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Some investors avoid paying taxes in a move called round-tripping — sending money offshore, then investing it in U.S. stocks or bonds. A study estimates it costs the U.S. billions in lost revenues.

Recently, MIT professor Michelle Hanlon and two colleagues set out to find out all they could about round-tripping.

"I think it's a big problem in the U.S. tax system that individuals can evade taxes and that they try to do so offshore," Hanlon says. "So we just felt like it was a big policy issue actually to try to get a handle on how much this occurs and whether we could track this down with data."

Round-tripping occurs when American citizens open bank accounts in tax havens such as the Cayman Islands. They funnel money into the accounts and then use it to buy stocks and bonds back in the U.S., which is why it's called round-tripping.

"A U.S. individual would pretend essentially to be a foreign investor," Hanlon says. "So they would set up, say, a bank account or a shell corporation offshore and from that offshore location they would invest back in the U.S."

Normally, she says, American citizens who invest in the United States are supposed to pay taxes on any profits they make. "But if they pretend they're foreign and don't report that they're U.S. [residents] and don't report that income then it's very hard for the tax authorities to catch them," Hanlon says.

For a long time it's been nearly impossible to quantify round-tripping. E.J. Fagan of Global Financial Integrity, a nonprofit research and advocacy group, says a lot of countries refuse to tell the Internal Revenue Service anything about their U.S. customers.

"Very often a lot of these jurisdictions — places like, for example, Mauritius or the British Virgin Islands — they make the Cayman Islands look open and transparent. So, very often it's hard to know where the assets are," Fagan says.

But, a study in the Journal of Finance, Hanlon and her co-authors, Edward Maydew of the University of North Carolina and Jacob Thornock of the University of Washington, took a look at how much money has come into the country from places such as the Cayman Islands since 1984. The flow of money into the U.S. has always been erratic and it can be affected by a lot of different factors. But the researchers decided to look at what happened to the flow when the U.S. tax rate went up.

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Havens Are Turning Hellish For Tax Avoiders

One of the least imaginative, but always popular, stories for an editor to assign in years past was the annual tax day frenzy at the local post office.

Younger Two-Way readers may not know this, but before e-filing was the thing to do, many procrastinators would wait until the last possible moment to finish their federal tax returns. And many post offices would keep staff on hand until midnight so that those returns could be postmarked before April 15 turned into April 16.

Now?

"Post offices no longer stay open late on tax day," is one of this morning's typical headlines. As Michigan's Macomb Daily writes:

"Local post offices used to take on a circus-like atmosphere on April 15 when many people would file their taxes up until a midnight deadline amid tax protestors and consultants on hand, often with some dressed up as Uncle Sam.

"But those days are gone.

"Since so many taxpayers now file electronically, most post offices no longer stay open late on tax day.

" 'We really stopped extending hours at our postal locations because there really isn't a need to any more,' said Elizabeth Najduch, a spokeswoman for the U.S. Postal Service's metropolitan Detroit region."

Proposals to let U.S. taxpayers get a statement from the government that's already filled in with their financial information have been under attack by Intuit, the maker of TurboTax, according to ProPublica. The non-profit newsroom says several people took a stand against the proposal in a "grass-roots" campaign Intuit orchestrated.

The proposed "return-free" system would use information the federal government receives from banks and employers to simplify the filing process. It's used in parts of Europe, and in a California pilot program. Its critics warn that such a system might ignore tax credits and incorporate errors. And tax preparation companies such as Intuit say it would hurt their business.

The ProPublica article is by Liz Day, who also wrote about the campaign against return-free filing last year. She says she looked into the campaign after noticing "remarkably similar language" being used to weigh in on a "remarkably obscure topic."

In a Morning Edition interview last year, Day gave some context about the proposed system:

"President Ronald Reagan supported it and talked favorably about it in 1985. And President Obama has spoken also favorably about it on the campaign trail in 2007. The idea is that you would get a pre-filled return from the government, using the information they already have, to send a pre-filled return to you that you could either accept or throw away. It's completely voluntary."

At Passover celebrations around the world tonight, the youngest child will sing a song in Hebrew. "Why," they'll ask, "is this night different from all other nights?"

Adults in Ukraine can ask a similar question this year: What makes this Passover different from all others? It's a question Rabbi Alexander Duchovny has been thinking about a lot. "Passover is z'man cheruteinu, time of our liberty — time of freedom," he says. "And especially for Ukrainian Jewry, and for Ukrainians, this is a time of liberty."

Duchovny is a progressive rabbi, and like many Jews in Kiev, he joined thousands of protesters in Independence Square this winter, demanding a change in government.

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