As the nation staggers toward the April 17 tax-filing deadline—otherwise known as National Crash Your Car Day—the immovable object of a debt-financed $3.8 trillion federal budget is incentivizing the irresistible force of rapacious government to scrounge for any and all spare change in the country’s cushions.
Some of these desperate collection measures are new, internationally unprecedented, and already damaging to innocent individuals and institutions. Others are mere proposals so far, or accumulations of water torture-style outrages that comparatively tax-compliant Americans have tolerated for too long. What they have in common is an utter lack of demonstrated concern for the time, privacy, and freedom of U.S. residents.
In handy list form, here are five ways Uncle Sam’s tax collectors are screwing America.
5. Preposterous Foreign-Income Disclosure Rules
The IRS wants everyone with more than $10,000 in foreign-based financial institutions to cough up every last detail of every last account. Let’s say (just for the sake of argument) that in 1997 you married a French woman who had previously written a few articles for a soon-to-be-defunct UK newspaper, and had opted to park her checks in a London bank for walking around money on future visits. Let’s say further that she has earned enough European-based income over the ensuing 15 years to exceed that five-figure savings threshold.
Result? As of 2012, that London savings account, and every single other foreign based account you and your wife may have, must now be divulged in full—complete with your estimation of its highest value during the previous year—to the Internal Revenue Service.
Good luck figuring out form TD 90-22.1, by the way. My tax professional (who charged me more than $1,000 for her services, though it was worth every penny), shrugged, and gave me a yellow highlighter so that maybe I could shed light on the relevant verbiage of TD 90-22.1 and its rich cousin, form 8938. Even the Government Accountability Office has trouble; “Extent of Duplication Not Currently Known, but Requirements Can Be Clarified” was the subtitle on its recent paper on the dueling FBARs (foreign bank account requirements).
The important thing to realize is that by failing to cough up each and every detail of accounts that are filled with your legitimately earned and (in my case) already taxed money, you are subjecting yourself to a $100,000 fine and up to five years in prison.
If you happen to have some money overseas, and are nervous about the U.S. government’s ability toharass or imprison you, you’re probably better off burying the cash in a can. Or depositing it in a country that doesn’t care about playing by Uncle Sam’s rules. Which brings us to….
4. Scaring Away Foreign Banks
This isn’t a new IRS rule, it’s a new consequence of a lousy new law, called the Foreign Account Tax Compliant Act (FATCA … get it??).
This 2010 law, which was passed in an effort to increase tax collections on Americans using shelters abroad, is estimated by its supporters to maybe bring in an extra $8 billion in receipts over the next 10 years, or less than $1 billion per year. This for a federal government that spends $1 billion every two and a half hours.
Uniquely in the world, the United States government is demanding that all foreign financial institutions disclose the details of all U.S.-based accounts and withhold 30 percent in potential taxes from accounts held by other institutions that don’t disclose. Let’s see, what do you suppose might happen when Washington makes life a living hell for every foreign bank that dares do business with Americans?
Shocker: “Banks no longer want American clients.” So if you are one of the estimated 6.6 million Americans living abroad, you can forget about opening or even maintaining that bank account. Sorry! Those 150 minutes of federal spending won’t pay for themselves!
And of course it gets worse: U.S.-based companies are discovering to their horror that foreign talent, no matter how executive, is getting caught up in Washington’s greed. Expatriates from Switzerland—a country whose remarkable financial sector was built on the notion of banking secrecy—are getting theiraccounts closed by FATCA-spooked banks back home.