We don't need a "crackdown". The problem with our approach to financial crimes is that it is based almost entirely on crackdowns -- splashy press releases that are supposed to deter all the thousands of other financial crimes that we lack resources to prosecute. Sometimes this leads to injustice, e.g., see the documentary film Abacus: Small Enough to Jail. The only bank to be prosecuted criminally for shenanigans in the subprime era.
What we do need is vastly more resources for financial regulators, as well as courts. Yes the laws and regs could also be improved, but that is a harder problem. The easy problem is that the people doing good work to combat financial crimes only have the staffing and money to go after a small, small fraction of likely targets. And the courts do not have what they need to handle a high volume of increasingly complex, technical subject-matter.
My goodness that documentary had me so infuriated. If people haven't seen it, I highly recommend it.
> The only bank to be prosecuted criminally for shenanigans in the subprime era.
That's the amazing part. Out of all the multinational "too big to fail" banks in NYC, they went after a small community bank. Just on optics it looks terrible, but the bank they went after actually had very low numbers of defaults and foreclosures.
That was as clear a case of bullying as I've seen. They went after the smallest bank they could find to intimidate them and force them to settle so that they can tell the press the banks were punished for the financial crisis. Which would have been a farce had they succeeded.
This is probably true for the IRS. I'm less sure this is true for th SEC. From the admittedly limited amount I have read about insider trading cases, it seems like the courts have interpreted the law extremely narrowly, and this has basically legalised many common forms of insider trading where there is no explicit quid pro quo. Similarly to how we have interpreted corruption.
The story about Abacus was interesting. I didn't realize they were the only actual bank to be prosecuted. That said, a handful of employees at other small banks around the country were prosecuted - I personally know a low-level mortgage broker who went to prison for fraud related to the 2008 crisis. They were falsifying mortgage applications for unqualified customers.
The enforcement still wasn't enough in my opinion, but (and I'm struggling to find a source backing me up) I believe there were several hundred of these cases. None, however, from the big banks that arguably should take more of the blame.
Post 2008 the real estate industry was rife with fraud. I had a boss that got kickbacks from contractors fixing rigged bids on foreclures to the tune of 500-600k. He never got caught. It was blatantly illegal and involved federal agencies.
They had some brokers that they fired, before any criminal action had been filed, when a senior manager noted indiscrepancies in the closing process (like writing multiple small checks for down payments and closing costs).
Well, yes: if you leave enough crime by the well-connected alone for long enough, in a country with poor election integrity and unlimited campaign finance spending, then you get a country run by gangsters. It came about pretty rapidly in Russia where there was no established democracy to displace.
There are many ways to negatively affect election integrity, both illegal and legal.
For example, in Georgia, US, one of the candidates himself blocked 53,000 voter registrations just 3 weeks before the election. The demographics of the 53,000 is 70% black.
Gerrymandering, strict voter id laws (e.g. requiring drivers license but removing all but one DMV in the entire county in opponent's strongholds) and similar are also various ways to negatively affect election integrity.
The USA is one of the few countries in the world that doesn't require an ID to vote. I'm continually astounded by the fact that people consider that having some sort of identification, which most functioning adults ought to have anyway, is some sort of horrifying oppression.
> The USA is one of the few countries in the world that doesn't require an ID to vote.
It's also one of the few that doesn't have compulsory universal uniform national (or even state) ID. Oddly, the same faction that is up in arms about voter ID is also dedicated to avoiding compulsory national/state ID.
If we had compulsory universal ID with the supportive policies necessary to avoid that becoming an unreasonable burden on the poor, or selected political groups or racial minorities, voter ID would be a non-problem. As it is, it's a problematic mechanism which is publicly sold as solving something which is a non-problem to all evidence, and has on multiple occasions been privately admitted by it's backers (and subsequentlt revealed) to be actually motivated by partisan interest and racial animus, in both cases being about keeping disfavored eligible voters from voting.
When Alabama enacted voter ID, it simultaneously shut down DMV offices in counties with the most potential black voters.
Or like in Texas where student IDs are specifically prohibited from being used for voting, even though gun permits are, in order to suppress student turnout.
Or in North Dakota, where voter laws were changed to suppress Native Americans from voting using tribal IDs.
> Because it can be used to disenfranchise voters.
So can knives.
> When Alabama enacted voter ID, it simultaneously shut down DMV offices in counties with the most potential black voters.
Most of these problems are now mitigated by years of not needing ID. Now we have voter registration mailouts and such. Don't just throw away a good idea because of past abuse. We strive to be better. Giving up is regressive.
> Don't just throw away a good idea because of past abuse.
The specific (Alabama) “past abuse” referred to by the grandparent was in 2011-2015, not some distant time where there has been intervening radical change in the political culture that would render it irrelevant.
> Don't just throw away a good idea
The whole idea was voter suppression. There is no good idea associated with Voter ID laws in the United States. People involved in them this decade have admitted the racial and partisan purpose (usually, when they thought only members of their race and party were around, obviously.)
