Milosia2 Loc: Cleveland Ohio

Tax-Free Day For The Ultra-Wealthy
By The Lever • 18 Apr 2023

It’s tax day in America — but for the wealthiest among us, it might not matter much. As we note in today’s featured story, the wealthiest Americans are avoiding billions in taxes by using offshore tax havens — and thanks to recent moves in Washington, it could get easier for the ultra-rich to shirk their tax duty.

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The Internal Revenue Service building in Washington, D.C. (AP Photo/Patrick Semansky)
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By Andrew Perez, Matthew Cunningham-Cook & Rebecca Burns

Tax day is a costly annual annoyance for most, but for some of the wealthiest people in the United States, this year’s April 18 tax deadline might not mean much. That’s because according to a new report, the richest sliver of our population has managed to avoid billions in tax obligations by hiding their money offshore.

What’s more, it could get easier for the mega-rich to hide their taxable income, thanks to efforts by the Supreme Court and the Biden administration.

A recent study from academic and Internal Revenue Service (IRS) researchers found that wealthy Americans have stashed nearly $2 trillion in foreign tax havens, with much of that fortune linked to a handful of the country’s richest households.

That data arrived weeks after the U.S. Supreme Court hobbled regulators’ efforts to combat international tax evasion schemes by limiting fines for people who fail to disclose foreign bank accounts. The study also follows a U.S. Senate report warning of a glaring loophole in a law designed to combat the use of tax havens — a law that Republican legislators have long been trying to repeal outright. Compounding matters, earlier this year, the Biden administration gave foreign banks a reprieve on tax reporting.

Together, the moves paint a picture of a tax day and many more to come where ordinary Americans will pay what they owe, while the rich can get off scot-free.

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“Strong Concentration”
The new study, published last month by the National Bureau of Economic Research, found that U.S. households held “just below $2 trillion” in 2018 in financial accounts in places like Switzerland, Luxembourg, and the Cayman Islands that are generally considered tax havens because they have low effective tax rates.

Not surprisingly, a disproportionately high percentage of assets held in offshore tax havens are owned by the top 0.01 percent of U.S. earners.

“We find a strong concentration of offshore assets at the very top of the income distribution: Around 30 percent of all foreign assets belong to the top 0.01 percent, with a particularly high share for assets held through partnerships and assets held in tax havens,” the researchers write.

They additionally note that “more than 60 percent of the individuals in the top 0.01 percent of the income distribution own foreign accounts, the vast majority in tax havens.”

The study is based on account information reported to the IRS by foreign financial institutions under the Foreign Account Tax Compliance Act (FATCA), a law passed in 2010 to help the government crack down on offshore tax evasion.

Republicans, led by Sen. Rand Paul (R-Ky.), have introduced several bills to repeal the law, which requires foreign banks and financial institutions to disclose accounts and assets held by U.S. customers.

Major multinational banks have repeatedly enabled tax evasion schemes by the ultrawealthy. A two-year investigation into Credit Suisse by the Senate Finance Committee recently revealed that employees of the crime-ridden and collapsed Swiss bank knowingly helped a U.S. businessman conceal $220 million from U.S. authorities, even after the company pledged to comply with all requirements of FATCA as part of its 2014 plea agreement with the Justice Department.

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Limiting Enforcement
Last fall, the Senate Finance Committee released a report noting that loopholes and limited enforcement resources “have significantly hindered” the effectiveness of FATCA. “As a result, wealthy taxpayers continue to use schemes involving offshore entities and secret bank accounts to successfully hide billions in income from the IRS,” lawmakers wrote.

For much of FATCA’s history, its enforcement mechanism has not been utilized. Banks that fail to comply with the law are supposed to be hit with a 30 percent withholding tax on their U.S. investment income. For years, the IRS waived this requirement, before it finally went into effect in 2020.

The clampdown didn’t last long. Earlier this year, the Biden administration gave a new three-year grace period to some foreign banks that fail to disclose the tax identification numbers of existing U.S. account holders.

Due to significant historical underfunding at the IRS, it is impossible to know whether or not the total amount of money collected thanks to FATCA has met the original $8.7 billion projection when the bill was passed, because measuring the amount raised by voluntary compliance is difficult.

Opponents of FATCA — like the Center for Freedom and Prosperity, a Koch-linked think tank — have used this lack of information to argue in favor of the law’s repeal, buttressing the Biden administration’s decisions to water down enforcement.

A potential lifeline for tax enforcement emerged last summer, when Congress passed the Inflation Reduction Act, which granted a $80 billion budget increase to the IRS over ten years.

keepuphope Loc: Idaho

The people we voted into our government made those loopholes possible by the laws they pass which benifit them as well. You don't become a guaranteed multi millionaire in a matter of a few short years serving in Congress and Senate by working hard and earning it like the rest of us hour by hour. If they were payed by the hour and not on salary they would be as broke as the rest of us because they literally only work for half the year and are on break for the rest. And it's not all Republicans fault the dems are equally responsible. There's more rich people on the dems side than Republican also although they have their fair share also.

Milosia2 Loc: Cleveland Ohio

*** There's more rich people on the dems side than Republican also although they have their fair share also.**
Correct .
Only because there are Democrats in the party than Republicans in their party .
Per capita republicans have more millionaires , but less members .
The Democratic millionaire’s know what hard is and what took to get them there .
They sympathize with workers in America .
The right does none of this .
Their entire basis is their privilege of having money .
Clarence Thomas
a very privileged individual .

Milosia2 Loc: Cleveland Ohio

*** Republicans, led by Sen. Rand Paul (R-Ky.), have introduced several bills to repeal the law, which requires foreign banks and financial institutions to disclose accounts and assets held by U.S. customers.**
Randy Paul .
Hiding money offshore ??????

Rose42

Complete and utter bovine scat. Just more made up silliness which you do often.

SeaLass Loc: Western Soviet Socialist Republics

Come come now, there are far more "millionares" in both parties in all branches of the government per capita than there is in the US population as a whole.

keepuphope Loc: Idaho

Actually 51% of those in the Congress and Senate are millionaires compared to 1% in America they get in for the money. AOC was broke she's now a millionaire as is every one of the squad who came in with a medium income.

SeaLass Loc: Western Soviet Socialist Republics

I'd say a 50:1 ratio qualifies as "far more",