Clinton targets Cayman Islands tax schemes

Hillary Clinton, the Democratic presidential frontrunner, targeted the Cayman Islands and other offshore centers in an interview with MSNBC on Monday.

Outlining her income tax plans, should she become the next U.S. president, Mrs. Clinton said she will end tax abuses and apply a surcharge to income gains even if they are generated offshore.

“We are now in a position, I think, where we can go after some of these schemes that you did read about: the kind of misclassifying of income, trying to make it look like it’s capital gains when it is really ordinary income, going ahead and routing income through the Bahamas or the Cayman Islands or wherever,” she said.

“So I want to have a surcharge that wherever the income comes from, wherever the income is, it would be on the adjusted gross income and it would give us a chance to try to get around and end some of these abuses that are taking place in the tax system.”

Mrs. Clinton has proposed a 4 percent tax surcharge on Americans making more than $5 million annually, to ensure that the wealthy, who are the most likely to benefit from tax planning, pay a higher effective tax rate than the middle classes. Mrs. Clinton plans to close “egregious loopholes,” like the “Bermuda reinsurance loophole,” whereby a hedge fund or hedge fund investors make a capital investment in an offshore reinsurance company, which then reinvests that capital and the premiums it receives in the hedge fund.

Tax on the investment is deferred until the investment is liquidated and then taxed at the lower capital gains tax rate.

Her plans further target the “Romney loophole,” a reference to the 2012 presidential candidate’s disclosure that he had accumulated more than $100 million in his retirement account, in part through the legal deferral of income tax on his offshore fund investments. Mrs. Clinton wants to limit the ability of the very wealthy to game the system by sheltering large incomes in tax-preferred accounts.

In addition, she endorsed the “Buffett Rule” proposal, named after billionaire investor Warren Buffett, which would set a minimum tax rate of 30 percent for earners with an income of more than $2 million.

The measures are necessary, the Clinton campaign said, because “as a result of loopholes and the ‘private tax system’ of lawyers and accountants who enable complex strategies to shelter and lower the bill on income for the most fortunate, some of the wealthiest taxpayers continue to pay low effective rates on their income.”

Asked whether she would aim at raising the capital gains rate, which was cut by her husband, former President Bill Clinton, from 28 percent to 20 percent, she said that those cuts were part of a budget deal and “middle class folks, poor people got something for it” in return.

Instead, she is proposing a different capital gains structure. “You would pay ordinary income tax for holding an asset for less than two years and then it would drop until in the sixth year it would be 20 percent,” she explained.

However, it is unclear whether the tax proposals would affect the ability of high-income earners to legally shelter or understate their true income for tax purposes. In any event, implementing the tax plans would first require a major power shift in Congress, commentators noted.

Hillary Clinton

Hillary Clinton

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  1. This "candidate" is the most hypocritical, distrustful, condescending politician we’ve ever seen. Her "Clinton Foundation" benefited from the same loopholes and fishy accounting practices that she wants to end. Over 16 foreign countries received 160+ billion dollars from the US state dept. while she was Sec of State. Those same countries also donated millions to her "foundation" How this person is still a candidate is unbelievable. The emails, Benghazi, and let’s not forget her husband! Pray she does not get elected!

  2. Politicians are politicians no matter where they are. She needs to set her sights on Delaware, but people don’t like to put what’s going on in their own backyard on blast…

    This is all politicking just like how Alden is suddenly saying they’re addressing Caymanian Unemployment when the CIG itself employs quite a bit of expats. How hypocritical it is for them to say the private sector needs to hire and train Caymanians in place of work permits when they don’t even practice what they preach. Another example is developer concessions, one party complains when the other does it yet they turn around and do the same thing themselves.

    They all went to the same school and read out of the same book of poli-tricks.

    It that time again when they are put on their best suits and go out with a mission to say whatever people want hear that will get them to to vote for them, while they actually have no intention or sometime not even the means to keep the promises they make such as the fixing Mount Trashmore without Darts help, we all see where that went.

  3. @ Michael. True, all politicians say/do things to ensure people cast votes for them. Maybe that’s why non-career politician candidates are making so much news and are so popular. Governance is supposed to be for the people and by the people– People who live and work in the community not someone who is out-of-touch with the persons they represent.

  4. The reason the Hillary and all the other US Politicians pick on the Cayman Islands is that no one from the Cayman Islands EVER responds or engages them!

    We roll over and let the rest of the world crap on us.

    Our compliance is stronger, our diligence better, are rules more current, yet NO ONE in Cayman will stand up to these guys.

  5. J Bodden makes an excellent point. Cayman’s tax-haven professional bodies are pathetically weak at public relations – and always have been, pretty much.

    "Offshore" havens do have a plausible defence for what they do, and I for one have written about it in overseas online publications whenever I can. But is anybody else doing that?

  6. The reason is definitely more what Michael said than anything. Her job is to win votes, not be technically correct about the ins and outs of international finance and offshore jurisdictions. I’m sure she knows all of what else has been stated but her potential voters don’t know and do not care. Nothing much of what she is saying if she wins, as it’s a sound bite more than an actionable policy item.

  7. Same thing with the unemployment issue and the local politicians, ain’t it ?

    A lot of vote-winning sound bites and next to no effective action on the issue.

    What really cracked me up recently was the claim that the Christmas work that was provided for 700 unemployed dole recipients was evidence that those ”workers” were ready for the workplace and ready for work careers.

    If they were, why aren’t they on the permanent payroll of the Govt’s environmental dept ?

    This is a perfect example of the drivel that comes out of politicians mouths that they expect intelligent people to believe.

    I wonder how many bank and retirement accounts Hillary and her husband, good ole Bill has stashed away in Cayman and other tax-friendly jurisdictions…and by the way…Delaware as well.

  8. Politicians will always be politicians. Do as they say (especially during election season) but DO NOT do as they do. The problem is that the corporate tax rate is so high, it discourages “bringing” the money home. Simple economics says, lower the tax rate and more money will be in the US coffers.