Yes, this is the kind of corruption where someone should go to jail but won't. It might not even be illegal for the Secretary of State to simply deregister voters who will be voting for his opponent.
To be fair, there is also a significant lack of evidence that they haven't. It is difficult to collect data in this area because of the setup of the electoral system (both its federated nature and the lack of possible verification of individual votes). This together with the tight margins of modern American elections means potentially significant fraud could hide in the noise. In-person fraud would be hard to hide but electronic fraud is possible and there are interested, capable parties out there (e.g Russia) who shouldn't be discounted.
So to say that 'we definitely don't have an "election integrity" issue' isn't correct. There is nothing definite about it - we just have a consensus that we don't have a problem. You could say the same about every data security breach until they were discovered. I have noticed that there is a significant cultural interest in propagating the idea that our elections are sound so I tend to take the idea with a grain of salt as long as our system is as vulnerable as it is.
Fraud in the form of the outcome of a specific election being different than the actual votes counted: well, probably not super widespread or rampant but not exactly non-existent.
Disenfranchisement, gerrymandering, polling place reductions, unequal representation, etc. are, however, quite rampant. Not all votes are equal in the US, and not all voters are treated as equal either. The result is the same (subversion of democracy), but the tactics are different.
I was thinking of issues like the use of provably hackable voting machines, as well as the selective disenfranchisement mentioned by other commentators. The latter has been a problem in the US for its entire existence.
Selective voter suppression and exclusion, which the US has had in a significant way for centuries, mitigated somewhat for a time by the voting rights act before it was gutted, is a pretty enormous issue with the integrity of democratic elections.
The idea that the US doesn't have election integrity issues is simply false.
> Well, yes: if you leave enough crime by the well-connected alone for long enough, in a country with poor election integrity and unlimited campaign finance spending, then you get a country run by gangsters.
No, if being well-connected means your crime gets left alone, you have a country run by, and for, gangsters. That's the initial condition, not
the long term result if the situation continues.
If you do it long enough, people notice that the country is being run by and for gangsters.
You'd have to completely reframe the penalty for crimes to be percentage based instead of fixed amounts. Even when caught the penalties are often so low that they don't matter, so white collar criminals go right back to it. When you can routinely make $10 million doing something a $1 million fine the one time you get caught just isn't a big deal.
The cost-benefit analysis almost always favors the criminal for white collar crimes (or any non-violent crime, really) when you have money. If I had $100m+ I wouldn't really pay attention to the law either.
The justice department also called this a fair punishment for an unrelated money laundering crime for Saudi nationals funding of terrorism. They didn't even bother to bring charges. (Which is a perfect answer to your question.)
"of yearly profit" is not the relevant comparison. What is relevant is the amount of money they made from the cartel money laundering. I am preeeeety confident that HSBC didn't make ~10% of it's profits from these transactions.
“Moreover, the dollar transfers earned HSBC hefty fees. The Senate investigation quoted an HSBC email lamenting how the bank would lose $2.6 billion in revenue from U.S. dollar accounts that it was forced to close because of the Mexico fiasco.” *
First, apparently HSBC was making 2.6 billion USD (annual?) revenue from these accounts, and was fined 1.9 billion USD. Second, it is not a certainty that a company engaging in illegal behavior will get caught and fined. The company’s “expected value” function would multiply the expected fines by the chance of being caught. We can only observe the world in which they get caught and perhaps pay a fine larger than what they made. We don’t see the world in which they don’t get fined, which makes the illegal behavior on average profitable.
You can't just apply the margin like that. You have to estimate the marginal cost of the extra business.
For something like banking I'm fairly certain that the marginal cost is tiny. It takes a lot of money to setup all the systems needed for moving money around, but once they are in place the difference between 10b and 11b flowing through them is tiny. As such HSBC probably pocketed most of that revenue.
Please read the second paragraph again. Where they didn't even bring charges for an unrelated crime of financing terrorism that they found out later. That was my answer to your question.
Well that again isn't an example of someone being caught and receiving a penalty lower than the gain from the crime.
I don't know why the justice department didn't pursue charges here. Maybe HSBC wasn't guilty? Maybe there wasn't sufficient evidence to win? Who knows. But this isn't an example of a caught party with a "so low that they don't matter" penalty.
> Well that again isn't an example of someone being caught and receiving a penalty lower than the gain from the crime.
I disagree... and frankly, just saying it isn't is a poor answer.
> Maybe there wasn't sufficient evidence to win?
Once again, your ignorance shows. The Justice Department expressed concern it would threaten the health of the financial system if they were too hard on HSBC at the time so they gave a low fee and ignored another crime.
> But this isn't an example of a caught party with a "so low that they don't matter" penalty.
I didn't say it was. I was answering your above question about a party that was 'caught' and faced a lower... NO penalty, in this case.
