House Majority Leader Dick Armey, R-Texas, is trying to stiffen the spines of Bush appointees, under pressure from career holdovers in the Treasury Department who formulated a Clinton policy of cooperation with the Organization for Economic Cooperation and Development (OECD). That Paris-based international agency has urged worldwide trade and economic sanctions against "harmful competition" from low-tax countries.
In a meeting Thursday, Armey urged President Bush's Chief Economic Adviser Larry Lindsey and Assistant Treasury Secretary for Tax Policy Mark Weinberger to act quickly.
The OECD initiative would create a "global network of tax police," the House leader told the Bush officials. "It is a full-scale assault on tax competition and financial privacy."
The OECD, an association for industrial nations, has launched a program to stop what it calls "harmful tax competition."
In plain English, that means put a stop to the robust economies in low-tax nations that drain away investment and jobs from high-tax welfare states. That could mean in the future no tax cuts for Americans. It's not "fair," you see, to the high-unemployment countries that have taxed their people to death.
It is probably no coincidence that France, which originated the OECD, has perhaps the most comprehensive socialist high-tax welfare system in all of Europe.
In its publication "Towards Global Tax Cooperation," the OECD called on its 29 member nations, which include the U.S., to "eliminate harmful tax practices" such as low-tax policies that attract investment from overseas.
And with the great concerns in this country lately over privacy or lack thereof, Americans should be interested in this tidbit. The OECD also demanded that low-tax nations agree to dismantle financial privacy or face financial protectionism. That is a not very thinly veiled way of saying, "Let our bureaucrats paw through your bank records or we’ll cut you off from world commerce."
Of course, all of this has to be dressed up in some high-sounding worthy cause. And supposedly the rationale is cracking down on tax evasion and money laundering.
There is a right way and a wrong way to deal with those problems, according to Rep. Armey. "The wrong way is to destroy financial privacy in an effort to force greater compliance. The right way is to cut tax rates and reform the tax system."
The Texas lawmaker, a former economics professor, added, "When tax rates are lower, there's less incentive to use illegal means to avoid taxes or hide money."
Armey last month urged Treasury Secretary Paul O’Neill to act quickly and reverse the Clinton administration's support for the OECD initiative.
Some low-tax nations are facing the threat of financial protectionism as early as this July. Most of them are smaller countries.
If the OECD had applied its rules evenhandedly, the United States, Britain, Hong Kong and Switzerland would also have been issued such ultimatums. That is precisely why Armey and others want the Bush administration to reject the OECD. They fear the U.S. is next.
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