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CF&P E-mail Update, September 19, 2007

Center for Freedom and Prosperity's E-mail Update

1) Washington Update

2) CF&P Videos

3) CF&P Signs Letter to Congress Seeking Permanent Extension to the Federal Moratorium on Internet Access Taxes

4) Dan Mitchell Sets the Record Straight

5) CF&P's Fight Against the OECD is Chronicled in Jason Sharman's Book "Havens In A Storm"

6) Dan Mitchell on the Right Way and Wrong Way of Dealing with Tax Evasion

7) CF&P's The Market Center Blog

8) Dan Mitchell to Speak on Tax Competition Next Month in Brussels and Zagreb

9) Richard Rahn on the IMF's and the World Bank's Untouchable Status

10) Opportunity to Attend Free-Market Film Premiere"


1) Washington Update

The Center finished the summer by meeting with representatives of more than 120 members of the House of Representatives and the Senate, educating them on the need to preserve tax competition. We also alert them to the many anti-free market bills being pushed by statist members such as Senators Dorgan and Levin and Representative Doggett.  All office receive fact sheets on CF&P's major issues:

In this update, we also discuss our new experimental project on producing educational videos.  Check out our first video attempts and please send back your thoughts and comments. We also discuss Dan Mitchell's response to a Tax Notes article on the OECD's attack on low-tax countries and we invite those in Washington to attend a premiere of a new Documentary from the Acton Institute entitled the "Call of the Entrepreneur." Catch-up on Dan Mitchell's trip to Europe in October and note the Coalition letter the Center signed asking Congress to extend the Internet Tax Freedom Act before it expires on November 1.

Best regards, AQ


2) CF&P Videos

The Center for Freedom and Prosperity Foundation is constantly seeking new ways to promote sound policy and individual liberty. With this in mind, we are experimenting on producing videos that explain, in a succinct manner, the important issues that we track and cover.

Since these are first-time efforts, we understand the production quality of these videos needs some improvement. We're most interested in your thoughts about persuasiveness.

If you have not had a chance to view and remark on these two videos, please take time to send us your comments.

Video #1:  Cutting the U.S.'s Corporate Tax Rate (9:20 min.)

Video #2:  Benefits of Tax Competition (2:20 min.)

Our goal is to have a series of persuasive videos covering a range of issues, including the flat tax, tax competition, the OECD, the Laffer Curve, and the need to reduce government spending. With a limited budget, we're not expecting (or seeking) to match the professional quality of network TV, but we do want the production quality to be at a sufficiently high level that it doesn't undermine the educational/philosophical message in the videos.

Also, could you please send the video to a few people you know. We need to spread the word on these important issues.

Note: We are currently producing our next video on the importance of tax competition.


3) CF&P Signs Letter to Congress Seeking Permanent Extension to the Federal Moratorium on Internet Access Taxes

The Center for Freedom and Prosperity is one of 39 free-market organizations to sign and send a Coalition letter to Congress asking them to "extend the Internet Tax Freedom Act before it expires on November 1."

In 1997, Congress passed a law to protect Internet access and Internet commerce from discriminatory taxes. Unlike phone bills, Internet bills therefore are largely free of a plethora of taxes and this has removed an obstacle to the prosperity of the e-commerce industry. Congress should make the Tax Moratorium permanent by enacting the Permanent Internet Tax Freedom Act of 2007 (H.R. 743 and S. 156). This law would make permanent the ban on state taxation of Internet access and on multiple or discriminatory taxes on electronic commerce. Below is an excerpt from the letter followed by a link to the full letter and list of signers.

[Excerpt from Coalition letter]

On behalf of millions of taxpayers, we request that Congress promptly extend the Internet Tax Freedom Act before it expires on November 1, 2007. If the moratorium is allowed to lapse, American taxpayers could be exposed to countless new and onerous taxes from states and municipalities simply for accessing the Internet.

Since 1998, Congress has ensured that Internet access is not subject to either state and local taxes or multiple and discriminatory taxes on Internet commerce, regardless of the technology consumers use to access the Internet. With the moratorium's expiration rapidly approaching, it is imperative that Congress continue to prohibit Internet access taxes and multiple and discriminatory taxes on electronic commerce.