Banks are require to abide by a charter that requires good behavior. For evidence of criminal conduct that charter can be revoked and HSBC should have lost their right to operate in the United States. I would certainly call that a fee so low they don't matter penalty.
Especially since HSBC is now being accused of money laundering again... this time by Nigeria.
All you are giving is negative arguments. Saying things are not, and raising speculation without a basis does not add to the discussion. I am done with this.
No penalty is not the same thing as a lower penalty. You don't go around saying people got a lower penalty that were never actually prosecuted for something.
You claim the parent is speculating without basis but the parent is asking for an example where a normal penalty is lower than the profit, because that is an extraordinary claim.
If hsbc was able to profit from money laundering while paying they penalty, they would still be doing it. They obviously had no moral barriers to doing it before so why would they stop?
There was a case only last year involving manipulations of cattle futures. The firm made the decision that the cost of being caught was less than the potential penalty, and they were right.
It's not about criminal convictions. In theory it's just a civil case with a criminal case to follow. Which is why SEC fines are often less than the net befit. But, the actual number of criminal cases is rather low.
EX: "In June 2009, the SEC sued Angelo Mozilo, former CEO of mortgage lender Countrywide Financial, and two other former officers, charging that they misled investors about the quality of Countrywide's loans while knowing the company was fueling its growth by letting its underwriting guidelines deteriorate and originating a growing number of risky subprime loans. In October 2010, the SEC settled the lawsuit and Mozilo was required to pay a fraction of the $521.5 million he had earned, just $67.5 million in penalties" https://en.wikipedia.org/wiki/List_of_major_SEC_enforcement_...
The issue is that Mozilo's behavior resulted in personal gains against extreme public losses. It's in our best interest as a society to deter such behavior, while enabling whatever legitimate business Countrywide conducted. How do we best do that? The public at large wins — Mozilo should win, the public at large loses — Mozilo should lose.
I think GP's point is that a $60M fine (against $520M in earnings) is not a an effective deterrent against such antisocial behavior.
I agree all is a bit much but, it is more than 13% including penalties, especially when you include the effect the 'boosted' earnings had on the stock price.
But the general thesis that people are making so much money from their crimes that they don't fear criminal penalties seems to hold. like the 2.x billion in profits lost from the 1.9 billion fine?
A percentage of what though? A percentage of unlawfully obtained income or a percentage of personal wealth, whether or not it’s connected to any unlawful activities?
If all you lose is the income from illegal activity and a small fine it’s not much of a penalty now is it? The criminal justice system needs to be as vicious against criminals as collection agencies are against poor people.
I really have no problem seizing absolutely everything from somone who manipulates markets or defrauds investors. In fact, step it up. Seize everything and stick them with a lifetime of debt that can’t be discharged.
In that case, regardless of the merits of the idea, it’s constitutionally rather problematic in the United States, as the Eighth Amendment prohibits imposing excessive fines.
White collar crimes are problematic. I once saw a case where someone was convicted for selling prescription sleeping pills. It shouldn't be illegal to sell under the counter pills, I thought, but otherwise it was hard to fault the prosecution. The accused was caught trying to sell the pills to an undercover officer, fled from the police, and apprehended with a wide variety of illegal substances on his person. There was little doubt that he was at least guilty of the conduct of which he was accused.
White collar crimes are murkier. There is, for example, nothing illegal about getting the upper hand in a transaction. But it can be illegal based on little more than what the seller knew or was thinking at the time of the sale. Even things like false claims to the government often turn on little more than the characterization of certain transactions. A great deal of the white collar prosecutions I've seen have left me unsettled--the evidence was murky or subject to different characterizations, and the "wrong" often turned on the unknowable--the accused's knowledge or intent.
I'm a bit surprised to find someone suggesting that selling prescription pills under the counter shouldn't be illegal. Do you mind elaborating on your perspective?
If there's a willing buyer, and a willing seller, and the goods aren't stolen, and the seller isn't lying about what the goods are, then who is the victim?
If there's no victim, there's no crime.
(And, yes, identical logic does apply equally to illegal drugs).
It depends. Most (all?) antibiotics aren't sold without recipe. If they were and people started using them without good reason, we could end up in situation where there are no longer any effective antibiotics for the species (this is already the case to some degree, but accelerating it certainly isn't ideal).
When something has negative externalities, the answer isn't to ban it, it's to tax it in proportion to the pro rata share of the negative externalities (and then maybe waive the tax if you have a prescription; but maybe not -- they seem to be overprescribed as it is, and the negative externalities don't disappear when you have a prescription).
If you want to pay $2000 for useless antibiotics, no problem. But the price will deter enough people that we don't get the scale required for widespread negative consequences, especially when insurance companies won't cover it without a prescription. Then the money can go to subsidize medicine in general so there is no net consequence for overall medical costs or insurance premiums.
And we could do the same thing for heroin with the money going to drug treatment etc. and do without all this business of SWAT teams and drug cartels.
