In Defense of Lindsey Graham—and (Legal) Tax Evasion
The Republican senator says Mitt Romney is welcome to avoid paying taxes as long as it's legal. He's entirely correct.
Democrats are in full assault mode against Mitt Romney for his fancy accounting tricks, which include Swiss bank accounts and financial instruments in the Cayman Islands. But he's got a champion in South Carolina Republican Senator Lindsey Graham, who offered a defense Tuesday.
"It's really American to avoid paying taxes, legally," Graham (no relation to the author) said, adding, "As long as it was legal, I'm OK with it. I don't blame anybody for using the tax code to their advantage. I blame us for having it so complicated and confused. Pick a rate and make people pay it."
Naturally, that brought another wave of condemnation from liberals. But look: Graham is right. Romney's use of such elaborate and opaque financial dealings was boneheaded as a matter of politics -- it simply doesn't look good to many voters, for whom it's at worst inappropriate tax-dodging and at best the province of the very wealthy. As Romney might have put it, he's running for office, for pete's sake!
But as a matter of finance, it's entirely reasonable. Assuming that everything Romney did was legal -- and no one has produced evidence it wasn't -- he's well within his rights. Sure, putting money overseas may result in lower tax revenues stateside, but that's the fault of a loophole-riddled, overcomplicated tax code, not the enterprising taxpayer. Despising the IRS is a bipartisan U.S. pastime (though the tax man remains far more popular than Congress, according to some polls), and a desire to keep one's money is surely quintessentially American as well.
The situation is the mirror image of the discourse about the so-called Buffett Rule. Conservatives sneered that if Warren Buffett wanted to pay higher taxes so badly, he was welcome to do so without dragging any of his fellow millionaires into the matter. That missed the point: It requires more than a single taxpayer to increase revenues meaningfully. By the same token, Romney alone can't solve the problem of American individuals and corporations keeping money offshore, estimated to reduce annual tax revenues by as $100 billion. As long as such opportunities remain open to Americans, they'll continue to take them.
For more on the tax-policy stakes of this year's election, read Derek Thompson's analyses of Romney's and Obama's tax plans.