Milosia2 Loc: Cleveland Ohio

Full Text Transcript:

Jeff Schechtman: Welcome to the WhoWhatWhy podcast. I’m your host Jeff Schechtman. Scott Fitzgerald got it right, “The rich are different,” and one of the key ways they’re different is in their approach to taxes, not just avoidance but participation in an entire and very expensive industry built around the loopholes to keep dollars out of the public treasury.

While some of us would argue that wealth creation and investment, no matter how big, is the key to a healthy and prosperous society and that those that succeed are a net plus, it also requires that those who benefit pay their fair share. Today a secret army of tax attorneys, accountants, and wealth managers have been evolving and enhancing a wealth defense industry. They’re paid big money to hide and protect the fortunes of the richest 1%.

In his new book, The Wealth Hoarders: How Billionaires Pay Millions to Hide Trillions,​ my guest, Chuck Collins, offers an insider account of how this industry is doing everything it can to create and enhance hereditary dynasties and sequester wealth. Chuck Collins is a senior scholar at the Institute for Policy Studies in Washington where he directs the program on ine******y and co-edits ine******y.org. It is my pleasure to welcome Chuck Collins back to this program to talk about the wealth hoarders. Chuck, thanks so much for joining us once again here on WhoWhatWhy podcast.

Chuck Collins: Thanks for having me and having the conversation.

Jeff: Well, it’s great to have you here. This wealth defense industry that you talk about that’s the core of what you write about in the Wealth Hoarders, how long has that industry been evolving? What was the key tipping point in creating something as large and monolithic as the industry we see today?

Chuck: In some ways, Jeff, it’s probably as old as the hills. As old as there’s been taxation, there have been courtiers and servants and butlers, financial helpers who’ve helped the rich reduce their taxes, but I would say we’re entering a new chapter as we’ve seen these growing inequalities of wealth and power. In the last 15 years, we’re seeing not only is the wealth flowing up but the expansion of the tax attorneys, estate planners, accountants, family offices that are all dev**ed to helping billionaires hide trillions. The pace has picked up.

Jeff: Talk about it as the chicken or the egg proposition, the degree to which this industry is enhancing the ine******y you talk about or the ine******y is driving the industry.

Chuck: Yes, it is sort of a symbiotic relationship. As wealth concentrates, more people get into the idea of investing and defending their wealth and rigging the rules to get more wealth and power and so that that then further concentrates wealth. The role of this wealth defense industry is enabling, fixing, and providing the tools and the capacity to hide all this money, and they themselves have become a class of workers with their own power and agenda as well. It all I think feeds on itself.

Jeff: In many respects though, it really exists around the tools that were created by the government, tools that really are these loopholes in the system.

Chuck: Yes. What these folks will say is, “Hey, look we’re just obeying the law,” but what I try to show in this book is that the wealth defense industry is writing the law. They’re writing the rules and laws in countries like the British Virgin Islands and the Cayman Islands, or in states like South Dakota and Wyoming, and Delaware. They’re rigging the rules to help these wealthy folks hide their money. They’re lobbying to weaken oversight and to fend off any regulation. They’re not just standing there saying, “Well, we’re just obeying the existing rules,” they’re writing the rules.

Jeff: That really then shows that the tools are in the hands of policymakers more than in the hands of this wealth defense industry.

Chuck: Yes, except that our political system has been captured by big money interests. Captured doesn’t necessarily mean that the wealthy always get what they want, but often, it means that they have the power to block changes. If you look at a tiny state like South Dakota or Wyoming or a small country, these wealth defense industries are very powerful. They can encourage and entice politicians to write the rules in their favor. That’s essentially what’s happening.

Jeff: One of the thing that has changed and it’s reversed a lot of trends that we used to see many years ago is that the traditional hiding places for money, the Cayman Islands, the Swiss bank accounts that we used to hear about, those have disappeared but yet there’s a whole new strata of places where money is hidden.

Chuck: One of the things that it’s important to update our concept. We often think of offshore tax havens as the Caribbean islands and that’s where the money is parked, and that is still true at the global level, but for wealthy people in the US, there are reforms now where the United States has entered into treaties with places like Switzerland where Switzerland now discloses the names and deposit of US citizens.

What’s happened is the US has become the weak link. We are not enforcing oversight. We have weak t***sparency laws and so global capital is coming here. If you’re a Russian oligarch or a Chinese billionaire and you need to get the money out of China, or you’re a dictator and you’ve plundered your country of all of its natural resource wealth, where do you take your money? Well, you bring it here to the United States where it’s way easier to hide it than many other places in the world now.

Jeff: Talk about money laundering and the way that is part of this industry.

Chuck: A portion of this if you could call it kleptocratic capital or money laundering. Somebody has plundered wealth from their home country, they open up a bunch of anonymous bank accounts in some of these offshore tax havens, but pretty quickly, they move the money to a place like the United States where they can buy luxury real estate, they can incorporate a Delaware shell company and don’t have to disclose any information, they can create a trust in South Dakota. More and more of that money is moving into our local economy and in some cases disrupting housing and the local economies.

Jeff: Expand on that, how it’s impacting local economies.

Chuck: Well, there are trillions of dollars of global capital now flowing into US cities, buying up luxury real estate, buying up condos, and encouraging the construction of these large residential buildings where, in many cases, no one is living in these buildings, they’re just wealth storage units for the global rich. So you’re seeing local housing markets being completely upended by huge amounts of money coming in. Yes, they’re driving construction, they’re using a lot of energy, they’re bidding up the cost of land and having an adverse effect on local communities that are trying to address their affordable housing problems.