Cigarettes are legal and people still smuggle and sell them on the black market to avoid paying taxes. Your scheme would be mostly indistinguishable from the current prohibition and would still be dominated by cartels and SWAT teams.
> Cigarettes are legal and people still smuggle and sell them on the black market to avoid paying taxes. Your scheme would be mostly indistinguishable from the current prohibition and would still be dominated by cartels and SWAT teams.
Then where are the cartels and SWAT teams in the black market for cigarettes? The difference in the level of violence is stark. And most of the cigarettes on the market are sold through legal channels.
Failing to eliminate 100% of all crime is hardly an indictment of a significant improvement from the status quo.
i would argue that if taxes are so onerous as to support a black market for a legal good, the taxes are probably much too high. for instance, consider the price of cigarettes in the state of new york. the average cost of a pack (after tax) is $12.85. the federal tax is about $1 per pack, and the state government levies an additional $4.35. without accounting for local taxes that are added in some counties/cities, that amounts to a ~70% tax on a pack of cigs. in addition to being an absurd tax from the get-go (in my opinion), it is also quite regressive, since poor people are significantly more likely to be smokers. when you add states that levy per-pack taxes of less than $1 to the mix, you basically guarantee that people are going to bootleg cigarettes.
> i would argue that if taxes are so onerous as to support a black market for a legal good, the taxes are probably much too high.
Nah, when something has large negative externalities you set the tax to the point of mostly discouraging it. That'll be pretty high. It's supposed to be.
> in addition to being an absurd tax from the get-go (in my opinion), it is also quite regressive, since poor people are significantly more likely to be smokers.
"Regressive tax" only applies to necessities. Cigarettes are a luxury item, like lottery tickets or whiskey. Nobody ever starved or froze or lost their job for lack of a cigarette.
> Nah, when something has large negative externalities you set the tax to the point of mostly discouraging it. That'll be pretty high. It's supposed to be.
you really think each pack of cigs does $5.35 worth of damage to people other than the smoker?
When their insurance premiums or taxes go up to have to cover a million dollars in claims when you get cancer or other long-term chronic health conditions, yes.
A lot of the times the drugs being sold are painkillers, opioids and such. And this doesn't happen in a vacuum where no one else is harmed. Alcohol is legal, and there's lots of victims involving its use. We're just willing to tolerate it and we tried prohibition and it didn't work. And then some yahoos decided to try Prohibition II, like drugs are really different when alcohol is a drug itself.
The whole reason drugs are illegal is because of all the social ills having 20% of the population addicted to drugs in the late 19th century caused. And it's all been knee-jerk reactions and staying the course no matter how insane or counter-productive the results are ever since.
There are white collar crimes that are just as clear as the pill example you gave, and there are non-white-collar crimes that are murky. The examples don't demonstrate anything.
The U.S. has prosecuted white collar crimes in the past, and has underfunded and hamstrung its enforcement now. They could prosecute them again.
The reason for this is twofold.
First, we don't have the capability to go after big crime, so we go after little crime that can't defend itself well.
Second, it's often the case that people will bend the rules to gain an advantage, instead of being 100% fair and open and forgo that advantage, with a small risk that said bending ends up as criminal. You always have the choice of being 100% fair and open.
I totally agree with this. Take the recent Tesla fiasco. Do you think a $20M fine means a damn thing to Musk? That's like $0.01 for most people.
Now a $20M fine and a year in prison would make them think twice. More often than not, they make more in the commission of their crimes than they are fined, so they still come out in the black. In other words, they aren't truly punished.
> I totally agree with this. Take the recent Tesla fiasco. Do you think a $20M fine means a damn thing to Musk? That's like $0.01 for most people.
Elon Musk was forcibly removed as Tesla's chairman. That was the real punishment. Furthermore, Elon Musk agreed that two new board members would be selected by the SEC. Finally, Tesla promised that they'd watch Elon Musk's twitter account better.
The $20 Million was a slap on the wrist. The "real" punishment from the SEC were those new restrictions, which should clamp down on Musk's behavior.
----------
No one wants to see Tesla or Elon go bankrupt. The SEC just wants Elon to be more factual in his tweets. Neither jail nor fines help anybody.
IMO, the SEC should have threatened Elon Musk's CEO position a bit more (I mean... they could push him out of any officer position in publicly traded companies), but there's a strong argument that Tesla wouldn't survive if Elon were forced out.
"Elon Musk was forcibly removed as Tesla's chairman. That was the real punishment. "
Supporting parent comments, it really wasn't. Poor people often get fines that wipe out most of their money, sometimes cost them jobs, and/or get jail time for low-value crimes. People like Musk get a fine that's a tiny percentage of they and their companies' worth with usually no jail time. I've always been in favor of jailing executives and/or board members for their part in crimes. Even if it's "make the numbers go up or else without giving me details." Oh no, we already know that's how most dodge responsibility. I think companies that do way better on talking to employees and accountability already show it could be done better. And then there's stuff like Undercover Boss showing a lot of problems can be spotted with one, undercover visit. Not even necessarily by CEO.
