The arrest of money manager Jeffrey Epstein in Palm Beach, Fla., on a charge of soliciting a prostitute has put the secretive money manager back in the headlines. The New York Post’s Page Six referred to him as a “New York billionaire financier.” The South Florida Sun-Sentinel called him “A wealthy Palm Beach resident.”

Readers of these columns will recall that, as far as the Internal Revenue Service is concerned, Mr. Epstein has considered himself neither a “wealthy Palm Beach resident” nor a “New York billionaire financier” but rather a resident of the United States Virgin Islands. Under a little-known tax loophole, that residency has allowed him to enjoy what the Virgin Islands Economic Development Commission has touted as “unbelievable tax benefits. “The program effectively allows participants to avoid 90% of their federal personal income taxes.

One of the many problems with those tax breaks was that, until a recent crackdown that followed the Sun’s exposure of the program, the definition of who was a Virgin Islands “resident” for the purpose of the program was vague. The Islands have argued for a lax definition. There’s nothing wrong with minimizing one’s own taxes legally, as Warren Buffett and many other Americans have done. Mr. Epstein has maintained his innocence of the soliciting charge, and the burden is only on the government to prove it. But whatever one’s view of the Virgin Islands tax break from a public policy perspective, Mr. Epstein seems to have demonstrated by his own behavior that the program didn’t require him to be resident in the Virgin Islands enough to prevent him from getting in trouble elsewhere.