March 5, 2009 - Phil Hodgen

The Stop Tax Haven Abuse Act (2009)–Now With Added Fail

Yeah I am watching the latest incarnation of the Stop Tax Haven Abuse Act.

I’m not commenting on the technicalities of this proposed law. This post/rant is a long range perspective on the awesome fail inherent in this bill and the approach of the U.S. government generally.

The interesting thing about international tax is that it operates in slow motion. You can look forward a decade to see where the trendline for laws is headed. Laws are introduced and die a few times but eventually they come into being.

I watch the U.S. laws. I also watch the OECD because that gives an indication of what the bloated bureaucrats worldwide are thinking. 🙂

My thought specifically on this law is that our politicians are insane on roller skates.

Think of it like this. It is simple arithmetic.

The most brilliant ideas coming from the economists and regulators in U.S. government + the most clever law-writing that our government could muster + the absolute best efforts of the enforcement and collection people in the U.S. government = current reality.

In other words, 100% effort in every facet of the endeavor leads to sub-optimal results.

So they don’t like current reality which they achieved at 100% effort. The solution? Give it 110% effort! 🙂 They’ll get more of the current reality, with extra FAIL. 🙂

The solution is smarter, not harder. Politicians are in the mode of “If it doesn’t work, escalate!”

Current voluntary tax compliance rates in the U.S. are estimated at 84%. Compare that to other advanced countries where it’s in the 70’s. I predict that the U.S. voluntary tax compliance rates will be in the 70%’s in 10 years. In other words, the “tax gap” will get larger rather than smaller.

Bigger clubs and more fear? Won’t work.