Right! He settles for twenty (420) million and then goes on to mock the agency he settled with afterwards. People also seem to quickly overlook this and his other bizarre tweets:
I don't think Elon Musk deserves to go to prison for any length of time for that. I understand that he may have been very hasty and made fraudulent claims to investors (arguable considering you can't tell his state of mind).
The United States needs to reduce its prison population, not increase it.
Suggesting he be banned from serving as CEO would be much more reasonable, though I think the fine was more than enough.
It's about a mindset of the purpose and necessity of imprisoning so many people, not an individual case.
Aside from that, do you believe that Elon Musk in particular deserves to have his freedom restricted, be in a potentially dangerous situation (even in low security), and be locked away from society because of a series of tweets that heavily jumped the gun and stated funding as "secured" when it wasn't?
Being barred from serving as Chairman for three years and being forced to step down in addition to a $20m fine doesn't seem to satisfy some people's bloodlust, I have my doubts that being forced to step down as Tesla CEO would.
Why wouldn't being banned from serving as CEO or Chairman of any publicly traded company for some certain amount of time be enough? Why wouldn't increasing the fine be enough? Say it were $40m, $80m, $100m.
You can punish someone without throwing them into a box. I don't see how that benefits Musk or society in any way. If he's unlikely to do anything like this again, he had power taken away from him, and investors recooped losses, what possible gain is there?
If we have laws that we don't enforce, then we should strike them from the books.
If we are not willing to fund enforcement of a law, we should not pass it.
This will show us what we really value as a society.
We need to punish judicial corruption with the death penalty. Judicial corruption endangers the entire basis of our courts, and is tantamount to treason.
At ~current funding levels, the IRS brings in ~$3 for every $1 spent on it. The federal government could bring in more tax dollars just by funding the IRS at a higher level; it doesn't, for reasons.
> At ~current funding levels, the IRS brings in ~$3 for every $1 spent on it. The federal government could bring in more tax dollars just by funding the IRS at a higher level; it doesn't, for reasons.
Here are some of those reasons.
$3 for every $1 is an extremely misleading way of putting it, as though the IRS is a business and everything is good as long as it's turning a profit. A better way of putting it is that collecting taxes through enforcement has ~33% overhead, which is high. By comparison, the overhead of normal IRS tax collection is a fraction of a percent.
It also only accounts for the government's side of the expense, not the cost (and stress) imposed on innocent taxpayers who get audited to no avail in order to catch the smaller number of people who were actually committing tax fraud, and who are almost always small business owners because they're the ones with unusual tax returns. So the actual cost is even higher and is paid by a group of innocent people who create a disproportionately large amount of economic value while being at high risk of becoming unviable when you impose large surprise costs and time commitments on them like that.
The IRS also prioritizes its enforcement to maximize effectiveness, which means they're already taking the low hanging fruit and increased enforcement would be at the margin rather than at the existing average. For the average to be at parity you would need to be doing a lot of audits that cost more than the revenue they generate in order to cancel out the revenue gained from the net-positive enforcement that is already occurring.
It's possible that we could actually raise government income by doing less enforcement, because $3 is the average. It would be a net gain to eliminate the ones where we're spending $1 to raise $.50 (or $0) as long as we keep the ones where we spend $1 to raise $20.
We could easily solve the small buisiness problem by making the audit process happen at the government’s expense and probably still make money. We don’t have the government just tell you what you owe (like many other nations) because of the tax prep industry lobbyist and people vested on existing loopholes.
I don’t believe the driving force is protecting small buisinesses from Audits- anecdotal, but small businesses in my family are still audited frequently. I believe it has to do with how unpopular the IRS is with the conservatives for ideological reasons, and they currently control the government. Our president bragged about how dodging taxes was an admirable quality- that kind of attitude is the driving force in american rhetoric, not protecting small buisiness owners.
I completely support the idea of the IRS sending individuals a default tax return which you can just use as-is if you don't have anything to dispute or amend and be done.
But that doesn't work for small businesses. If you sell hamburgers, the majority of your customers won't have informed the IRS of the transaction. If any part of your supply chain includes normal retail outlets, same thing. Small business tax returns are pretty horrific. (They're at least as complicated for large businesses too, but they actually like it that way for all the usual reasons.)
> I don’t believe the driving force is protecting small buisinesses from Audits- anecdotal, but small businesses in my family are still audited frequently.
And they typically don't uncover major tax fraud, right? Evidence that the existing level of enforcement is, if anything, too high.
> I believe it has to do with how unpopular the IRS is with the conservatives for ideological reasons
That doesn't make any sense. Both of the major parties are ideologically bankrupt and ruthlessly pragmatic. Some part of their constituency wants it this way -- and it's probably the small business owners who keep getting audited even though they're not evading taxes.
> Our president bragged about how dodging taxes was an admirable quality- that kind of attitude is the driving force in american rhetoric, not protecting small buisiness owners.
