Biden hits McCain on tax shelters

Democratic vice presidential candidate Joe Biden said Republican John McCain protected offshore tax shelters worth billions of dollars to U.S. insurance giants.

In his second trip in four days to this battleground state Tuesday, Biden said McCain promised to oppose any efforts to close a “Bermuda loophole” where American companies shielded $4 billion to $7 billion from U.S. taxes.

By claiming their headquarters as Bermuda, Biden said, firms actually based in the U.S. can keep profits out of the reach of the IRS.

“They're skipping out on billions of dollars in taxes, and that money could be used to insure our children, … to make sure the (Department of Veterans Affairs) is not underfunded, to rebuild bridges that are crumbling around the nation,” Biden said.

Biden was referring to a provision of tax law that some insurance companies can use to wipe out much of their U.S. tax liability. The companies that issue fire, property and casualty insurance are allowed to establish a Bermuda office and transfer the premiums they collect there, treating them as business expenses. That creates a deduction that erases millions of dollars in taxable profits, costing the U.S. Treasury $4 billion or more a year.

McCain spent three days in Bermuda in August 2007 meeting business and political leaders, and while there was quoted by the island's main newspaper as promising to defend tax breaks for insurance companies that locate there.

“The industry, the reinsurance that's had such phenomenal success has been good for both nations,” he was quoted as saying in an Aug. 23, 2007, article. “I would oppose any measures that would upset that.”

Biden's remarks echoed claims Obama's campaign made in a new TV ad Tuesday attacking McCain on economic woes amid fears of a meltdown on Wall Street.

“We have a culture in Washington where the very few wealthy and powerful have a place at the table and everybody else is on the menu,” Biden said.