Wednesday, October 14, 2009

Wealthy tax cheats get their due

Americans who strain to pay federal income taxes are properly joyous that thousands of the wealthy who cheated on their responsibilities by hiding literal fortunes in foreign banks and tax havens are finally facing a big due date on bills and painful penalties from the Internal Revenue Service.

One such unnamed tax evader, according to a Washington law firm, owes several hundred million dollars. Goodbye opulent lifestyle, maybe hello jail time.

The IRS has names of 4,450 clients that hid fortunes with the Swiss banking giant UBS to avoid taxes. To settle charges that it tried to defraud the U.S. government, UBS coughed up the names as well as a $780 million fine.

Some evaders face jail. However, the scofflaws are getting a break. Fines for tax evasion will not be the standard 50 percent, but between 5 and 20 percent.

What rankles honest taxpayers is that the wealthy tax cheats already have privileged ways of avoiding taxes that middle-income Americans pay, through U.S. tax laws that favor upper-income families and their investments.

While evading honest taxes, wealthy cheats in effect shifted the burden of paying for government services to regular taxpayers.

By flushing out major cheats, the IRS has sent a warning to others planning to duck out on tax obligations.

To truly make the message work, however, the IRS must step up enforcement and prosecution not only of the cheats but also of institutions that engage in conspiracies to defraud Uncle Sam.

Only fairness makes a complex tax system work.

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