Watch Tax Notes contributing editor Robert Goulder talk with Steven A. Dean, faculty director of New York University School of Law’s graduate tax program, about the intersection of racial diversity and U.S. international tax policy.
Here are a few highlights . . .
On what influenced the American support of the tax haven blacklist
Steven A. Dean: When the Bush administration came into office, there was some uncertainty about what they would do with respect to [the tax haven blacklist]. . . . Organizations like the Heritage Foundation made a big effort to derail this effort and to persuade Paul O'Neill, then Treasury secretary, to withdraw support for it.
What surprised a lot of people, and frankly confused them, is that one of the most influential letters came from . . . the Congressional Black Caucus. . . . One of the most prominent letter writers was former Congressman Charlie Rangel, who served a generation of Black tax lawyers and was really a hero to many others. He was a powerful force in Congress for many years. When the delegate from the Virgin Islands got some, but not all, of the Congressional Black Caucus to sign onto a letter to Paul O'Neill asking them to reconsider, that really had a big influence. It really had an impact that many other members of Congress would not have had.
As part of writing this article, I looked back at what Rangel was doing at around this time. He'd been working on a free trade agreement with Africa. It wasn't as though he hadn't been thinking about this. Oddly, that's relevant because one of the countries named on the list was Liberia, which I happen to know [because] I had a Liberian asylum client who was fleeing just an incredibly violent and frankly, scary civil war and was seeking asylum in the U.S. at around the same time that the OECD was putting Liberia on a blacklist for not cooperating with tax evasion.
That's really part of what I want to convey in the article. When you think about these issues, to me, they ended up on the wrong side while acting in perfectly good faith. I think a lot of folks who think that tax havens are really the problem and that this is not a problem that could be solved within the OECD without help from other states, truly believe that and don't have any racial animus or any xenophobia. I think it's just hard for them to picture what a very different country looks like.
On FATCA
Steven A. Dean: In Obama's campaign, he spent a lot of time talking about wanting to not reward companies that ship jobs overseas, which to a tax expert doesn't sound quite right, but certainly I think it marked his focus on tax policy and the importance of it. In the run-up to the [Foreign Account Tax Compliance Act], you can see a new recognition that what was lacking in the international sense was a real analog to third-party facial reporting.
When you rewind even further, Rangel and the Congressional Black Caucus had a really marked impact on the end of apartheid in South Africa. I know this seems like a really big leap, but bear with me. One of the efforts that really had an impact was Rangel, along with many others, getting arrested in front of the South African consulate in New York. This is just a thing that many people did, but not many people were Rangel.
In Rangel's autobiography, he mentions that in conversation with Nelson Mandela, Mandela pointed out that a U.S. law denying foreign tax credits to businesses operating in South Africa was known in South Africa as the "Bloody Rangel Amendment." They really didn't like it very much [because of] this sense that if you want things to happen, you can get yourself arrested, write angry letters, but why do you threaten people's tax credits? Or as in FATCA, why not threaten to hurt banks? Say, "If you don't help us with the information we need, we are going to . . . impose, essentially, sanctions on non-U.S. financial institutions that refuse to provide information.” This is not something that everybody agrees with.
I'm not sure I am a fan of FATCA, but I prefer FATCA very much to imposing sanctions on Liberia to fix our problems. . . . I think FATCA is not entirely without fault, but the element that is really quite elegant here is the connection with the "Bloody Rangel Amendment." If you want action, the thing to do is not to create a blacklist of countries that can't solve their own problems. That's not going to get the job done.
The element I like to tease out of this story is: Is Obama better at tax than somebody else? I don't know. Is Rangel better at tax than somebody else? I don't know. But it's certainly worth noting that when you bring in a diverse group — and when you have two Black people involved in tax policy, that is certainly going to be diverse — something interesting could happen.
Is it going to be perfect? No, and FATCA certainly isn't. But I think it's important to acknowledge that getting a new group together to think about an old problem gives you a better chance of coming up with a new solution than just getting the same team back together who are going to rehash the same ideas, again and again.