Senator Wyden’s proposed ‘Billionaires Income Tax’ could raise significant revenue to fund President Biden’s Build Back Better investment plans.
How is it that U.S. billionaires are able to pay so little taxes, as exposed by the June 2021 ProPublica report?
One tool that the wealth advisors to the rich deploy is a dynasty trust — see this IPS Policy Brief: “Dynasty Trusts: How the Wealthy Shield Trillions from Taxation Onshore,” by Kalena Thomhave and Chuck Collins.
A dynasty trust is a form of trust that is designed to sequester wealth for longer than ordinary trusts — sometimes for centuries or forever. They are often formed in U.S. states, such as South Dakota, that have suspended or altered their state “rule against perpetuities,” legislation that previously limited the lifespan of a trust.
In my book, The Wealth Hoarders: How Billionaires Pay Millions to Hide Trillions, I describe how the wealth defense industry deploys dynasty trusts to enable ultra-high net worth individuals — those with $30 million or more — to systematically avoid wealth transfer taxes – that is, estate, gift, and generation-skipping taxes.
Because the super-wealthy are avoiding or reducing their taxes, they are shifting the obligations to pay for society’s investments onto lower and middle-income households. Dynasty trusts also entrench existing levels of wealth inequality and facilitate the formation of dynastic concentrations of hereditary wealth and power.
In the Policy Brief, we recommend that lawmakers act at the federal level to shut down or discourage the formation of dynasty trusts for the purposes of tax avoidance and dynastic succession. Actions could include the passage of a federal “rule against perpetuities,” banning certain trust arrangements, and taxing income and wealth in trusts.
Read the full IPS Policy Brief: “Dynasty Trusts: How the Wealthy Shield Trillions from Taxation Onshore,” by Kalena Thomhave and Chuck Collins.