Clever Corporate Tax Shelters like LILO

, I wrote about the various constitutional challenges and other fringe legal theories that some tax protesters use in their battle against the IRS, and how they don’t appear to be valid legal arguments.

But I acknowledged that these schemes “really work — if only in the sense that the IRS certainly loses more revenue from the adherents of these theories than it is able to recover from those it defeats in court.”

, the US Senate’s Finance Committee is holding hearings about fraudulent corporate tax shelters. According to an article in the New York Times (link — requires registration and will probably go stale soon):

A consultant’s report, prepared for the I.R.S., but kept secret by the agency until now, is expected to show that corporate tax cheating in cost the government $14 billion to $18 billion.… [M]any businesses and individuals are breaking the law because their risk of detection is small and even if they are caught they are unlikely to be punished or even made to pay the taxes.

Instead of voting for more funds to enforce the law, Congress has tightly restricted I.R.S. spending on auditors, criminal investigators, training and new technology while many of the agency’s most qualified auditors have left in .…

About eight of 10 known [emphasis mine] tax cheats are let go without having to even pay the taxes, interest or penalties.

Another article on today’s Senate hearings mentions the latest popular type of corporate tax shelter:

…complex transactions that involve companies paying lump sums to foreign towns and cities to lease bridges, dams, subways and other infrastructure. They then lease the property back to the town or city for the sole purpose of cutting their U.S. tax bill by depreciating the asset. No lease payments are ever made and the town or city is in no danger of losing control of the subway or other asset…

Participants include major U.S. banks and Fortune 500 companies… “This scheme is so pervasive that much of the old and new infrastructure throughout Europe has been leased to, and leased back from, American corporations”… [T]he tax shelter scheme has been so successful that U.S. cities are now doing the same, with the subway systems of Boston, Chicago and Washington having been leased back to U.S. corporations. He said he had reason to believe that New York and Chicago water authorities were about to lease the waterlines under their streets.

You’ve seen the stories before: Huge US corporations making billions and yet somehow getting out of their taxes, or even getting refunds. They’re occasions for brief flashes of righteous anger on the op-ed pages. But I’m happy to see these companies being so clever — putting their accountants and lawyers to work outwitting the tax man — maybe even coming up with a dodge that the little guys can use from time to time.

Also, I wrote about the debate prompted by prominent conscientious objectors in Israel’s military. I wondered at the time what something similar would look like in the US.

In ’s San Francisco Chronicle was a piece about how some groups are trying to encourage soldiers to defy illegal orders in Iraq, particularly with an open letter to occupation soldiers co-authored by an Israeli refusenik and an American conscientious objector.

There isn’t much sign that these moves have had much of an effect yet, although some soldiers are failing to come back from leave for whatever motives.

And to finish things off today, there’s a good article about Thomas Jefferson in the New York Review of Books that will be of interest to those of you who are also curious about some of the issues I brought up in a Picket Line entry .