In an effort to score political points, Democrats are pounding Mitt Romney over his use of offshore bank accounts. Over the weekend, Senate Majority Whip Dick Durbin remarked, “You either get a Swiss bank account to conceal what you’re doing, or you believe the Swiss franc is stronger than the American dollar.” DNC Chairwoman Debbie Wasserman Schultz recently wondered aloud, “Why does an American businessman need a Swiss bank account and secretive investments like that?” Maryland Governor Martin O’Malley even called Romney’s Swiss bank account a “bet against America.” These attacks reek of populist nonsense tinged with more than a little economic xenophobia.
Contrary to the dominant rhetoric on display, overseas banking is not a crime. People who invest or bank overseas do not hate America. Oftentimes, they are simply banking where their money is earned to avoid the hassle of exchange rate and wire transfer fees. In today’s global economy, earning money in multiple currencies is hardly uncommon.
It’s also smart practice to diversify. Few if any of these critical Democrats lack their own overseas investments for just this reason. But regardless of his specific motivations, Mitt Romney should not be cowed into shame over his banking practices just because he doesn’t strictly park his after-tax earnings in American banks, but should instead seize the opportunity to more aggressively defend against populist attacks on financial privacy and explain the benefits of jurisdictional tax competition.
Tax competition exists when tax burdens are reduced by shifting capital and labor from high-tax jurisdictions to low-tax jurisdictions. Competition to attract mobile taxpayers forces politicians to be more responsible, pushes tax rates down and allows people to enjoy more of the money they earn. Not surprisingly, politicians and statists fight tax competition at every turn.
Central to the effort of undermining tax competition are attacks on so-called tax havens, or low-tax jurisdictions with more competitive tax rates than their high-tax, welfare-state counterparts. The Organization for Economic Cooperation and Development (OECD), a Paris-based bureaucracy that works to punish low-tax jurisdictions and hinder the flight of jobs and capital from high-tax nations, has long been leading the charge against tax competition. The OECD has over the years used blacklists, intimidation and skulduggery to enforce unjust protectionist measures on nations that adopt free-market policies. To make matters worse, the U.S. is the single biggest contributor to the OECD and funds a quarter of the organization’s budget.
At stake in this debate is more than just whether or not President Obama is able to successfully distract Americans from his abysmal economic record. The attacks on his opponent are in part based on political opportunism, to be sure, but they are also part of this ongoing effort to undermine tax competition and make it easier for politicians to pursue onerous tax-and-spend policies.
For instance, a centerpiece in the latest onslaught against Romney is a Vanity Fair article written by Nicholas Shaxson. Shaxson provides no evidence of wrongdoing on Romney’s behalf, instead relying on guilt by association and innuendo to give the impression of impropriety. Nor is he a disinterested reporter just covering a story. Rather, Shaxson is part of a network of advocates for bigger government who have realized that attacking capital mobility, tax planning or avoidance (the right to lawfully structure one’s assets to reduce tax burdens) and tax competition are surefire ways to promote statism.