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money-laundering bills now moving through Congress are illustrations
of the dangers of lawmaking during a crisis: Old agendas that couldn't
be enacted get a new lease on life, even if they clearly have nothing
to do with the crisis, simply by being tacked on to a bill that
ostensibly addresses it.
In this case,
the old agenda is the campaign by European governments and American
tax-law enforcers against "tax havens." For the purpose
of this campaign, a tax haven appears to be defined as a country
that has lower taxes and stronger privacy laws than the government
of France would like and is weak enough to attack. The Organization
for Economic Cooperation and Development (OECD) has spearheaded
the campaign for sanctions on the tax havens. By its criteria, America
and other industrialized countries ought to be on the target list
— but they're not, because the OECD knows better than to take
them on. It would prefer to punish poor Caribbean islands and set
the precedent for going further.
Defenders of
the tax havens, led by Andrew Quinlan of the Center for Freedom
and Prosperity and Daniel Mitchell of the Heritage Foundation, had
been able to get the Bush administration to brush off most of the
OECD agenda — until 9/11. Now we're being told that we have
to crack down on tax havens in order to go after money laundering.
But most of the states that pose a problem for investigations of
money laundering are not tax havens, according to a subdivision
of the OECD itself.
Quinlan and
Mitchell object to three of the Senate bill's criteria for determining
whether a state is a "primary money laundering concern."
(Mitchell details his case in a memo with the unfortunate title
"Sneak Attack on Administration's International Tax Policy.")
If a state is so certified, a Treasury secretary would be able to
take steps ranging from regulation to prohibition of certain financial
transactions between Americans and institutions in that state.
How does a
state get on the suspect list? One way is to offer tax breaks or
financial privacy to nonresidents. Surely, however, the important
question is whether the state will pierce its privacy laws when
presented with evidence of a crime. That's better accomplished through
mutual legal assistance treaties than sanctions. And the logic of
including tax breaks would suggest, again, that America should be
a target state.
Another way
a state can become a target is by having a high volume of financial
transactions relative to the size of its economy. If applied consistently,
this would be bad news for New York City and, for that matter, South
Dakota.
Third, a state
can be a suspect if it "is characterized as a tax haven or
offshore banking or secrecy haven by credible international organizations
or multilateral expert groups" — in other words, if the
OECD thinks its taxes are too low. This has zilch to do with fighting
money laundering.
The House version
of the bill takes superficial steps to avoid these problems. For
example, it takes the words "tax haven" out of the previous
quote. But it still gives the OECD a green light to go after anything
it calls a "secrecy haven." (And all countries have some
laws on secrecy.)
The administration
knows these provisions are bad, but it seems disinclined to do anything
about it. Democratic senators John Kerry and Carl Levin are leading
the charge against tax havens, and for this White House "bipartisanship"
increasingly seems to mean giving the Democrats what they want.
A
Hasert Flip-Flop
Freshman Republican Melissa Hart of Pennsylvania wanted to amend
the Labor-HHS spending bill to cut federal funding for schools that
distribute the "morning-after pill" to minors. An amendment
to that effect has passed the House with wide margins before. Speaker
Hastert promised her she would get to offer the amendment.
But the appropriators
threatened Hastert that they would bring down their own spending
bill if the amendment were offered a disruption that always horrifies
House leaders. Rather than call the appropriators' bluff, Hastert
got Hart, as a personal favor, to drop the amendment. So many promises
get broken the morning after.
Worth
Reading
Will
Saletan calls for a propaganda war… Richard
Nadler makes the case against high-speed rail… and Ron
Bailey evaluates the anthrax threat.
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