New Tax Cheat Bill from… Charlie Rangel?

When I read this item at Politico over coffee this morning, I had to double check and see if I hadn’t inadvertently followed a link to The Onion. A new bill is being introduced which would make it far more difficult for people to hide their assets in foreign banks to avoid paying taxes on the money. Good idea! But it’s being introduced, in part, by Charlie Rangel. (I’ll give you a moment to read a portion of the linked article while you stop gagging.)

The “Foreign Account Tax Compliance Act of 2009” — introduced by Baucus and Rangel in conjunction with the Obama administration — would mandate Individuals with offshore accounts provide details and list them on tax returns. Rules governing trusts would be “significantly strengthened” to prevent the true beneficiaries from hiding front entities.

“This bill offers foreign banks a simple choice – if you wish to access our capital markets, you have to report on U.S. account holders,” said Rangel, in a statement posted on the committee’s homepage. “I am confident that most banks will do the right thing and help to make bank secrecy practices a thing of the past.”

There are two portions to this story which should be of interest. First, there’s the idea of the bill itself. I’m not sure how much additional tax revenue will be generated for the public coffers from this, should it be passed, but that’s really not the point. Legislation like this would be a good step toward increasing confidence among Americans that the government is actually interested in a level playing field. There has long been a perception (and probably more than a grain of truth) among the hoi polloi that the rich have access to “more justice” than the common person. If we make a math error and under report our income by a couple thousand dollars, we know that the IRS will come down on us with a heavy hammer to collect the taxes along with penalties and fees. But we also suspect that the very rich are privy to tricks and cons which allow them to tuck away more money than we will earn in our lifetimes and pay no taxes on it. A bill like this could provide more psychological comfort to the masses than actual tax revenue, but it’s still worthwhile.

But the strange part is, why would the Democrats allow Charlie Rangel to introduce it? He’s in the middle of an investigation for outrageous tax cheating incidents himself and has become the butt of more jokes than we could count on the Hill. Surely somebody could have realized just how bad the optics of this are. Who’s going to introduce the Senate version? Chris Dodd?

We shouldn’t throw the baby out with the bath water, though. Let’s be clear… this isn’t a case of the Obama administration wanting to crack down on foreign investments by American companies. (Which I’ve already stated we also need to do.) This would apply to a simple case of Americans hiding money in foreign banks for the express purpose of avoiding taxes which they know they should be paying. And I hope that my conservative and Republican friends won’t find some reason to oppose this just because it was proposed by Obama and the Democrats.

But seriously… Charlie Rangel? Really?