Back in March of 2015, Thomas Piketty, famous economist who calls for a global wealth tax to fix the inequality of income, was interviewed on CNBC. It is clear from the interview that Piketty wants the global wealth tax to be administered nation by nation, with a sharing of financial information across national lines. [At the end of this article I will share what the IRS thinks about financial offshoring as a scam and my ideas for a market based solution.]

There is no doubt to me that this global lawmaking is a tempting proposal. Justice is, after all, a key to survival of the human race. But justice is quite flawed in its practice, and  big finance has the power to bend justice and even write into law what it thinks justice is.

So, it is clear that Piketty supports globalization and said so in the interview. He does not want middle class business owners thinking that globalization is not as good for them as it is for big business, which often pays a lower rate of tax than small business.

But Piketty does not want a world government to enforce the world wealth tax. He specifically said this in the interview. And that is where I believe the economist is being hopeful but naive.

In fact, globalists can take advantage of the weakness of sovereign nationality to put money offshore, hide assets when needed and even write laws making this legal in many instances. But globalists can also take advantage of a global law, administered by nations, and can simply turn around and treat it like they treated Dodd-Frank.

Globalists can say that the wealth law is being poorly administered on a nation by nation basis. They said Dodd-Frank was ineffective and should be scrapped. Ask Jamie Dimon about that. Criticism about Dodd-Frank weakness actually led to a watering down of the law. There will be an outcry from the globalists that the wealth tax is being poorly administered, and calls for a world agency to properly administer it. That is almost a guarantee.

So, as much as I would like to support a law creating a wealth tax worldwide, I think it is a very bad idea because of the unknown and partially understood consequences that could result from that law. Sovereign nations are still important in the world. Empire is created by force, as it was in Rome, and by financial power, as it is in our time.

Without Empire, there may have been no liar loans spread to Spain, the UK and the USA. Without Empire, there would not be a desire to rule the entire world, as stated by the Neocons when they said America was the only remaining superpower.

Empire can be dangerous and can make serious mistakes and commit serious fraud, and so can a world government that seems to consolidate power even further. Piketty's plan would, I fear, lead to that consolidation.

Globalization does borrow from Empire, and the definition of globalization is a worldwide integration and development. The risk of limiting national sovereignty is always there and is sometimes in the news, as we watch the travails of Greece, and of Argentina, and even of Russia.

I know Russia wishes it could be Empire again, but for now its leader is popular because it holds national sovereignty dear. That statement may offend some, and I am not saying Putin is a saint. But national sovereignty is really the way things ought to be. Empire is not how things ought to be, and many religions even agree with my view. Seeing what Empire has done in history makes even secular folks understand that Empire isn't really good.

Now, national sovereignty can be turned on its head by people like Donald Trump. I don't want to be too political in this article, but should mention that national sovereignty that comes with national arrogance is dangerous too. 

But for the most part, national sovereignty is good. That is why Europe is failing, because the nations are not equal. Germany and the northern countries do not want equality. That could be the eventual undoing of the Euro and the Eurozone.

Piketty has formulated his ideas from his experience with France and the UK. And certainly, he has a sense of what is just. But perhaps a better way to solve this problem is to make stiff penalties for those who are caught hiding money out of their sovereign nation's view. The penalties should be very harsh, and act as a deterrent.

As of now, the IRS has a voluntary program of disclosure but I believe it should be backed up by more forceful laws if you are caught. Other nations could follow that lead. Here is the IRS program:

The Internal Revenue Service today said avoiding taxes by hiding money or assets in unreported offshore accounts remains on its annual list of tax scams known as the “Dirty Dozen” for the 2015 filing season.

"The recent string of successful enforcement actions against offshore tax cheats and the financial organizations that help them shows that it’s a bad bet to hide money and income offshore,” said IRS Commissioner John Koskinen. “Taxpayers are best served by coming in voluntarily and getting their taxes and filing requirements in order.”

Since the first Offshore Voluntary Disclosure Program (OVDP) opened in 2009, there have been more than 50,000 disclosures and we have collected more than $7 billion from this initiative alone.  The IRS conducted thousands of offshore-related civil audits that have produced tens of millions of dollars. The IRS has also pursued criminal charges leading to billions of dollars in criminal fines and restitutions.

The IRS remains committed to our priority efforts to stop offshore tax evasion wherever it occurs.  Even though the IRS has faced several years of budget reductions, the IRS continues to pursue cases in all parts of the world, regardless of whether the person hiding money overseas chooses a bank with no offices on U.S. soil.

Through the years, offshore accounts have been used to lure taxpayers into scams and schemes.

Compiled annually, the “Dirty Dozen” lists a variety of common scams that taxpayers may encounter anytime, but many of these schemes peak during filing season as people prepare their returns or hire people to help with their taxes.

Illegal scams can lead to significant penalties and interest and possible criminal prosecution. IRS Criminal Investigation works closely with the Department of Justice (DOJ) to shut down scams and prosecute the criminals behind them.

Hiding Income Offshore

Over the years, numerous individuals have been identified as evading U.S. taxes by hiding income in offshore banks, brokerage accounts or nominee entities and then using debit cards, credit cards or wire transfers to access the funds. Others have employed foreign trusts, employee-leasing schemes, private annuities or insurance plans for the same purpose.

The IRS uses information gained from its investigations to pursue taxpayers with undeclared accounts, as well as the banks and bankers suspected of helping clients hide their assets overseas. The IRS works closely with the Department of Justice (DOJ) to prosecute tax evasion cases.

While there are legitimate reasons for maintaining financial accounts abroad, there are reporting requirements that need to be fulfilled. U.S. taxpayers who maintain such accounts and who do not comply with reporting requirements are breaking the law and risk significant penalties and fines, as well as the possibility of criminal prosecution.

 

That possibility of criminal prosecution for failure to report should change to probability of criminal prosecution. And the IRS needs to go after the wealthiest hedge funds and others engaged in this fraud. Piketty would certainly approve of this increased reporting requirement.

I also believe that the marketplace should be put to work. If a nation refuses to pass tough international disclosure laws and/or hides offshore money from home nations, that nation should be boycotted in some way. That means it could be necessary to boycott allies.

For example, the UK has corporations actively involved in hiding money. The US is far too lax with that nation as we are shocked by the Guardian's study on the subject.

It isn't just the UK but rather the entire Anglo Financial Empire that needs to be reined in by US lawmakers. At least some markets in the UK should be boycotted by our nation until all this is sorted out.

Perhaps there is a way to reach Piketty's goal without giving up more sovereignty than we and other nations already have. A good old nation to nation negotiation is what is needed. We aren't talking war, just real economic war to get this problem fixed.