefits the investor class benefits everyone else.
The investor class dislikes taxation of investment income or gains, inflation, regulation, and renegotiation of failed debts. The investor class likes deregulation, captive central bankers, and the unfettered flow of capital across national borders.
We are not talking about low taxes. We are talking about no taxation whatsoever, guaranteed by bilateral treaties and foolish practices like respect for paper corporations that allow income to be shifted wholesale to tax havens.
That may not be a mainstream view. But here are some thoughts in reaction:
G.K. Chesterton said when people stop believing in God, the problem is not that we believe in nothing, it’s that we believe in anything. Now we believe in something like free markets: I might say instead the profit motive, because (despite what anyone says) we do regulate markets some, but many of us believe in the invisible hand (and want to harness it via incentives, public and corporate, or disincentives, like excise taxes).
As for treaties, some folks defend loopholes against overrides as if some question of national honor were involved — as if all Americans had a duty to sacrifice to show respect for and deserve respect from other countries. Or something. See N.Y. State Bar Ass’n Tax Section, “Comments on the Proposed Denial of Treaty Benefits for Certain Related-Party Deductible Payments” 10-11 (May 22, 2010),available at http://www.nysba.org/AM/Template.cfm?Section=Home&CONTENTID=38538&TEMPLATE=/CM/ContentDisplay.cfm. That might be true if the loophole were bargained for or anticipated, but those aren’t the ones Congress overrides.