The governor of the U.S. Virgin Islands, Charles Turnbull, has a letter to the editor in the adjacent columns claiming that “We are not asking Congress for anything more than fair and reasonable residency and income rules” and that the tax breaks offered under a program for Virgin Islands residents are “not a tax loophole.” So now that Mr. Turnbull has accepted “fair and reasonable” as the terms of the debate, let’s recall just what he is asking Congress for – easier rules for tax breaks that offer money managers the chance to avoid 90% of the federal taxes they would pay if their tax residences were on the mainland.

This story was opened up by our Ira Stoll, and it grows more newsworthy by the hour. As our Meghan Clyne reported last week, the Virgin Islands government wants people to be able to qualify for these tax breaks by spending a scant 122 days over three years on the islands, barely enough time to get a tan. The current standard – imposed by Congress in 2004 after reports that the vagueness of the residency requirement was leaving it open to exploitation – is six months a year. As of yesterday, the Web site of the Virgin Islands Economic Development Commission itself was describing the tax benefits it offers as “unbelievable.” Seems to us that promoting the tax breaks as “unbelievable” tends to undermine the idea that they are “fair and reasonable.” Governor Turnbull, call your office.

We’re all for low taxes, and there’s an argument for the idea that, because the Virgin Islands residents don’t have a vote in Congress, they should be able to set their own tax laws. No taxation without representation, and all that. But this is a matter of American law that has an affect on mainland Americans, not only Virgin Islands residents. It’s one thing, after all, to apply these tax breaks to bona fide Virgin Islands residents, another entirely to say that people with homes and business offices in New York and Connecticut and Chicago should be able to avoid 90% of their federal taxes by spending two months a year in the Caribbean. Or four months over the course of three years.

This is more than just an arcane tax policy dispute. Articles in The New York Sun and the New York Times have named some of the nation’s top money managers – Richard Driehaus’s Driehaus Capital Management LLC; Michael Masters’s Masters Capital Management LLC; Steven Gluckstern; S. Donald Sussman, the founder of Paloma Partners of Greenwich, Conn. – as taking the tax breaks. If Congress widens this tax loophole, it’d be a fine opportunity for President Bush to unsheathe his veto pen.

The costs to the American Treasury, and to the fairness of the tax system, outweigh any economic development benefits to the Virgin Islands. If taxation without representation is the problem, it could be resolved by joining the islands to a state such as Florida or Hawaii that has a compatible economic or geographic profile. Or by granting them independence, if that is what the islands’ residents want. There’s no need to put a hedge-fund-sized loophole in the tax code. The only ones who think otherwise are the senators and congressmen who have been making the trip down to the U.S. Virgin Islands for campaign fundraisers and a little winter-time sunshine.