SOME U.S. insurance companies have created their own Bermuda triangle. Instead of ships and planes vanishing without a trace, these companies have figured out how to make their federal tax burden disappear.
American property and casualty companies that insure businesses make their profits not on premiums charged but by investing their reserves. A handful of them have figured out that by reconstituting and headquartering their corporate parents in Bermuda, , their investment earnings can escape nearly all U.S. taxation.
The Bermuda presence is in name only -- often just a storefront office in Hamilton, the island's capital city. The companies' top decision-makers work in the United States, their operations centers are located in the United States and the bulk of thir investments are in the United States.
While business profits are at record levels, the corporate share of income taxes is falling. In 1996, corporations accounted for 21 percent of the nation's income taxes. This year, their share is down to 17 percent.
The shift in the tax burden further undermines the public's confidence that the tax system is fair and the burden in evenly distributed. That's why Treasury Secretary Larry Summers' regulatory attack on abusive tax shelters makes sense.
The Bermuda scam is allowed by law. It's a loophole in the tax code that ought to be closed.
If Congress passes any tax legislation this session, one provision must be ending this Bermuda tax dodge.