Douglas Holtz-Eakin of the National Review makes an interesting point in a post today -- Instead of demonizing Americans who hold money in Cayman Island bank accounts, why don't we learn from them?
The existence, success, and scale of the Cayman financial sector should tell U.S. policymakers to look outward to opportunities around the globe as a way to enlarge the markets for U.S. workers and take advantage of the potential income from the 95 percent of the world’s consumers that live outside U.S. borders.
And second, the U.S. tax system should be configured so that its firms can compete permanently on a level playing field with companies from other countries. In practice, this means that the U.S. should bring itself into alignment with global best practice and adopt a territorial tax system. A territorial system would tax U.S. earnings at the U.S. rate, but not tax international earnings. Instead, those earnings would be subject to a single layer of tax at the host-country rate — allowing for a level playing field for competition. And those earnings should be repatriated tax-free so that the U.S. economy can benefit from global success.
The Caymans have unfairly been a political punching bag. The right reaction should be to recognize that its operations carry a moral for U.S. tax policy and get started on much-needed corporate-tax reform.
It's funny how everyone is always so quick to criticize people like Mitt Romney for having a Cayman bank account, but how many do you think took the time to understand why an American would choose to hold money there? Rabble, rabble. It's un-American! Rabble, rabble.