Not paying taxes you don't actually owe is textbook capitalism. The idea that we should be outraged at companies for not paying what the law we passed says they don't owe instead of replacing the tax laws with ones that cause them to actually owe taxes is some kind of nonsense populist rhetoric.
> But that doesn't work for small businesses. If you sell hamburgers, the majority of your customers won't have informed the IRS of the transaction.
Hamburger joints getting extra scrutiny at the government’s expense doesn’t seem like a problem to me, especially since they often already do.
The people who aren’t getting audited often enough are not Mom&Pop hamburger joints, no one is arguing that. The premise of the parent poster is that the IRS is underfunded to deal with real large scale white collar crime, and as I understand you argue that’s not possible without splash damage to small buisinesses. But they're unrelated: you can specifically target large buisinesses, and you can make the government pay for audit services for small buisinesses.
> Some part of their constituency wants it this way -- and it's probably the small business owners who keep getting audited even though they're not evading taxes.
That’s utter nonsense. The large Republican doners not only have large tax bills at stake but believe they should not.
And it’s harder to tell the exact numbers, but probably thousands of times more more than all small buisinesses in donations.
How ideologically bankrupt democrats are is irrelevant and doesn’t change what is happening here.
> The idea that we should be outraged at companies for not paying what the law we passed says they don't owe instead of replacing the tax laws with ones that cause them to actually owe taxes is some kind of nonsense populist rhetoric.
The idea is we should be outraged at the tax law and fix it, instead of celebrating the loopholes for billionaires.
> Hamburger joints getting extra scrutiny at the government’s expense doesn’t seem like a problem to me, especially since they often already do.
The problem with "at government expense" is that it annihilates the premise that this is going to increase government income. If you audit someone, they not only have to hire a tax professional, they have to spend their own time on it because they're the only one who knows their own business. But because they're the only one who knows their own business, they also need to spend their time running the business. So the amount you would have to properly compensate them would be at something like the overtime rate, but worse because it's involuntary, and for someone whose time may already be valued at six or seven figures.
The government would never actually pay that full cost, so the idea that everything's fine because the government is paying for it is silly, and if they did it would immediately put the program deep underwater.
> The premise of the parent poster is that the IRS is underfunded to deal with real large scale white collar crime, and as I understand you argue that’s not possible without splash damage to small buisinesses. But they're unrelated: you can specifically target large buisinesses, and you can make the government pay for audit services for small buisinesses.
The problem is large businesses largely aren't the ones committing tax fraud -- hardly anybody is. Large businesses pay very low taxes because they hire very good accountants, not because they have fraudulent returns. The problem isn't that we need more audits, it's that we need better tax laws.
> The large Republican doners not only have large tax bills at stake but believe they should not.
Is it surprising that the people with the most money are the largest donors? It's basically a prerequisite.
> Each one of these doners individually spends hundreds of times more than the national small buisiness association on lobbying
Because small businesses don't have huge margins to be spending on lobbying. They're not a constituency because they donate, they're a constituency because they vote.
> The idea is we should be outraged at the tax law and fix it, instead of celebrating the loopholes for billionaires.
But that isn't where the outrage is directed. Nobody is actually fixing the laws -- either party. Even the Republican proposals (tax simplification, flat tax etc.) would fix it, but they never get enough votes to pass it because it's impossible to pass anything like that with the current level of polarization. If you can't get a single vote from the other party then it only takes a small handful in your own party to be corrupted by special interests and it's impossible to fix the problem.
It sounds like we are in violent agreement about better tax laws, and where we differ it’s only on the cost of auditing small businesses. Someone should do a study :)
> It's possible that we could actually raise government income by doing less enforcement, because $3 is the average. It would be a net gain to eliminate the ones where we're spending $1 to raise $.50 (or $0) as long as we keep the ones where we spend $1 to raise $20.
Keep in mind the likelihood that the enforcement actions we spend $1 to raise $0.50 are there to deter tens or hundreds of billions in related avoidance or fraud schemes. That's more important than the actual revenue recovered.
That's assuming those audits are actually deterring anything. The idea that significant numbers of people are looking at detailed IRS audit statistics before choosing to commit tax fraud is somewhat farfetched. Especially when they're still busting the largest offenders and offering huge bonuses to insiders for reporting fraud.
This is one of those things the media is profoundly stupid at. For example:
> Johnston and her coauthor, Andrew Joy, BS, also of Western New Mexico University, reviewed data on mass shootings amassed by media outlets, the FBI and advocacy organizations, as well as scholarly articles, to conclude that “media contagion” is largely responsible for the increase in these often deadly outbursts.
In other words, widespread media coverage of mass shootings has increased the number of mass shootings, because the perpetrators do it for the attention and seeing how much attention it gets encourages future perpetrators. So now the media does its level best not to inflame the public and give unnecessary publicity to these monsters.. or not.
