Most Americans fear being audited by the IRS based on the knowledge that, if they have not paid their fair share, they could face penalties, garnishment of wages and/or possible imprisonment. Yet some of the wealthiest Americans and multinational corporations apparently have no such fear. It’s not enough that these people and organizations have used their wealth to lobby Congress to create a myriad of tax write-offs and corporate welfare schemes. Many find tax shelters to avoid paying taxes altogether.
According to the Financial Secrecy Index created by the Tax Justice Network, “An estimated $21 to $32 trillion of private financial wealth is located, untaxed or lightly taxed, in secrecy jurisdictions around the world.” The organization uses the term “secrecy jurisdictions” rather than the more common “tax havens” because the secrecy provided by these jurisdictions does more than aid tax avoidance. The secrecy is key to such illicit activities as fraud, money laundering, insider trading, and avoidance of regulations. Moreover, it allows the wealthy to hide their assets while forcing those less fortunate to subsidize their needs and to shoulder their nations’ resulting debt.
In other words, most of us are making up for the taxes that the wealthy refuse to pay.
Even some of those at the highest levels of the US government have taken advantage of secrecy jurisdictions. For example, in the Panama Papers (a list of the wealthy who used the services of a Panamanian law firm to set up tax shelters) Donald Trump’s name shows up 3,450 times. And, recently, The Intercept published a story revealing the use of one of the world’s most secret tax havens by Senate Majority Leader Mitch McConnell and his wife, Elaine Chao, both of whom have avoided taxes while cashing US government paychecks. Former Massachusetts governor, GOP presidential candidate and current Utah senate candidate Mitt Romney also has reportedly taken advantage of multiple tax havens.
Many of the wealthy don’t even have to send their money offshore to evade taxes. Some of the most active tax shelters are right here in the United States! As reported by The Washington Post, “Contrary to popular belief, notorious tax havens such as the Cayman Islands, Jersey and the Bahamas were far less permissive in offering the researchers shell companies than states such as Nevada, Delaware, Montana, South Dakota, Wyoming and New York…” Indeed, The Washington Post found that US regulations for setting up shell companies are more lax than any country in the world, except Kenya!
Ironically, all of this is aided by a financial industry taxpayers saved from bankruptcy after the financial crash of 2008. According to the Tax Justice Network, “A global industry has developed involving the world’s biggest banks, law practices, accounting firms and specialist providers who design and market secretive offshore structures for their tax- and law-dodging clients.”
It’s not unlikely that such tax evasion will eventually have disastrous economic consequences for the US. But, when it does, the wealthy will simply pull up roots and relocate to another country where they can resume their form of legalized larceny leaving the rest of us to clean up their mess.