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December 19, 2003
Howard Dean's Hypocrisy on Corporate Tax Breaks

As part of a continuing series on Howard Dean's association with the offshore "captives" tax shelter he set up in Vermont, the Boston Globe reports today that under his leadership, Vermont actively and aggressively set up tax shelter front companies for offshore corporations to enable them to avoid paying tax penalties for not being headquartered in the United States:

As part of Howard Dean's effort to attract companies to set up so-called "captive" insurance businesses in Vermont, he signed legislation that enabled a Bermuda-based company to establish a Vermont branch, which industry analysts said at the time could provide a tax break for the parent firm. ...

In May 1999, Dean signed a bill designed to help self-owned, or "captive," insurance companies that intended to remain offshore. The legislation, for example, allowed an offshore-based captive insurance company to set up a "branch" in Vermont as a way of complying with US labor laws. This occurred when the captive wanted to cover employee benefits, a new form of business for the captives. The branch was not in an actual building, but was an operation run by Vermont-based specialists in the insurance business.

The impact of the legislation was described this way in a 1999 publication called Best's Review -- Property/Casualty Edition: "Although a company has a property/casualty captive established offshore, it would take a tax hit under the US Employee Retirement Income Security Act for lumping the employee benefits in with the captive's business. By creating a branch captive in the United States -- in this case, in Vermont -- the company would be spared the tax penalty."

Was this illegal? No. But it points out the hypocrisy of Governor Dean, who handed out corporate welfare on one hand for twelve years, and uses his other hand to waggle his index finger at the Bush administration for allowing corporations to headquarter themselves in Bermuda for tax purposes:

Dean has criticized corporations that incorporate in Bermuda for tax reasons. Yesterday, in a speech prepared for delivery in New Hampshire, Dean said, "It's time to look behind the fiction that allows corporations to become citizens of places like Bermuda and avoid paying income taxes on their foreign income."

There may be fair criticism of federal incorporation law, but for one thing, it certainly didn't start with the Bush administration; the corporations that Dean uses as examples started migrating off-shore years ago, as Dean's efforts show, going back to 1993. And, to put it bluntly, Governor Dean stuffed the Vermont pocketbook with money that should have gone to whatever tax penalty existed to prevent it. At the very least, Howard Dean was an off-shore enabler for almost a decade, and his angry facade appears to be more of a defense mechanism than previously thought. (via Question Dean Blog)

UPDATE: Dean's hypocrisy extends past corporate taxes, too:

Democratic front-runner Howard Dean often blames President Bush's tax-cut policy for rising property taxes, but when Dean was governor of Vermont, his budget frequently came up short, forcing towns to make up the difference with property tax increases. ... "Take a look at your property taxes. They probably went up," Dean said during a speech Thursday in Manchester, N.H. "That's part of the Bush Tax."

Yet, in the nearly 12 years Dean was governor, property taxes that support local schools in Vermont nearly doubled. Those that pay for municipal government went up by nearly half to make up for less money from the state.

Blogs For Bush is also covering the story.

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Posted by Ed Morrissey at December 19, 2003 8:06 AM

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