From the Tuesday edition of the Morning Jolt:
Sanders: The Panama Papers Prove I’m Right, and Also, Time Travel
Bernie Sanders seems to think everything he doesn’t like is connected.
“We now know, as a result of the ‘Panama Papers’ released by an international consortium of investigative journalists, that more than 214,000 entities throughout the world have been using a law firm in Panama to avoid paying taxes.
“At a time of massive income and wealth inequality in the United States and around the world, the wealthiest people and largest corporations must start paying their fair share of taxes. Children should not go hungry while billionaires use offshore tax havens to avoid paying their fair share of taxes.
“The Panama Free Trade Agreement put a stamp of approval on Panama, a world leader when it comes to allowing the wealthy and the powerful to avoid taxes.
Where to begin? For starters, there aren’t that many Americans named in the Panama Papers yet – and the ones that have been mentioned so far have fraud indictments or other reasons to hide their assets from prying eyes of investigators. If you’re a wealthy American, setting up a secret account in Panama isn’t a particularly wise way to avoid taxes – you’re probably going to lose money once you add up all the fees, lawyers, accountants, and etcetera. It’s only worth it if you want the money to stay hidden – say, if you’re hiding it from an ex-spouse in an alimony fight.
But the big headline out of the papers was the number of foreign political leaders who were keeping their money in Panama, a move probably designed to avoid taxes and uncomfortable questions in their home countries. There the issue is hypocrisy and, if the income was never reported, fraud. But it’s really hard to believe that Icelandic Prime Minister Sigmundur David Gunnlaugsson set up a company in the British Virgin Islands in 2007 through the Panamanian bank because of a U.S.-Panamanian free trade deal enacted in 2011. If the Icelandic Prime Minister is hiding his money, that’s really an issue for Icelandic law enforcement and Icelandic voters to address.
Secondly, the timeline doesn’t fit Sanders’ perception of the scandal at all. Accounts set up through this Panamanian law firm go back four decades, long before the 2011 Panama Free Trade Agreement. What, were wealthy people setting up accounts in Panama in the 1980s because they could sense that in 2011, the U.S. would set up this free trade agreement?
It’s not often you see the editorial board of the Washington Post declare, “this Democratic presidential candidate has no idea what he’s talking about.”
Even before the free-trade deal, Panama was under pressure from both the United States and Europe to clean up its tax-haven act; the pressure intensified after the financial crisis of 2008. The Obama administration, backed by members of Congress, made it clear the free-trade deal – which Panama badly wanted, to match a deal between its Central American neighbors and the United States – hinged on a separate agreement granting U.S. tax authorities more access to Panama’s financial system. The United States particularly insisted on plugging the “bearer shares” loophole. Panama agreed and changed its laws accordingly – before the free-trade agreement reached the Senate and Sanders nevertheless voted “no,” claiming, wrongly, that it would make the tax haven “worse.”
In response to our questions, the Sanders campaign didn’t address the data, but said the administration had missed an opportunity to completely “eradicate” the Panama tax haven. To us, it looks like the Obama administration’s diplomacy resulted in real progress, and that if anyone’s entitled to say “I told you so” about that, it would be Clinton.