It's the same kind of thing here. The deterrent effect you're looking for comes from people talking about the major tax evasion cases the IRS is winning. It gets reduced by publicly lamenting a lower enforcement budget -- which would have no effect on deterrence if nobody was talking about it.
It's way more important that people understand that the IRS is prosecuting people than whether the actual number of people they're prosecuting goes up or down. And they definitely still are.
Not sure where GP got his/her numbers, but the $3 to $1 ratio is way off. Maybe it was describing the marginal rate for additional collection of unpaid taxes? US federal income and payroll tax receipts for 2018 was approx $3,000 billion, while the IRS budget for 2018 was only $11.7 billion, a ratio of approx 256 to 1.
It makes sense that the rate at the margin would be much higher than the overall rate, you've already collected all the low-lying fruit, now you're going after the scofflaws trying to avoid paying anything.
> Not sure where GP got his/her numbers, but the $3 to $1 ratio is way off. Maybe it was describing the marginal rate for additional collection of unpaid taxes? US federal income and payroll tax receipts for 2018 was approx $3,000 billion, while the IRS budget for 2018 was only $11.7 billion, a ratio of approx 256 to 1.
That's including all the taxes paid by people with unchallenged tax returns. That's basically just the cost of processing the checks. It's quite a lot more expensive to get money from someone who filed a fraudulent return and you have to do an audit to get them to pay. Especially when a lot of the audits you do won't turn up any real fraud.
A lot of which is legal "dodging", which is another large problem. There are more loopholes in the tax laws than there are actual tax laws. You have to have money and assets to be able to utilize a lot of them, though. The average Joe wouldn't be able to.
The drug war has been disproportionally devastating along racial and to a lesser extent economic lines and ineffective at its stated goal. Why would we want to reuse this failed strategy to fight another kind of crime?
Just because the overarching goal of a project is awful doesn't mean every detail about the project is awful. There are lessons to be learned from every failure, and like it or not the war on drugs funds itself quite well through asset forfeiture.
Case in point: no one would argue the Nazi regime was anything approaching "good", but when the war was done, we didn't throw away the V2 rocket and start research from scratch. We threw out all the horrible shit the Nazis did but kept their wildly successful rocket.
Likewise, it's possible to throw away the racist bullshit that perpetuates the drug war but use it's funding mechanism to fund prosecution of other crimes that would otherwise be financially infeasible to prosecute otherwise. If someone is convicted of insider trading, take all the money they gained from it and use it to prosecute other insider trading crimes.
> ...but when the war was done, we didn't throw away the V2 rocket and start research from scratch.
But we did throw away all the research they did on unwilling human subjects even though it could conceivably have lead to better science if we ignored all the "racist bullshit"...
No, we did not. Introducing you to Japanese Unit 731 [1] that was conducting atrocious human testing during World War 2 and whose information was happily collected afterwards with the promise of “forgetting” about the crimes committed.
> Shiro Ishii, as the chief of the unit, was granted war crime immunity from the US occupation authorities, because of his provision of human experimentation research materials to the US.
What about the part where the war on drugs doesn’t actually reduce drug use? Sure it funds itself by sealing money from innocent people but that’s just another negative externality.
It was not necessary for the Nazis to kill millions of people to develop rockets. Oversimplifying that period of human history doesn’t make reusing failed law enforcement programs a better idea.
I don't understand what exactly you're arguing. I would appreciate it if you'd explain clearly exactly what you are arguing for or against and how it relates to the comments you're replying to.
Neither I nor Animats ever stated that the war on drugs (or Nazism for that matter) were good things. I think that's entirely clear from even a cursory reading of our comments. In fact, I even stated that you can throw away all the bad stuff but keep one good thing.
It sounds to me like you're arguing that since the war on drugs is bad, we should never do anything affiliated with the war on drugs again. That's silly, and isn't an argument to anything anyone even came close to saying. Computers and cell phones are used in the war on drugs, should we get rid of them too?
Again, you're massively misrepresenting every argument that's been stated in this thread and using it to hold the moral high ground with the easy "Nazis are bad" argument. Of fucking course they are. Maybe read past that? Because it's not edgy. It's not "ends justify the means". It's an actual fucking argument that you're completely ignoring for an easy win.
Shame on you. You should aspire to be better than that.
Okay because it kinda sounds like you're saying "the war on drugs and Nazis are bad". Which no one here is arguing against. So congratulations, you win.
Maybe I lack relevant local knowledge (I am not a US citizen) but seems like this describes a situation where a government agency had discretion to perhaps do something legal but immoral back in 2016. Did they, in fact? That is, did the IRS tell Vanguard it owes a large new tax bill on a "transfer pricing" rationale?
The UK's GAAR has this trick called a "double reasonableness test" which it uses to get rid of some types of tax _avoidance_ and that seems like an appropriate legal rule here if, in fact, the IRS does abuse this discretion.
The double reasonableness test asks this:
Could any reasonable person (not you, the jury member, judge or whatever, but some other reasonable person you're capable of imagining) think that this way of doing things was reasonable ?
