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On the Third Hand: Panama

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On the one hand, some rich people probably put their money in the now infamously breach-prone Panamanian tax haven system because they were trying to simplify their finances, or get a little bit of extra, legitimate privacy.

On the other hand, some of the Panamanian account holders were probably ordinary crooks.

Some, apparently, might be examples of an even more terrible form of crookedness: People who shout loudly about how other people should pay all of their taxes, no matter how absurdly high or complicated those taxes might be, or who may even be in charge of the ferocious tax compliance enforcement systems, while cheating on their own taxes. Or, while aggressively exploiting “legal” but awful loopholes to reduce their tax bills “legally.” 

But, on the third hand: Some people might have put assets in those Panamanian accounts for a different reason: They were afraid their governments would confiscate their assets for no particularly good reason whatsoever.

Or, that their governments would impose the kinds of restrictions on the movement of assets that would amount to a de facto confiscation.

Americans planning for long-term care (LTC) expenses might laugh at the idea of our fine government confiscating our retirement savings, let alone our LTC money. But, really, what else is the current low interest rate environment but a polite way to confiscate the future money of people who bought long-term care insurance (LTCI), variable annuities, or other products that are supposed to help people get through retirements that are set to start a decade or so from now?

See also: Lloyd’s of London takes ‘massive hit’ from low investment return

Setting rates so low is a way to confiscate LTCI money and use it to prop up the housing market and stock market, so that boomers who got in when the getting was good can muddle through well enough, and not think too much about tomorrow, or that day that will soon be here.

Another kinder, gentler way is to confiscate retirement money is to let inflation soar. Inflation tends to favor workers and borrowers over retirees who are living off of money invested in bonds (in other words: money lent to big borrowers).

Traditionally, Democrats have been warm to the idea of openly “taxing the rich.”

Two other popular asset confiscation techniques include suddenly imposing new taxes on retirement savings arrangement income, without providing much, if any, grandfathering for existing retirement savings arrangements, and suddenly imposing new, ungrandfathered or poorly grandfathered eligibility rules on users of Medicare health coverage and Medicaid nursing home benefits.

Sellers of private LTCI might like the idea of the government using tough new eligibility rules, or stronger enforcement of existing rules, to weaken Medicaid’s role as the country’s de facto universal single-payer long-term care benefits program. That might increase your sales. The people of the United States, including well-informed retirees with assets, might come to agree that the country has to do that to guarantee defenseless people a minimum level of support. But, no matter how reasonable toughening Medicaid nursing home eligibility rules might be, if today’s 50-year-olds find it’s a lot harder to hold on to their house than they had expected, based on looking at what happened to their parents, from the perspective of the 50-year-olds, that amounts to a (reasonable, easily foreseen) asset confiscation.

If our government is too dysfunctional to make good on what looked to insurance companies like Patient Protection and Affordable Care Act (PPACA) risk corridors program obligations, or even to protect pregnant women from mosquitoes carrying the Zika virus without going through partisan firestorms, how can people who will be old someday really trust the government to leave LTC or retirement planning arrangements alone?

I guess the answer lies not in Panama, but in a nice green herb from Mexico. Give us enough medical marijuana and maybe the humor in this situation will be more apparent.

See also:

LTCI Watch: Cyprus

Bobo Blasted For Column On Estate Taxes


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