The case for taxing the rich gets an unexpected boost.
We’ve become accustomed, over recent decades, to see Americans front and center whenever a blockbuster new report spotlights the world’s super rich.
Last month, for instance, Bloomberg reporters tracked down the world’s 25 richest families. Ten of the 25 happened to come from the United States. No other nation had more than four.
Researchers from Wealth-X released new data last month as well. Their eighth annual Billionaire Census counted 3,204 personal fortunes of at least 10 digits worldwide. Leading the way: the United States of America, with 927 such fortunes, more than Germany, Russia, the UK, Hong Kong, Switzerland, India, Saudi Arabia, France, and Italy combined.
A bit earlier this year, the Swiss banking giant Credit Suisse published the 2021 edition of its annual Global Wealth Report, tallying up 215,030 adults on the international scene with fortunes worth over $50 million. Americans made up 110,850 — 55 percent — of that total.
This past week has seen the release of still another blockbuster look at the world’s super rich. This one — now known the world over by the simple shorthand of the “Pandora Papers” — has come courtesy of the International Consortium of Investigative Journalists. The group worked with news organizations from 117 nations to analyze over 11.9 million documents leaked out of 14 offshore financial firms. What those firms all have in common: They provide confidential “administrative services” for financial pros who specialize in concealing the wealth of the world’s deepest pockets.
Out of the 2.94 terabytes of Pandora Papers data have already emerged the clearest profile yet of what’s become known as the global “wealth defense industry,” that vast network of lawyers, accountants, and various other financial pros who devote their considerable expertise to shielding grand private fortunes from their national tax collectors — and, in many cases, police and prosecutors as well.
The Pandora Papers investigators have named names in their stunning coverage. They’ve exposed the tax-dodging financial machinations of individual “rich and famous” from every corner of the known Earth. But in this blockbuster report, unlike all the other major recent deep dives into worldwide grand fortune, wealthy Americans do not at all dominate. The vast majority of the super rich the Pandora Papers have uncloaked come from outside the confines of the US of A.
America’s most familiar super rich simply do not appear in the Pandora Papers coverage. No sign of Jeff Bezos or Elon Musk or Bill Gates or any of the other U.S. mega billionaires who top the just-released annual Forbes 400 list of America’s richest. The over 130 billionaires worldwide who do appear in the Pandora Papers treasure trove include just a few scattered fantastically rich Americans.
“Only a handful of U.S. billionaires,” observe Peter Whoriskey and Agustin Armendariz in the Washington Post, “show up in the records.”
How could that be — when Americans so dominate the ranks of the global super rich? Are America’s super wealthiest simply behaving more nobly than their peers elsewhere and refusing to engage in shifty financial games to shield their fortunes?
Let’s get real here. The relative absence of U.S. billionaires in the Pandora Papers has nothing whatsoever to do with nobility. We’re talking accessibility here. The U.S. super rich have plenty of financial agents — the tax attorneys, accountants, and wealth managers, as my Institute for Policy Studies colleague Chuck Collins puts it, “paid millions to help billionaires sequester trillions” — close to home. They don’t need to partake of the services provided by wealth advisory firms in places like Samoa, Cyprus, and Singapore, or any of the other 11 offshore locales from where the Pandora Papers leaked.
One other dynamic also helps explain why so few U.S. billionaires have been showing up in the Pandora Papers coverage. America’s super rich, as one Pandora Papers report notes, “pay so little in taxes relative to their incomes that hiding money offshore” can turn out to be “mostly unnecessary.” Our contemporary U.S. tax code essentially expects precious little from the super rich at tax time and furnishes convenient, perfectly legal workarounds to the taxes the law does stipulate.
How effective have these workarounds become? This past June, analysts at ProPublica gleaned from a massive leak of IRS data that America’s 25 richest paid taxes on the $401 billion they gained from 2014 to 2018 at an incredibly tiny true tax rate of a mere 3.4 percent.
But don’t take the small U.S. billionaire footprint in the Pandora Papers exposé as any indication of disinterest in tax havens on the part of Americans. Quite the contrary. The Pandora Papers make dramatically clear that the United States has now become a premiere “offshore” tax haven for super rich the world over.
To be more exact: A handful of low-population U.S. states — led by South Dakota — have essentially turned themselves into pimps for global plutocrats. They’ve enacted a series of state laws that let financial agents set up shop within their borders and then go on to service and shield grand foreign fortunes. The “dynasty trusts” these states harbor are helping the super rich worldwide cloak their grand private fortunes in a gloriously lucrative anonymity.
The Pandora Papers abound in the stories of these global rich. A shady former vice president of the Dominican Republic, for instance, had built up a huge fortune as the president of a giant Dominican sugar company notorious for violating the human rights of its workers. In 2019, this deepest of Dominican pockets shifted a major chunk of his ill-gotten wealth into a South Dakota dynasty trust.
South Dakota, note tax analysts Bob Lord and Kalena Thomhave, now safe harbors $500 billion in trust assets, up 36 percent since 2019. In the process, charges journalist Timothy Noah, the state has become a “moral sewer.”
Our U.S. contribution to the global concentration of wealth, the Pandora Papers help us understand, has become frighteningly enormous. We’re not just bending over backwards these days to grow the fortunes of our home-grown super rich. We’re helping grow the fortunes of the super wealthy all over the world. We’re no longer just dominating the world’s billionaire ranks. We’re helping those ranks worldwide become ever more dominant.
Sam Pizzigati co-edits Inequality.org. His latest books include The Case for a Maximum Wage and The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class, 1900-1970. Follow him at @Too_Much_Online.