Clean Money

We’ve all heard the term “money laundering” in gangster shows. However, contrary to popular belief, that doesn’t mean cleaning off the cocaine residue that allegedly is on much of the currency in this country. Laundering means to hide the illegal source of money and make it appear to be from a legitimate source. As the old cliche goes when trying to catch crooks, “follow the money.” As we’ve seen in countless movies about drug lords, they deal with suitcases full of cash and need ways to make sure nobody knows where it came from.

For a long time, private citizens have been deputized in the war on drugs by being required to file Form 8300 with IRS in Detroit within 15 days to report any business transactions where they received $10,000 or more in cash or cash equivalents. Of course the crooks do everything they can to avoid having their payments reported. They try to break up transactions into multiple payments, each of less than $10,000. However, related payments are supposed to be combined and reported on an 8300 if they total more than $10,000.

A few weeks ago on the Sopranos show, Carmela was going around to several different stockbrokers and investing about $9,000 of cash she had taken from Tony’s stash with each broker in order to avoid the 8300 reporting.

Each time the form is revised, the list of types of cash equivalents grows. It currently includes U.S. currency, Foreign currency, Cashier�s checks, Money orders, Bank drafts and Traveler�s checks. With the cost of postage stamps increasing, I wouldn’t be surprised to see them listed soon. We use Priority Mail a lot and are constantly buying $3.85 stamps.

The penalty for not filing Form 8300 when you are required to can be the full amount of the cash involved. I can still recall a case in Silicon Valley shortly before we left there ten years ago. IRS checked the books of several auto dealerships and found where several expensive vehicles had been purchased for cash and no 8300s had been filed. IRS fined the dealerships millions of dollars, the full amount of unreported cash.

When I was presenting my real estate taxation seminars around Arkansas, I included a section on this reporting requirement because it is a well known trick for drug dealers to launder money through real estate. We even heard some first hand stories from some of the Realtors in attendance of being involved in investigations of just such a thing.

What triggered this longer than expected discussion of money laundering was this recent story about drug dealers laundering money through life insurance policies. Of course, I’m sure we are hearing about this at least a few years after it started and the crooks are already on to something new by now.

KMK

Tax Change Ideas

There’s rarely a shortage of people voicing their opinions on how the tax system should be changed. Here are a few recent ones, obviously written before the announced departure of Treasury Secretary O’Neill. With that development, the floodgates will be open with suggestions for the benefit of his replacement.

Jack Kemp’s suggestions

Victor Canto’s proposals

Daniel Henninger on the growing tax burden

Daniel Mitchell saying good riddance to IRS Commissioner Rossotti

KMK

Strange Legacy

Most politicians do something during their term in office that makes such an impression that it is the one thing you think of when recalling that person. It sticks with them for the rest of their lives. For Dan Quayle, it was spelling potato. For Bill Clinton, it was his famous speech lying about his relationship with Monica. Treasury Secretary Paul O’Neill’s legacy seems destined to be as a U2 groupie, which is rather odd for a financial person. As is their duty, the editorial cartoonists are having a great time with this.

KMK

No Tears for O�Neill

It has been hard to take seriously a Treasury Secretary who has nothing better to do with his time than fly around the world with an Irish rock star discussing how much USA taxpayers should give away to ungrateful third world countries. Maybe Bush can find a replacement who will work on fixing the insane tax system we have to cope with.

KMK

Dividend Reform

Let’s hope Bush is able to eliminate double taxation of corporate profits. That would change some of the dynamics of corporate finance, as pointed out by Larry Kudlow.

As much as I’d like to see a serious move to true capitalism, and the elimination of all taxes on dividend income, I’m not optimistic that such a drastic change will fly with the people who believe that only evil rich people receive dividends. What we are more likely to see is a return of something that I can remember from my earliest days in the tax business. Back in the mid 1970s when I started, each person was allowed up to $100 per year of dividends tax free.

KMK

Short Memories

What a surprise. Not a word during the campaigns about raising taxes and then once the polls close it’s a mad rush to see how many taxes can be added and jacked up.

Our rulers know that they are safe from any voter backlash because the next elections are two years away and the collective memory of the populace is about two weeks, at most. What would be great for this country is a little Instant Karma for our rulers. No more waiting until the next formal election to punish them. As soon as they try to raise taxes, we start a recall or impeachment drive.

KMK

Don’t Be A Chump

Here’s a good summary of some of the most common work at home scams. Many of them are the same. You pay some scamsters for their “secret formula” to solicit other suckers to pay you that very same “secret formula.” Can anyone say pyramid scheme?

KMK

Misery Loves Company

Some other countries think that the USA has an unfair advantage on the world market because we have lower tax rates than they have. Just as with the similar argument that we should be willing to pay four dollars a gallon for gas because that’s what they pay in Europe, the answer to the disparity in tax rates is for us to raise ours, not for them to cut theirs. Luckily for us, our ancestors fought a war 226 years ago to detach ourselves from having to take any orders from the Europeans. If they want to continue destroying their society with expensive socialist programs, that’s their right to do. However, we have the right to ignore their advice and learn from their stupid mistakes.

KMK