For legal professionals, bankers, investors, travelers and anyone else interested in international investment, travel or governance, FATCA (the Foreign Account Tax Compliant Act) has been in our thoughts. The Act, in short, declares that the U.S. Government has the right to seek from all foreign banking and investment institutions any information regarding U.S. citizens and their accounts worldwide. Many writers have written eloquently about the legal and ethical problems this Act creates, along with the harsh consequences it has had for Americans living abroad.

Probably the best argument I have seen for the repeal of FATCA actually comes from one of its proponents. Writer Rebecca Wilkins, an executive director of a left-leaning “Financial Accountability and Corporate Transparency (FACT) Coalition” has written a column online for The Hill. http://thehill.com/blogs/congress-blog/economy-budget/237110-endorsing-tax-evasion

Its title is “Endorsing Tax Evasion,” and Ms. Wilkins has nicely encapsulated the main arguments used by statists and anti-freedom types to justify further restricting the freedoms of U.S. citizens through FATCA.
A Senator has sponsored a measure to attempt to repeal FATCA, and Ms. Wilkins focuses her attention on the evils that only FATCA can save good people from.

Ms. Wilkins starts her rant off with the following incendiary message:

“A vote in favor of repealing FATCA sends a message: a message to foreign banks that they can get back to helping wealthy Americans hide their assets and use offshore accounts to evade tax.”
Throughout the rest of her column, she uses faulty logic, grade school reasoning, and classist emotionalism to detail exactly why the world will go to Hell if we don’t keep FATCA in place. However, the pure weakness and intellectual dishonesty of her arguments (and the similar arguments of those who are like-minded) demonstrate why FATCA is indeed a very bad law.

Ms. Wilkins uses five arguments, the intellectual dishonesty of which would be laughable were she not so earnest in her writings. They are as follows:

1. The use of a false dichotomy. “Voting to repeal FATCA is a vote in favor of allowing tax evasion to continue—and escalate.” FATCA is an extremely complex law dealing with the complex subjects of overseas bank accounts and investments, both those held by U.S. citizens and by those who are U.S. residents. It purports to apply worldwide and offers draconian penalties for even unintended violations and failures to report. It was based on doubtable legal premises (that the U.S. has the right to tell the world’s banks what to disclose), and was enforced using extralegal tactics (threatening to not allow “non-compliant” banks access to U.S. systems). Civil libertarians do not like it. Americans overseas do not like it. Overseas banks do not like the arrogance of it and have closed the accounts of many U.S. citizens. Ms. Wilkins chooses not to address any of these potential problems. Apparently, in her opinion (as we’ll see below), those are the just desserts for committing the sin of investing outside of the United States. The best she can come up with is the creation of a false dichotomy: either you keep FATCA, or you’re a dishonest person who likes tax evasion. There are no legitimate reasons (legal, moral or practical) why an honest person shouldn’t like FATCA. Therefore, if you are opposed, you are dishonest and likely a tax evader.

2. Questionable estimates and conclusions. Ms. Wilkins then argues that FATCA is necessary to stop tax evasion and points to figures without any basis for their substantiation:
“The U.S. loses an estimated $150 billion in tax revenue each year to tax haven abuse – a revenue shortfall that honest taxpayers have to make up. About $40-70 billion of that revenue loss is from individual tax evasion. In light of those numbers, the virtues of FATCA become exceedingly clear.”
A second intellectually dishonest argument used to justify government intrusion is to use statistics or figures that cannot be supported, with the argument that if we allow the government intrusion, then we’d really see after the fact how those estimated figures are correct. Where did those figures come from? We don’t know, but just like the Patriot Act and other bad laws, we’re just supposed to believe that our legislators shall act in our best interests, and one day the facts will speak for themselves.
Millions of people speed every year, do illicit drugs and—yes—cheat on their taxes. If we could install cameras and auto-shutoffs in cars, monitors in folks’ homes, and make everyone take lie detector tests, I’d venture a guess that we could reduce all of those ills. But for now, at least, society has made a decision that such fixes are worse than the ills they are supposed to cure. According to Ms. Wilkins’ logic, however, the ends would justify the means and freedom is something worth giving up in exchange for governmental protection.

3. Class warfare. One thing that Ms. Wilkins and her leftist cronies have successfully done with the passage of FATCA is to get the general population not to care about it. The argument is two- fold: why should you care? You’re not a “FATCAT” (using her language)? You’re not investing abroad. Should you be comfortable with laws of questionable validity and morality, just because those laws don’t currently affect you? According to Ms. Wilkins you should. Only rich people invest overseas. You’re not one of them, are you? Then why should you care?

4. Ignore questions about the legal authority to effect the law. Notice in Ms. Wilkins’ column that she never once broaches the questionable (read non-existent) authority underpinning FATCA’s basis, which is that the United States has the right to tell every other bank in the world to disclose its customer lists to the U.S. government. She can’t address that argument in her column—even if to attempt to shoot it down—because it is a complex and nuanced issue. It’s hard to win folks over to her position by acknowledging some of the intellectually challenging aspects of it. So she leaves the hard arguments alone, settling instead for ad hominem attacks, and finally, her best argument of all:

5. Only bad people would dare invest outside ‘Murica. Granted, given that only a minority of U.S. citizens have ever set foot outside the country (or even would want to), she’s playing with a bit of a stacked deck in her favor. She’s arguing to the preconceived notions of many people who ask “why travel to [insert country here] when we’ve got the best of everything here in the good ole U.S.A.?”
In her column, the only people who would dare invest outside of America are wrongdoers:
“The FATCATS are the ones with those offshore bank accounts.”

Well, says who? Folks with overseas jobs working careers? The young kids in the Peace Corps or teaching English as a second language so they can travel around the world on a budget? What about retirees who decided to move to a “third world” country to enjoy its lower costs of living? FATCATS according to Ms. Wilkins.
Ms. Wilkins could have attempted to deal with a number of meaty subjects in the FATCA debate, such as:
–the dubious legal underpinnings of the law;
–the questionable ethical basis for the assertions in the law; or
–the fact that some claim FATCA will hasten the demise of the United States’ reserve currency status.
But no, all of those issues would require nuance, intellectual depth, and an honest debate. When you can’t win an honest debate, don’t debate honestly. And Ms. Wilkins, as well as the other writers in support of FATCA, can only support the law through intellectual dishonesty.