The UBS Issue

As many of you are well aware, Swiss based UBS has been a haven for wealthy Americans seeking to get away from the oppressive taxes levied on them. This may not be the case for much longer (read the details here: http://www.time.com/time/business/article/0,8599,1910389,00.html)

I have many, many issues with the IRS but the issue here is that of a broader political problem. The US government in the form of the IRS is saying that a company based on Swiss soil must turn over records about their clients to the US government. Let's turn this around for a second..... imagine Citibank being told by the Chinese government they had to turn over records of dealings with Chinese citizens or their assets would be seized and they would no longer be allowed to do business there. Seeing the problem a bit more clearly now?

What it boils down to is that the IRS is pissed that they are missing out on taxing all the $15 billion that US citizens allegedly stashed with UBS. Well you know what IRS? These people are clearly smarter than your agents are, don't be a sore loser!

But this brings to light a bigger issue than just the IRS and their pettiness. In modern day America, people who earn more are increasingly taxed as a sort of jealousy penalty (can you tell I'm a proponent of a flat tax?). It is almost like saying "oh, you make more money than I do? Let's take some more!" This kind of tax policy is the definition of unfair. It is discrimination based on income alone. See the graph below to see a quick and dirty of what I mean:

So what our unfair tax policy leads to is exactly what the IRS is fighting today, it drives our high earners overseas to tax havens like Switzerland. The desire to save money is basic human nature (I would do the same if I had any significant amount of money). Instead of giving an insane percentage of their earning to the federal government, they take it out of the country entirely which makes the US government worse off than if they had just asked for a reasonable amount from these people in the first place. So the government pays the IRS to investigate and then the whole shitstorm gets tied up in litigation as it is now which also costs the taxpayers money. So the logical conclusion (who am I kidding, logic isn't in the government's vocabulary) would be to go to a flat tax system where everyone would agree to pay and you wouldn't have these enforcement problems (good luck getting a flat tax program passed, there are waaaayyyy too many people who would be out of a job, like every single accountant).

The entire US tax system is a disgrace and this just goes to prove my point.

Now a little more light-hearted: