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Tax havens in U.S. cross hairs

With $345 billion in lost revenue, tolerance for off-shore avoidance fades.

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When Barack Obama or John McCain enter the White House next January, either one will face a crucial problem: How to raise revenues or cut spending to shrink the massive federal budget deficit.

Tax economist Martin Sullivan suspects that Senator Obama will go for the "low-hanging fruit" first – that is, chasing down wealthy tax evaders, individual and corporate. Obama signed on to the Tax Haven Abuse Act, a bill introduced in 2007 by Sens. Carl Levin (D) of Michigan and Norm Coleman (R) of Minnesota.

Senator Levin figures that secretive offshore tax havens cost the federal government $100 billion in lost tax revenues each year. That's part of the total "tax gap" – the amount of unpaid taxes owed by individuals, corporations, and other organizations – estimated by the Internal Revenue Service (IRS) to be $345 billion.

As Levin sees it, these tax evaders are "willing to rob Uncle Sam and offload their tax burden onto the backs of honest taxpayers." His bill will be reintroduced next year. If the nation's economic woes continue, lawmakers will probably have a more difficult time opposing legislation that could raise billions by thwarting efforts that amount to illegal tax evasion.


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