U.S. tax havens for the rich are shifting to the rest of us
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Chuck Collins is co-editor of Inequality.org at the Institute for Policy Studies. This column was produced for The Progressive magazine and distributed by Tribune News Service.
The Pandora Papers, published in early October, are the product of massive data leaks carefully analyzed by more than 600 journalists around the world. They are unmasking the secret ways the world’s super-rich hide billions of dollars and dodge taxes – not just on a sandy Caribbean island, but right here in the United States.
Billionaires and crooks around the world now view the United States as an offshore tax haven. They bring their treasure to “secret jurisdictions” such as South Dakota, Delaware, Nevada and Florida.
My role in the publication of the Pandora Papers, recognized in numerous international reports, was to serve as an advanced source for foreign journalists to understand the American system of wealth concealment.
The list doesn’t include many super-rich Americans, even though they use the same toolkit of offshore banks, anonymous shell companies, and blackout trusts. That’s because this mine of leaks comes from offshore wealth consultancy firms in 12 countries, including Samoa, Cyprus, Belize, and Singapore – not places super-rich American citizens go to for financial services.
The United States has become a tax haven because, since the 1990s, a number of states have changed their laws to accommodate anonymous shell companies and unlimited life trusts. This attracts both domestic and foreign wealth from the “very high net worth” crowd – people with $ 30 million or more, including those whose wealth has been obtained through illicit means.
South Dakota comes under scrutiny in this report, as it leads the pack of entities known as “dynasty trusts,” where wealthy families bet billions with the intention of making money. ‘avoid taxes for centuries.
This hidden wealth system causes four serious damages.
First, it allows the plundering of the wealth of nations, particularly hurting the poorest and most vulnerable populations in the world. Some of the shady characters backing their assets in the United States are dictators and politicians who have stolen public funds as well as business owners who have broken their country’s laws. The United States is now complicit in these crimes, providing a getaway car in the form of secret trusts and limited companies.
Second, the hidden wealth system leads to tax hikes for the non-rich. When billionaires and global corporations sidestep and sidestep their tax responsibilities, they are passing the costs of public services onto everyone. When the rich don’t pay, they burden the rest of us with the bills of responding to the pandemic, caring for veterans, and funding infrastructure and schools.
Third, the covert funding system empowers bad payers and criminals, allowing them to mix funds in secret. U.S. law enforcement has lobbied to abolish anonymous shell companies, like those formed in Delaware, that facilitate money laundering, human trafficking and other illicit activities.
Finally, the hidden wealth system contributes to growing economic inequality. It allows some families to create dynasties of billion dollar inherited wealth while making everyone else’s life more economically precarious.
US lawmakers could shut down Tax Haven USA if they mustered the political will to do so. They could invest in tax enforcement, rebuild the Internal Revenue Service’s ability to monitor the financial gambling of the super-rich, and enforce existing tax laws. They could regulate or ban trusts and transactions that serve no purpose other than tax evasion.
President Joe Biden is pushing forward his Build Back Better plan, funded by increased taxes on the very rich and global corporations. But this effort will be undermined if we leave this system of hidden wealth in place.
We can do better. And we should.