Free Rides For The Wealthy?

The economy of the United States has many problems that it is trying to work itself through in 2008. That an old problem has recently hit the news again reminds me of my early years in the municipal bond business. The Federal Government of the United States is “leaking” tax revenue. Well, perhaps the use of the word leaking may not be the correct word, but I like the way it sounds. Let me explain.

Back in the 1960’s, when I was just getting started in my career as a municipal bond salesman, I would read any articles in newspapers or magazines that had anything to do with money or investing money. One article that caught my eye I remember was about how organized crime, as it was referred to then, moved money out of the country by gentlemen dressed in suits and ties and attaché cases filled with bundles of one hundred dollar bills. I believe that it was figured that at least a half million dollars could be transported in one of those thin attaché cases.

This is the way it worked. Money that was collected by organized crime from their many business ventures was then converted from smaller bills into one hundred dollar bills and then bundled into 50 bills to a bundle, just like they do it at the bank. If you are wondering how many bundles make a million dollars, the correct answer is 200. Today a million dollars does not sound like a lot of money, but in the 1960’s a million dollars went a long way. So, what ended this very simple courier system for organized crime?

Plane hijackings brought this simple, yet efficient method to a halt. After a few Cubans hijacked a few jets, the airlines and the government decided that they needed to take a peek in those attaché cases. That ended that method.

Men in suits with attaché cases filled with hundred dollar bills would fly to any of the islands in the Caribbean and deposit the cash in a private bank that would then wire the money to a numbered bank account in Switzerland. By doing this, organized crime could move the money they earned and avoid paying federal income taxes on their earnings. Once the money was safely in Switzerland in a numbered bank account, the money could then be used to buy stock in American companies back in the United States. Investing in American companies was an easy and efficient way to invest in legitimate businesses and recycle their money into the American economy. A good plan does not have to be complicated. Simplicity has its own beauty.

Now, let us fast forward to 2008, and we find that ordinary citizens are moving millions of their dollars to Liechtenstein to avoid paying federal income taxes. This is nothing new. I have read advertisements in The Wall Street Journal offering people offshore accounts for years, so why the big deal now?

It seems that a disgruntled employee of one of these banks in Liechtenstein turned over a list of names to the United States Government and now the government is looking into why these nice people are trying to avoid paying taxes on their money. Evidently, even if you earn money outside the United States, and you are an American citizen, you need to pay your taxes on money earned in overseas ventures. This is only fair as the good life that people enjoy is preserved by the efforts and at the expense of the United States Government. No free rides for the wealthy. If they want a free ride, let them run for political office.

Stay tuned.