Reports by Professors Emmanuel Saez (UC Berkeley) and Gabriel Zucman (LSE and UC Berkeley) published Friday, show that the very top one thousands percent, 0.1%, are even vastly more wealthy than previously expected using offshore tax havens to hide wealth. And, the concentration of this wealth is increasing, explains Paul Krugman, in his New York Times Blog
Offshore and Underground, after having lunch with Gabriel Zucman who wrote the report showing the concentration of wealth of the top 0.1% that is linked in the first update. A second paper by Saez on Offshore Tax Haven is also linked there as well.
You might have suspected that already, but it’s one thing to rely on anecdotal evidence, another thing to find the clear footprint of underground money in official statistics. What Zucman points out is that we have international data on investment positions, with each country reporting its assets abroad and foreign-owned assets at home. But the numbers don’t add up: globally, liabilities are substantially larger than assets. That’s
mathematically impossible, but Zucman shows that it’s what will appear in the statistics if a lot of money is run through offshore havens, so that the ownership doesn’t show up in anyone’s national statistics. And he uses other data and information to show that this is by far the most compelling explanation.
I think this is telling us something important about how the world really works. There was a flurry of interest in the offshore haven issue when Mitt Romney’s Cayman Islands accounts; a bit more interest when Cyprus hit the wall, and the question of what it was doing arose. But the issue keeps receding, I think due to a sense that it’s somehow trivial, a matter of a few Russians and maybe a handful of our own wealthy.
In reality, however, it’s almost surely a much bigger deal than that. At the commanding heights of the US economy, hiding a lot of one’s wealth offshore is probably the norm, not the exception.
Krugman's post is short so I'll only use two paragraphs. He closes speculating that this is probably a much bigger deal than we think and that for people at this level hiding money in offshore accounts is probably the norm not the exception.
Readers here may remember last week I published an article on the $2.1 trillion dollars in profits American corporations have avoided paying taxes on by keeping them offshore. I will link that as well.
Americans need to think more deeply about these problems. With the expanding economies of the European Union and South East Asia, and especially China, we can no longer assume the United States is the sole universally dominate player in global economics. Much of this offshore money may never come back. Many of the best future investments for the most wealth, in terms of perceived returns on investments are no longer in the United States.
In the last years a comparative global economic survey found China was investing close to 9% of its GDP in what were considered economic infrastructure investments such as road, bridges, electric, and telecommunications networks, etc. The aggregate investment of the EU in such infrastructure was just under 5%, while the U.S. if memory serves me correctly, our infrastructure investment was in the high 2% areas, or just below 3%, perhaps about 2.8% but do not quote me on that, it was a year ago.
The main point is where would a multinational corporation wish to locate new investment.
Even as of 10 to 15 years ago, one comparative study of workforce education and skills asserted that the average Asian high school student scored higher on math proficiency than the average American college student.
My point is not to make us feel bad, but to raise awareness that we can not automatically assume that the super wealthy are "really Americans" at heart and this is really "our money" and "it will come back to us so we do not have to worry" where "our" rich people want to keep it.
The truly rich people at this level are "trans-national" when it comes to wealth, estates and bank accounts. Much of this money may never see American shores again. Any assumption that non-repatriated, or the $2.1 trillion dollars of "infinitely deferred" corporate profits of "American" based corporations is like "our" secret savings account for a rainy day, may be an illusion.
In the article I from last week I will link shortly in the update, you will notice at the end, many of our congressional leaders suggesting that perhaps, in return for changing the laws to eliminate the loophole that allows multinational corporations to infinitely defer taxes on overseas profit we declare a "tax holiday" in exchange. How infuriating and potentially, ..... unwise.
At a corporate tax rate of 30% to 35% of $2.1 Trillion is over $700 billion folks. You know what they say -- $700 billion here, $700 billion there and pretty soon we are talking about real money.
At a time when we are cutting programs for Meals and Wheels, Head Start, Food Stamps, and Paul Ryan has the hatchet out for the most basic of our safety net programs for the poorest and neediest Americans such as proposal is obscene.
I don't want to mention names now, until I double check, and probably even give them a fair warning heads up, because this was late last week, when I was posting 4 to 5 articles a day, and we have plenty of time to line up our friends and allies, which we have too few of to alienate unnecessarily, but some of these folks may even have been Democrats.
We need wiser taxation policies that help bring such unimaginably extreme inequalities of wealth back into balance, over the course of the next generations. Simple and reasonable estate taxes, like we had for most of the last century for example, that the Republican tremble when they declare "death taxes," could be one simple example.
2:59 PM PT: This excellent reports is full of long-term data plots of wealth and concentration of wealth, as well as Power Point summary slides, The Distribution of US Wealth,Capital Income and Returns since 1913, by Emmanuel Saez (UC Berkeley), Gabriel Zucman (LSE and UC Berkeley), March 2014. The incredible data plots displayed here are apparently embedded in PDF files, requiring more time, for me to see if I can import some here.
3:14 PM PT: THE MISSING WEALTH OF NATIONS: ARE EUROPE AND THE U.S. NET DEBTORS OR NET CREDITORS?* Gabriel Zucman
This article shows that official statistics substantially underestimate the
net foreign asset positions of rich countries because they fail to capture most of the assets held by households in offshore tax havens. Drawing on a unique Swiss data set and exploiting systematic anomalies in countries’ portfolio investment positions, I find that around 8% of the global financial wealth of households is held in tax havens, three-quarters of which goes unrecorded. On the basis of plausible assumptions, accounting for unrecorded assets turns the eurozone, officially the world’s second largest net debtor, into a net creditor. It also reduces the U.S. net debt significantly. The results shed new light on global imbalances and challenge the widespread view that after a decade of poor-to-rich capital flows, external assets are now in poor countries and debts in rich countries. I provide concrete proposals to improve international statistics.
3:24 PM PT: I posted this here on April 9.
U.S. Corporations hold $2.1 trillion of untaxed profits overseas, says study
Kevin Drawbaugh and Patrick Temple-West Untaxed U.S. corporate profits held overseas top $2.1 trillion: study
(Reuters) - Foreign profits held overseas by U.S. corporations to avoid taxes at home nearly doubled from 2008 to 2013 to top $2.1 trillion, said a private research firm's report, prompting a call for reform by the Senate's top tax law writer. ...
Under U.S. law, corporations do not have to pay income tax on most of their overseas profits until they are brought into the United States. These earnings can be held offshore for years if they are classified as indefinitely invested abroad.
Research firm Audit Analytics said in a report issued last week that the total of such earnings was up 93 percent from 2008 to 2013, citing federal financial filings for companies listed in the Russell 1000 index of U.S. corporations.
Conglomerate General Electric Co had the biggest pile of earnings stored abroad, at $110 billion, the firm said. ... Next were software maker Microsoft Corp, with $76.4 billion; drugmakers Pfizer Inc, with $69 billion, and Merck & Co Inc, with $57.1 billion; and high-tech group Apple Inc, with $54.4 billion, it said.
Spokespeople for Merck, Microsoft, Apple, and many other multinationals all declared nothing but the highest respect for all foreign and U.S. tax laws and regulations.
Congress has been debating for years over whether or not to end "offshore corporate income tax deferral, perhaps, with a one time "tax holiday." I guess this would be rather than pay of the budget deficit which would suddenly be less important than a tax holiday for these multinationals.
It almost seems as if our tax law have been written by the rich, of the rich, and for the rich.
And, as a consequence, the rich are getting rich, and he working and middle classes are paying all the taxes.