Only if the answer is "No", which it will be only for the most extraordinarily tortured ways of avoiding tax, then this method of avoiding tax is prohibited. You don't go to jail or anything, your avoidance trick just doesn't work and you owe the taxes as usual.
What this is really exposing is a facet of the sham of "transfer pricing" in general.
The problem with transfer pricing is that "market price" is a context-dependent volatile fiction. If you buy a jar of peanut butter, it might cost $2 at one store and $2.50 at another on the other side of town. Which one is the market price? The difference is 25%, which at scale is enough to consume most companies' entire profit margin. And the answer is both, because the less expensive one is on the outskirts of town and the other is in the center of town where rents are higher and you pay a premium for the convenience.
Which is one of the ways international companies avoid tax. You have a 10% profit margin internationally, so you overpay/underpay by 10% for everything from your sister company and make zero profit in the high tax jurisdiction, but the entire difference is within the "market price" margin of error. It's even possible to justify the difference by making note of some value add feature/service you did or didn't have that justifies a higher or lower price.
The entire concept is a farce because the error margins are larger than typical profit margins.
Which is how you get bizarre nonsense situations like this. If Vanguard is charging less than others had historically, are they charging less than the market price, or that just the new market price?
It's much more bizarre than that. Vanguard is organized upside-down from most funds companies. Instead of a company that owns mutual funds, Vanguard funds own the management services company (and investors in turn own the funds). This aligns the incentives of Vanguard with its investors --- which is exactly what you want from a fund manager.
Vanguard is in trouble for "charging" the funds below-market rate on the services provided by the management company. But the only reason there are charges to pay attention to at all is that Vanguard deliberately organized itself to return as much money as possible to investors.
Suppose you open a car dealership that gives every person who buys a car a share of the dealership. The next thing you know that dealership has the best service and the lowest prices and makes no profits, because all the owners are also customers and they care less about getting a $10 dividend than about service quality and price.
So then the argument is they're under-charging themselves and they owe tax on the difference between what they charged themselves and the fair market value. But it turns out all the customers love this ownership structure and having to compete with it has caused all the other dealerships to lose business and cut prices, and two new independent dealerships with the same structure sprang up and are now charging similar prices, meanwhile several of the incumbents with the old structure have gone out of business.
So the question is, what's the market price? It's clearly lower than it was, even the old incumbents that are still around are charging less, and losing market share while doing it. If there are now multiple companies offering the razor thin margins, isn't that the new market price? It's a price available to any member of the public and it's what anybody has to compete with if they want to enter the market.
The argument that there is a difference between what they're charging and the market price is ignoring the fact that their aggressive competition has lowered the market price down to what they're charging. But if you try to compare with what rates were like in 1975 then you get a squirrely result.
It's the same problem as with any of it. The grey area covers the entire map. The price they're charging is reasonable -- someone could charge it and operate a sustainable business, and several people do. But somebody else argues that it used to be higher. They're both right, and that's why the entire concept is a farce.
I don't see it that way, since they could have simply organized the company the ordinary way, with a services company that owned multiple funds, and avoided these tax implications: the "transfers" we'd be talking about would still be happening, but they would be untaxable.
But that's irrelevant if you're not giving this defunct historical market value to the transfers. The only thing taxable is the difference between what they charge and the market value. The rate they charge is available to the general public -- it should be the new market value.
I'm not sure we're clear on what's happening. The transactions we're talking about are only transactions due to a consumer-protective structure Vanguard adopted. Fidelity also provides IT services to its funds (for instance), and won't provide IT services to anyone else in the market, but because it owns the funds, there's no taxable transaction occurring.
If Vanguard's tax filings are actually non-compliant, we should change the laws immediately.
There's a Matt Levine piece on this somewhere, it's worth finding and reading.
While it may be, I found it difficult to get into. I felt like I was reading a long rant that was peppered w/ interesting facts here and there. I put it down years ago with the intent to try again. I've not gotten back to it yet.
A book I recommend that does touch on the S&L scandal is Lying for Money (Dan Davies). The Outlaw Bank (Beaty & Gwynne) was also an awesome read.
As for the greater topic of white collar crime, it's a key ingredient of the cake, forever to be baked in. My professional advise to folks is simply to be aware of that and act accordingly. Can't say much more than that on the matter.
Controversial means i have to do a lot of research to determine whence the controversy and which side to trust, if any. (Which I don’t have the domain knowledge nor time for.)
Lack thereof, many people agreeing on the contents, is a sign that you can read the book and (sort of) trust it.
Nothing guarantees nothing, cogito ergo sum and all that, but it’s a good heuristic.
What we do need is vastly more resources for financial regulators, as well as courts. Yes the laws and regs could also be improved, but that is a harder problem. The easy problem is that the people doing good work to combat financial crimes only have the staffing and money to go after a small, small fraction of likely targets. And the courts do not have what they need to handle a high volume of increasingly complex, technical subject-matter.