Saturday, February 24, 2001

Anti-Tax Group Goes Global

by Louis Jacobson

     Bush Administration officials take notice. A new conservative group calling itself the Center for Freedom and Prosperity is sending a pointed message to the White House and to the Treasury  Department: Washington isn't the only anti-tax battleground.

     Buoyed by support from House Majority Leader Dick Armey,  R-Texas, and Senate Majority Whip Don Nickles, R-Okla., the  center's officials-led by prominent conservative activist Daniel J. Mitchell-have spent the past few months traipsing from  Washington to Paris to the Caribbean on a mission to stop  international attempts to put new restrictions on small nations  that are "offshore" banking centers. Highly-taxed European countries of the Organization for Economic Cooperation and Development are pushing the restrictions. Mitchell and his colleagues argue that such restrictions will hinder the flow of  global capital, thus removing a key marketplace lever that keeps  taxation levels low.

     "We're for fiscal liberty, financial privacy, and national sovereignty," says Andrew F. Quinlan, the center's president and CEO. "We fear that if all countries have the same  tax rate, the tax rates will go up because there will be no  competition."

     The CFP has also picked up the cudgel against a proposed  Internal Revenue Service regulation that would require U.S. financial institutions to report to foreign governments the  interest income that nonresident aliens receive. Quinlan argues that tax policy changes should not be decided by "bureaucrats seeking to advance an ideological agenda of worldwide taxation."

     The center has some Capitol Hill clout in its corner. Nickles recently wrote to Treasury Secretary Paul H. O'Neill and requested his department's cooperation in fighting the proposed  OECD restrictions. The center's Web site also displays an endorsement from Armey. And Elizabeth Tobias, an aide to Armey,  joined Mitchell and Quinlan in Barbados at a January summit on offshore banking.

     Mitchell and Quinlan are well-seasoned veterans of  Washington's policy wars. Mitchell, the new center's chair, is keeping his full-time position as the McKenna senior fellow in political economy at the Heritage Foundation. Mitchell is  "exactly the right guy for the job because he's built up 20 years of credibility in the tax community," says Stephen Moore, another  leading supply-sider.

     Mitchell helped to organize in 1997 a flat-tax working  group that included roughly 200 trade associations. Quinlan, a one-time Joint Economic Committee staffer, headed the grass-roots  group CapitolWatch, which advocates a tax-free Internet and ending the estate tax. William P. Jarrell, a lobbyist and CapitolWatch board member, calls Quinlan "a very good complement" to Mitchell.

     Mitchell writes economic studies for the center's educational affiliate and helps gin up support among other conservative think tanks. Quinlan handles the day-to-day running  of the organization. Veronique de Rugy, a George Mason University research fellow, handles outreach to academic and foreign parties.

     Mitchell won't disclose the center's sponsors, saying his donors "are confidential because we believe in financial  privacy." But despite the group's hefty travel bills, he says the center's budget is "less than $100,000." Quinlan adds that the center is "raising money from interested people in the U.S., from  multinational companies, and from anyone who thinks this is an  important issue."

     The center's big mission is to oppose the efforts of the  industrialized nations acting through the Paris-based OECD, which  has threatened to impose sanctions against Caribbean nations and  other jurisdictions that levy taxes at rates significantly below  those in the industrialized world. These "tax havens" also do not  give industrialized nations' investigators unfettered access to  depositors' financial records.

     Critics cite the hazards of criminal activity in offshore banking. But representatives of offshore-banking nations-and  their supporters at the center-say the governments of OECD member  countries really fear that their citizens avoid taxes by putting  their assets in offshore banks.

     Clinton Administration Treasury officials were among the  leading supporters of the OECD's effort. But with George W. Bush in the White House, Mitchell and Quinlan hope to change Treasury's mind.

     "When you've got other things on the front burner,  there's always some risk that the career bureaucrats at Treasury will continue running with the ball," Mitchell says. The center wants "to tackle those ball carriers, making sure that O'Neill and [Bush economic adviser] Larry Lindsey sit up and take  notice."

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