That Unending IRS Numbers Game

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Amnesty Flood

Under a Nov. 17th headline reading "14,700 Disclosed Offshore Accounts," New York Times reporter Lynnley Browning reports on an apparently gloating, IRS commissioner and what he seems to consider a victory of sorts.

"Douglas H. Shulman (below) of the I.R.S. reported a 'flood' as the disclosure deadline neared.

"The Internal Revenue Service said Tuesday that more that 14,700 Americans had been attracted to an amnesty program in recent months and disclosed their secret foreign bank accounts — many more than had been attracted to a previous I.R.S. program...A previous I.R.S. initiative, in 2003, aimed at luring Americans who evaded taxes through offshore credit cards, drew only 1,300 evaders, according to I.R.S. data.

"And the reason, Justice Department and I.R.S. officials said, was the widespread publicity about the agreement in February by the Swiss banking giant UBS to pay $780 million and admit to criminal wrongdoing in selling offshore banking services that had enabled tax evasion. In August, under legal pressure, UBS agreed to turn over the names of about 4,450 American clients suspected by the I.R.S. of using the bank’s offshore services to evade taxes."

Fear Factor

Before I get to the continuing IRS numbers game, the above Times quote underscores something I've said many times that official IRS policies too often amount to fostering tax terrorism and intentional fear.

In mentioning the IRS fear factor I'm in the good company with three leading advocates of personal liberty I've quoted before.

In 1757, one of the patron saints of conservative political philosophy, Edmund Burke, wrote: "No passion so effectively robs the mind of all its powers of acting and reasoning as fear." In 1776, John Adams of Massachusetts, that fiery leader of the American Revolution, and second U.S. president, correctly observed: "Fear is the foundation of most governments." Adams spoke of a tyrannical English king, but his words could be the official motto of the U.S. Internal Revenue Service.

And in 2002, and at many other times, my former colleague in the U.S. House, Rep. Ron Paul (R-Tex) has said of the IRS: "It's the use of fear to try to intimidate people. Fear is the tool used to intimidate most Americans to comply with the tax code."

That Numbers Games

I'm not going to replay the stats that prove the IRS engages in intentional deceit, but for those who are interested, see my run down of the numbers in my Oct. 17th blog entry.

There I recounted how, in recent years, the IRS commissioners have publicly claimed that offshore tax evasion supposedly amounted figures ranging from US$447 million to US$40 billion. At the same time the number of Americans allegedly who were offshore evaders was given variously as 82,000 or 505,000 or 2 million. (The numbers changed with every IRS press release).

But let's consider that number the current IRS Commish finds so pleasing -- 14,700 possibly fearful Americans came forward when offered amnesty, with reduced penalties and interest. If they did not, they faced losing half of the funds they had in unreported accounts and possible criminal prosecution.

Tax Paying Americans

The total population of the U.S. at the moment is about 304 million. 14,700 American who did not report offshore accounts equals .000048355% of all Americans.

Let's say one million of those Americans have offshore accounts and have failed to report them. 14,700 is .00147% of that 1 million.

An estimated 6 million Americans actually live offshore. 14,700 is .00245% of that group living abroad that might fail to report.

Lastly, the IRS statistics state that there are a total of 151 million American so-called "taxpayers" -- but when the IRS uses that word they mean only the people who file annual income tax forms, not necessarily those who owe and pay taxes.

Tax Free by Law

An astonishing 43.4% of all Americans now pay zero or "negative" federal income taxes, (negative is a liberal cover word meaning they get welfare payments simply for filing their tax forms for various reasons Congress has deemed to be tax-free worthy).

The number of single or jointly-filing "taxpayers" - the word must be applied sparingly - who pay no taxes or receive government handouts has reached 65.6 million out of the 151 million who do file.

That leaves about 86 million filers who really do pay taxes, (and recall that the top 10% of those folks pay 80% of all the taxes). 14,700 non-reporting Americans with offshore accounts figures out to be .000017093% of the total 86 million Americans who do obey the law and pay their taxes.

As one observer noted: "The perils of today's situation should be obvious. The United States is close to a tipping point where most people can skip the post office run on April 15 to mail a check because they're expecting one from the government instead."

So What's the Big Deal?

These tiny fractional numbers of alleged offshore tax evaders raise the question of what's really behind the continuing IRS hullabaloo demonizing all Americans who do business offshore. In my opinion, we can conclude it's all part of that IRS fear factor campaign.

Well, you say, Commissioner Shulman claims that the unreported UBS 4,450 accounts alone, at one point held $18 billion. How much tax is owed we don't know, but even if they owe half of that amount, it's $9 billion.

Real Numbers

One thousand times one million dollars ($1,000,000) equals one billion dollars ($1,000,000,000). One thousand billions equals one trillion ($1,000,000,000,000),.

The U.S. national debt now exceeds $12 trillion.  That's $39,000 for ever man, woman and child or $110,500 per taxpayer.

The U.S. government under the free spending President Obama already this year has spent $3.3 trillion; the annual budget deficit this year now is $1.5 trillion; both numbers are climbing by the minute. (The various socialized health care bills pending in Congress are estimated to cost from over one trillion dollars to over three trillion).

So 14,700 late reporting taxpayers is played by the IRS as a big deal -- but compare that to the 65.6 million who pay no taxes or get government handouts, or both.

Time to recognize the IRS fear campaign for just what it is. Figures don't lie but liars do figure.

You can read all about legitimate and legal offshore financial centers in my just published 4th edition of Where to Stash Your Cash Legally: Offshore Financial Centers of the World. Find out how here.

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Comments

[Bryan J Busch]

Even five people coming forward and admitting their wrongdoing would be a small victory, since we can find out who their advisers are, and subsequently find even more cheaters.

This might be my favorite story of the year.