Aaround the world, As our nations try to escape this pandemic, a question arises: How can we pay for recovery?
An increasingly popular idea around the world: tax the billionaires who benefited hugely during the pandemic.
And here in the US, nearly two-thirds of us now say we support an extreme wealth tax, including the proposal that Senator Elizabeth Warren and MP Pramila Jayapal brought to Congress.
Critics, such as the billionaire investor Leon Cooperman, counter that if a wealth tax were passed, wealthy people would simply “hurry to find ways to hide their wealth”.
In fact, billionaires are already hiding their fortunes. All in all, trillions of the world’s treasure are hidden in private property.
On a global scale, $ 24-36 trillion is hidden in offshore tax havens, anonymous mailbox companies, trusts, partnerships, and charitable foundations that disguise ownership.
That’s roughly 10 to 12 percent of global wealth – an astonishing number.
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The is not Uncle Joe with cash in his mattress. These are the richest people in the world, those over $ 30 million and the estimated 2,500 global billionaires.
These “ultra high net worth” people are the people who can afford to hire what social scientists call the “wealth defense industry,” an army of professional accountants, tax attorneys, wealth managers, and family office workers who the disappearance of this global wealth make action possible. You are paid millions to hide trillions.
The tools they employ include an arsenal of complex trusts – including so-called “dynasty trusts” – to safeguard wealth for future generations with the aim of achieving a kind of immortality of wealth across generations.
With one hand they claim they “only obey the law”, with the other they actively write the rules, block reforms and lobby to protect the interests of their extremely wealthy clients.
Across the Connecticut River in New Hampshire, these super-rich advocates lobbied the New Hampshire Legislature to create new ownership, anonymous civil law foundations (not a charity), in hopes of attracting global billionaires to their behalf hidden assets to park in the granite state.
Everything indicates that the scope of hidden wealth is accelerating. The US inheritance tax – the country’s only levy on the accumulated wealth of the top 0.1 percent – is so permeable that even a former Trump official quipped, “Only idiots pay inheritance tax.”
The number of family offices serving clans with more than $ 250 million has sprung up like mushrooms, rising from less than 1,000 in the 1980s to an estimated 10,000 worldwide today.
While family offices provide some of the more mundane wealth management services, their primary purpose is wealth preservation, tax cut, and intergenerational succession – essentially a mission to build a dynasty.
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There are three reasons we should be concerned about the rampant hiding of wealth.
First, aggressive tax avoidance by the rich shifts tax obligations onto everyone else – or creates the conditions for false austerity measures and budget cuts. As the Biden administration and Congress discuss how to pay for the past four years of Trump tax cuts on deficit spending by the rich and the pandemic, the hidden wealth system allows the very rich to shirk their responsibilities.
Second, it undermines the global rule of law – and ultimately stems from our own sovereignty and global credibility.
When you think of secret global tax havens, you might think of Swiss bank accounts or letterbox companies in the Cayman Islands. But the truth is that the US is now recognized worldwide as a tax haven in its own right.
Our anonymous Delaware limited companies and South Dakota Dynasty trusts attract the wealth of foreign despots and kleptocrats. Many also launder billions through luxury real estate in the US, avoid taxes, and park their treasure in a stable, regulated market.
Third, hiding wealth concentrates wealth and power in a few hands, which is dangerous for self-governing, democratic societies.
The pandemic has already charged America’s second golden age. In the past 14 months, the roughly 700 US billionaires have increased their combined wealth by $ 1.6 trillion, despite the fact that millions of their fellow citizens have lost their lives and livelihoods.
Those few hundred billionaires now have $ 4.3 trillion together, while the bottom half of all US households – 165 million people – have $ 2.4 trillion together.
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Ais this F.French economist Thomas Piketty warned: If the US cannot reverse this path, we are well on our way to becoming a hereditary aristocracy of wealth – where the grandchildren of today’s billionaires will dominate our economy, politics, philanthropy and culture.
As wealth and power concentrate, the cycle continues. The rich use their power to further shape the rules, news, and culture of society. They block popular reforms by conquering the political system and creating a dysfunctional deadlock.
This leads to a further consolidation of wealth dynasties that are impervious to taxation and accountability. It also leads to further social breakdown and polarization as our collective ability to solve big problems – like responding to a pandemic or an ecological disruption – becomes inoperable.
For a county born out of a rejection of feudalism, it may be difficult to see the telltale signs of a renewed enforcement of feudal and monarchical norms. One component is what law professor Allison Tait describes as a culture of “high-wealth exceptionalism,” where the rich believe that because of their wealth they are entitled to separate laws and rules – and the rest of society tolerates these rules .
We can fix that. Lawmakers could shut down this hidden asset apparatus overnight by banning certain trusts and loopholes, promoting transparency of ownership, passing global trade deals that outlaw offshore practices (and economic pariah states by rebel states), and invest in robust enforcement .
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The barrier to change is not just the super-rich, but the self-serving class of professional money collectors who are at work. It is in their best interest that the wealthy create trusts that will last forever – and of course, give asset managers a substantial cut.
The first step in reform is to overcome our cultural tolerance of “billionaire exceptionalism”. The second is to acknowledge that the asset defense industry thrives on complexity and lack of transparency and instead press the legislature for transparency and simplicity.
Get a trusted lawyer to declare a Grantor Retained Annuity Trust (GRAT) and I’ll give you two minutes to stay awake. Such financial instruments are targeted obfuscation. A simple solution: ban all trusts except for a few specific custody arrangements for a publicly disclosed single beneficiary – and request an annual tax return for the trust. Now sit back and listen to the howl.
If four decades of growing inequality and stagnating middle class wages weren’t enough, last year’s devastation should prove it: inequality kills.
Fortunately, our country is now seeing vibrant new social movements – and great popular support – to reverse these trends.
If you are thinking of paying taxes on your modest salary this year, take a moment to ponder the vast amount of untaxed wealth – and consider joining the movement to expose it.