Link to Coalition Letter:

CF&P Foundation's Fact Sheet on the Internet Tax Moratorium


4) Dan Mitchell Sets the Record Straight

In late July, Tax Notes published a review on J.C. Sharman's "balanced and thoroughly researched study" on the battle between low-tax countries and the OECD from 1998 to 2002.  Martin Sullivan used Mr. Sharman's book as a springboard to review the OECD's campaign to force these small countries to change their domestic tax laws for the benefit of foreign tax collectors (see link to analysis below). Today, this update highlights Dan Mitchell's response Sullivan's Tax Notes article. Dr. Mitchell's piece appeared in the August 20 edition of Tax Notes and discusses Sullivan's sins of omission and sets the record straight. The following is and excerpt from Dr. Mitchell's response.

Note: The Center for Freedom and Prosperity played a major role in the defeat of the OECD and we continue to fight them to this day. J.C. Sharman mentions part of our role in his book (see excerpt below).

[Dan Mitchell's Tax Notes Response:]

In his discussion of the history of the tax competition fight, Sullivan mentions that the OECD put together a blacklist of so-called tax havens. He also lists the criteria that were used to develop this list. But he should have revealed the hypocrisy of the exercise. When the OECD put together the blacklist, it conveniently chose to identify only nonmember jurisdictions—even though OECD nations such as Austria, Belgium, the U.S., Switzerland, the Netherlands, Luxembourg, and the U.K. all qualify as havens, according to the Paris-based bureaucracy's own definition. Moreover, these OECD nations control 80 percent of the world's ''offshore'' market, so this is not just nitpicking.

. . . The biggest sin of omission, however, was the absence of any economic analysis, particularly how tax havens are playing an important role in the tax-competition induced shift to lower tax rates and better tax policy around the world. …the assault on tax havens is an effort by politicians from high-tax nations to resist the liberalizing impact of globalization. While their ideological beliefs may be wrong, they are correct to be concerned. The increased mobility of labor and capital is a nightmare for statist politicians. The global shift to lower tax rates began more than 25 years ago with Margaret Thatcher and Ronald Reagan. Combined with the growing ability of taxpayers to shift resources to tax havens, this created enormous pressure on politicians to make their tax regimes less onerous. In other words, politicians felt compelled to lower tax rates to prevent jobs and investment from fleeing to jurisdictions with better fiscal policy.

. . . The article also contains a few misleading (and unsupported) assertions. Sullivan writes that compliance rates for offshore accounts remain very low, but he bases that on nothing more than a shot-in-the-dark estimate from the IRS. But because the tax agency has an obvious incentive to exaggerate evasion to justify bigger budgets and more staff, this is hardly an unbiased source. The article also includes a chart showing the amount of money (other than bank-to-bank deposits) in Cayman banks, but these numbers tell readers nothing about evasion of U.S. tax law. The bulk of those deposits are probably institutional funds, with a good chunk also coming from non-Americans. Moreover, because there is a tax information exchange agreement between the Cayman Islands and the U.S., common sense tells us that very little of that money is hiding from the IRS. To Sullivan's credit, at least he did not regurgitate the $70 billion offshore evasion figure concocted by a former John Kerry staffer, a number that was discredited when the former staffer admitted to the Congressional Research Service that — for all intents and purposes — the number was his personal guess.

Sullivan also links tax havens with money laundering and terrorist financing, but dirty money is much more likely to be found in ''onshore'' banks.

August 20, 2007, Tax Notes, By Daniel J. Mitchell, The Real Story of the Tax Haven War

July 30, 2007, Tax Notes, By Martin A. Sullivan, Lessons From the Last War on Tax Havens


5) CF&P's Fight Against the OECD is Chronicled in Jason Sharman's Book "Havens In A Storm"

[Excerpt from Mr. Sharman's book:]

… The campaign against the OECD initiative began in the United States with the formation of the Centre for Freedom and Prosperity (CFP) in October 2000. Comprised of Andrew Quinlan, Dan Mitchell (also of the Heritage Foundation) and Veronique de Rugy (also of the Cato Institute and American Enterprise Institute), what the CFP lacked in numbers it quickly made up for in influence, as even OECD and European Commission officials grudgingly admit (Author's interviews). Critics and supporters alike characterise the CFP trio as genuine ideologues rather than providing a façade for hidden corporate interests. Representative of growing suspicions in Congress and elsewhere, these lobbyists were incensed by the thought of a 'global tax police' directed by a French-based supranational bureaucracy on behalf of high-taxing European 'socialist' governments. These lobbyists were vital in fixing the issue as one of protecting fiscal sovereignty and defending the principle non-intervention in key sectors of the US government, leading to Washington's defection from the campaign in May 2001.

