Money manager Jeffrey Epstein “rarely talks publicly,” according to a New York Times article over the weekend, and after Mr. Epstein’s comment in the article describing his $200,000-a-year executive assistants as “an extension of my brain,” one can see how that might be a wise policy. As the New York Sun first reported on August 25, 2003 (a copy of the original article is available free at nysun.com), Mr. Epstein keeps a high profile in New York, but uses the U.S. Virgin Islands as his residence and place of business for tax purposes. Under a little-known provision of federal law, that qualifies him effectively to cut his personal federal income tax bill by 90%. That’s right, those who take advantage of the provision reduce their U.S. federal tax liability by 90%. (To understand, see our original article on the subject free at nysun.com).

With all the money Mr. Epstein saves on taxes, it is no wonder he can afford, as the Times article describes it, to pay his three assistants high-end salaries and maintain “a charge account at Frederic Fekkai, the society hair dresser, for their unlimited use” and pay “for all food eaten during his lengthy business hours, including takeout from Le Cirque.” Mr. Fekkai has salons in Manhattan and Beverly Hills but not in the Virgin Islands, and Le Cirque is in Manhattan, not the Virgin Islands. Yesterday, we reached one of the assistants mentioned in the Times article at her home in Connecticut. Tax returns available at Guidestar.org show Mr. Epstein is the trustee of a New York-based foundation whose address is at Madison Avenue.

We’re all for lower taxes across the board, but the case of Mr. Epstein highlights the absurdity of this particular special tax provision. No one doubts that he spends time in the Virgin Islands and has a home and office there. But he clearly has extensive and critical operations in New York City. Granted, long-distance phone calls and computer technology make it possible to telecommute, and many companies have multiple offices. That’s a point the Virgin Islands are attempting to take advantage of by luring money management firms there from New York. But from the federal point of view, we wonder if Mr. Epstein truly qualifies under the statute’s terms and we rather doubt that whatever economic activity Mr. Epstein is generating on the Virgin Islands is making up for the potentially lost tax revenue on the mainland. Here’s hoping that the people who write and enforce the tax laws take a close look at this one.