Jeff: They’re also bringing jobs to the community. I mean, there’s the construction of these buildings, people that are still working in the buildings, I mean, there is some benefit to the communities. We shouldn’t overlook that.

Chuck: Yes, and they pay property taxes and they probably don’t drain services. There is an upside but I think more and more, we’re seeing a downside which is they’re fueling these already intense inequalities in local cities, they’re pushing the cost of housing further out of reach for people who live in these communities. Maybe one remedy is, well, okay, if global capital is touching down, let’s tax luxury real estate t***sfers and put it into a fund to help first-time homebuyers from a community buy a home. Maybe there’s a way to capture some of this global money as it touches down in our neighborhoods.

Jeff: In terms of the domestic money, how much is this industry engaged in hiding money versus simply working around the existing loopholes in our current tax system?

Chuck: It is a combination of both. There’s both hiding it and then there’s what I would call sequestering it, just putting it outside the reach. There’s right now as Congress debates the possibility of raising taxes on the wealthy to pay for C***D relief or infrastructure, lots of wealth planners, lots of these wealth defenders are helping their clients create what are called dynasty trusts which are aimed at putting the money into a trust that it’s outside the reach of taxes, or they’re creating t***sactions and loopholes that are simply going to game the taxes down and make these very wealthy people look on paper like they have a lot less money.

That is a lot of the cat and mouse game that’s going on. A lot of that could be fixed by just increasing better enforcement on the super-rich tax filers, of which there’s very little enforcement going on right now.

Jeff: And that would require additional funding for the IRS, essentially.

Chuck: Yes, it could be reallocating the resources. I mean, right now, you’re four times more likely to be audited if you use the earned income credit, which is for working families than if you’re a billionaire using a complex tax loophole. Yes, it certainly would help to rebuild the IRS’ capacity to follow the money, have the expertise to sort of flesh out these shell games, and effectively close them down.

Jeff: When we hear the debate that’s taking place now about additional taxes on the rich, some kind of a wealth tax, talking about carried interest, capital gains increase, et cetera, et cetera, is that really just tinkering around the margins or would that have a significant impact?

Chuck: Well, after 50, 60 years of the tax code becoming more and more regressive, meaning that the wealthiest people in the society are paying less of a percentage of their income and wealth and taxes, these changes are meaningful. Restoring a progressive income tax, fixing the estate tax that is very porous, levying a new annual wealth tax, all those taxes would actually both raise meaningful revenue and they would also slow that democracy-distorting concentration of wealth at the top so, they are meaningful. It also means that instead of shifting taxes on to working people who already I think are paying enough, the rich can start to pay their fair share again.

Jeff: When we look at those changes, those things that are getting talked about now, in fact, even for the very wealthy, they amount to a very small amount of their wealth.

Chuck: Yes, I mean, the wealth tax proposal that Senator Warren put forward is a 2% tax on wealth, over 50 million. So, Jeff, you should know, your first 50 million is tax-free in terms of wealth, but then, 3% on wealth over a billion. While it wouldn’t alter the lifestyles of the rich and famous, it would raise substantial money because these folks have so much wealth. Here’s an interesting thing, Jeff, these proposals are popular. 70%, 80% of v**ers, the majority of Republicans and all v**ers support a wealth tax along the lines of what we’re talking about.

Jeff: Talk a little bit about the estate tax, and there’s this $11 million exclusion that exists and what needs to be addressed in that regard.

Chuck: What’s happened with the estate tax, and the estate taxes are essentially our inheritance tax. It’s a levy on wealth when it t***sfers from one generation to the next, sometimes derided as the death tax, but yes, at this point, it’s almost an individual can pass on up to 11, over almost 12 million, and a couple, almost 24 million before they pay an estate tax but it has become optional for the super-rich.

In fact, one Trump cabinet member said only morons pay the estate tax. What they mean by that is the super-rich have planners, they create these trusts, they create this alphabet soup of loopholes, and they’re not paying the estate tax so, it needs to be fixed. Some of the loopholes just essentially need to be outlawed and shut down and then it could be a more meaningful inheritance tax as a way to slow that buildup of wealth concentration.

Jeff: To what extent can these changes be made within the existing tax structure? By that, I mean, can we just tinker with it and make these changes, perhaps bring in more revenue, or do we need to really pull out the whole tax code from its roots and essentially start over again?

Chuck: You know, there’s some pieces that I think don’t require a full house renovation if you will. For instance, we could have a millionaire surtax, an income tax on incomes over three million, just a 10% surtax. Whether the income comes from capital gains or whether it comes from wages. That’s like essentially building on the existing tax system. The wealth tax would require creating a new tax regime. We don’t tax wealth on an annual basis, so that would require building up a new ability there.

Then some of what we’re talking about, we just need to shut down these hidden wealth systems. Again, it doesn’t require massive risk structuring. It’s a combination of enforcement, banning certain t***sactions that have no real economic or business value, and t***sparency, disclosure of what people are already doing, that could go a long way toward fixing

vernon

Do you have a savings account? Anyone with any sense puts money aside for future unaccounted for expenses. now is this using your head instead of being a complete dumbass.

Milosia2 Loc: Cleveland Ohio

I guess you didn’t understand what they were realizing about.