This change of heart in large part reflected the domestic political resonance of international norms. Initially the CFP had assumed that the Democrats would win the 2000 presidential election, and thus they opted to try to block American participation in the initiative through the Congress (Author's interview CFP), quickly gaining the support of Dick Armey, then-Republican majority leader in the House. They established an extensive website (, a regular email bulletin, and set to work lobbying various Washington insiders. Mitchell and Quinlan were invited to the January 2001 Barbados meeting by Sir Ronald Sanders, High Commissioner and foreign policy representative of Antigua and Barbuda. There they coached Caribbean delegates and sparred with Jeffrey Owens and OECD press spokesman Nicholas Bray, though they were excluded from the actual sessions after OECD delegates threatened to withdraw (Author's interviews). Their sweeping and vitriolic attacks on the OECD helped to restore listed states' morale (ITIO 2002 interview). Furthermore, the CFP brought along Armey's main tax advisor Elizabeth Tobias, to strengthen links between the opposition to the OECD in Washington and the Caribbean (Tax Notes International, 9 January 2001).

The Bush administration came into office uncertain about the harmful tax competition initiative, and gave conflicting signals on whether it would continue to support the OECD for several months. The CFP lobbyists and their allies were by no means kicking against an open door in seeking to persuade the new administration to abandon the OECD campaign. As a result of the disputed election results and slow transition, Washington paid little attention to the Barbados meeting or the subsequent Joint Working Group. Secretary of Treasury O'Neill endorsed a G7 finance ministers' communique in February 2001 praising the OECD's work in combatting harmful tax competition. Career Treasury officials were also committed to the initiative. However, thanks to the CFP's extensive connections and barrage of emails, articles began appearing about the OECD campaign under the headline 'Global Tax Police' (Robert Novak, Chicago Sun-Times, 19 April 2001; National Review, 23 April 2001).

Powerful Congressmen and Senators such as Tom DeLay, Jesse Helms and 84 others wrote to O'Neill arguing that 'Sovereign nations should be free to determine their own tax laws' (Letter from Dick Armey available at: ). The Center for Freedom and Prosperity also successfully lobbied such key officials as Mark Weinberger (the Assistant Treasury Secretary for Tax Policy), Lawrence Lindsey (presidential economics advisor), Cesar Conda (domestic policy advisor to Vice President Cheney), and Glenn Hubbard (Chairman of the White House Council of Economic Advisors) in February-March 2001. Nobel prize winning economists Milton Friedman and James Buchanan came out in support of the CFP and against the OECD campaign. Finally the CFP also gained the endorsement of all 26 members of the Congressional Black Caucus whose members, like the Commonwealth, were offended by the prospect of applying sanctions against small developing states (New Republic, 21 August 2001; Author's interview CFP).

The diversity of the coalition the CFP managed to build in opposition to OECD sanctions, together with the initial indecision of the Bush administration, indicate that this success was premised on persuasion rather than unthinking ideological reactions. In parallel to its domestic activities, the Center for Freedom and Prosperity had also been in close contact with Caribbean governments. And in this way, when O'Neill announced in the media 10 May 2001 that he was withdrawing US support for the initiative in its present form, the main points of the tax havens' critique as developed in the previous two years (discussed extensively in the following Chapter) were reproduced in his statement, particularly regarding the illegitimacy of using economic coercion to effect change in sovereign states' tax policies (Washington Times 10 May 2001).

November 2006, Havens In A Storm:  The Struggle for Global Tax Regulation, by J. C. Sharman, Cornell University Press


6) Dan Mitchell on the Right Way and Wrong Way of Dealing with Tax Evasion

Linked below is the PowerPoint presentation by Dan Mitchell to the Cambridge International Economic Crime Symposium on the right way and wrong way of dealing with tax evasion.

[Excerpt from PowerPoint presentation:]

Bad Policy Causes Tax Evasion

  • High tax rates create an incentive to evade.
  • Death taxes and wealth taxes, and other forms of double taxation exacerbate the problem.
  • The world's leading expert, Friedrich Schneider of the University of Linz, finds that taxation is the dominant factor in estimating a nation's shadow economy.

Tax Competition Improves Policy

  • Globalization has made bad policy less tenable since productive resources – the geese that lay the golden eggs – can flee to more attractive jurisdictions.
  • Margaret Thatcher and Ronald Reagan deserve credit for starting a global shift to better policy.
  • Personal tax rates have dropped 25 percentage points.
  • Corporate tax rates have dropped 20 percentage points.

The Tax Competition Revolution

  • Capital gains tax rates have dropped.
  • Double taxation of dividends has been reduced.
  • Death taxes and wealth taxes have been reduced or eliminated.
  • The flat tax is sweeping the globe, with more than 20 nations adopting non-discriminatory tax regimes.

September 6, 2007, Presentation to Cambridge International Economic Crime Symposium, Session XIII, by Dan Mitchell, "Fiscal Crimes: The Right Way and Wrong Way of Dealing with Tax Evasion" tm


7) CF&P's The Market Center Blog

Just is case you missed it… some interesting headlines from our daily blog.

Link to CF&P's The Market Center Blog:

Monday, September 17, 2007, The Market Center Blog, The Deadly Impact of Government-Run Health Care.

Monday, September 17, 2007, The Market Center Blog, More Evidence on Tax Competition Constraining Government Greed.

Tuesday, September 11, 2007, The Market Center Blog, Thanks to Government, Internet May Soon Become More Expensive.

Monday, September 10, 2007, The Market Center Blog, Tax Competition Pushing Taiwan to Cut Corporate Tax Burden.

Tuesday, September 4, 2007, The Market Center Blog, Walter Williams Challenges Papal Interest in Higher Taxes.

Monday, September 3, 2007, The Market Center Blog, The Reagan Revolution Sweeps the World.


8) Dan Mitchell to Speak on Tax Competition Next Month in Brussels and Zagreb

1) Brussels, October 10, 2007:  Fourth Annual International Leaders Summit on Economic Growth

"The Future of Transatlantic Relations - Strategic Focus on Economics, Freedom, Justice, Trade and Security"

Includes Special Session: ILS Economic Roundtable with Prime Minister Janez Jansa, Slovenia

2) Zabreb, October 15, 2007: International Leaders Summit on Economic Growth

Advancing Economic Freedom and Croatia's Prime Ministerial Election Debate Event


9) Richard Rahn on the IMF's and the World Bank's Untouchable Status

The IMF and the World Bank enjoy untouchable status without doing anyone but its pampered employees much good.  For all that, there is a way to reform these institutions for the 21st century"

[Excerpt from the article:]

Should the International Monetary Fund (IMF) and the World Bank exist and, if so, what should they be doing? These questions are increasingly being debated by policy wonks and even by those affiliated with these institutions. A growing number of critics, from both the left and right, are coming to agree that the IMF and World Bank have tolerated too much corruption among their clients and many of their programs do not meet reasonable cost-benefit tests. The IMF says its "primary purpose is to ensure the stability of the international monetary system," and the World Bank says its mission is to "eliminate global poverty." These are laudable goals, even if unattainable, particularly by politically dominated multilateral institutions.

…The managers of the IMF and the World Bank have allowed their missions to overlap, too often defined success as money dispersed rather than service delivered, put too much stress on the limited pool of skilled administrators in poor countries, and failed to act on serious calls for reform (such as those recommended by the Meltzer Commission in 2000). They have also fostered expectations to exceed what realistically could be done—hence, the current widespread disillusionment. Link to full article is below:

September 2007, Copenhagen Institute (Previously published in The American Spectator), by Richard Rahn, Saving Soiled Sisters


10) Opportunity to Attend Free-Market Film Premiere"

Many of you have seen the Center's corporate tax video. We appreciate the complimentary feedback (and also the suggestions for how to make our next video even better). Given the positive response, I wanted to forward an invitation for a movie-style documentary ( on the role of entrepreneurship. Dan Mitchell had an opportunity to see a pre-release screening and says it motivated him to participate in the Center's video project. Both Dan and I will be attending the premiere, and we hope to see you there. Here is the relevant information:

[Movie Screening Information:]

Join the Acton Institute in celebrating its first free-market documentary! Entitled "The Call of the Entrepreneur," the film will premiere in Washington, D.C. on the opening night of the American Film Renaissance Festival.

Washington, D.C. Premiere:
     Acton Institute's "Call of the Entrepreneur"
     Wednesday September 26th, 7PM
     E Street Cinema
     555 11th Street NW
     Washington, DC 20004

Watch the YouTube trailer:

Limited seating is available so secure your tickets now at

For more information, please contact:

     Michelle Muccio


Best regards,

Andrew Quinlan
Center for Freedom and Prosperity


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