By now we’ve had time to soak in the release of some earth-shattering information about corruption and wealth hoarding abetted by the shadow finance industry in the Pandora Papers, from the research highlighting wealth hoarding of the country’s top 1% and massive corporate profits resulting from generous taxation policy and tax avoidance. This sheer enormity of this precedent stems from diligent and painstaking research, but what it reveals still may not be enough to send shockwaves through the guildhalls of the policymaking world.
That is because we live in hell, but also because those in power in Congress have, time and again, refused to adequately respond to the needs of the public in light of corporate tax avoidance and massive wealth inequality. They prove over and over that they are in the pockets of large corporations instead of on the side of their constituents, which reinforces the observation that the wealthy and corporations make the tax laws, not the citizenry. Consequently, over time, these policies have turned the U.S. into a tax paradise for both corporations and wealthiest Americans. Inentivizing even tighter wealth concentration and more volatile inequality.
The rich and powerful have a deep, vested interest in protecting their enormous wealth at the expense of everyone else, and their allies in Congress are more than happy to lend them a helping hand. The Panama Papers, the Pandora Papers, and the U.S. tax code all underscore how moneyed interests shape American Tax policy both at the individual level and at the corporate level. After the first year of the Trump presidency, ITEP reported that “91 corporations did not pay federal income taxes on their 2018 U.S. income.” What’s more, French economists like Thomas Piketty and Gabriel Zucman have also cataloged the sheer depth of growing wealth inequality (both in the U.S and globally) since the Reagan era. Zucman, for example, shows in his 2016 paper shows how wealth inequality exploded since the 1980’s. He shows how the top 1% wealth share has increased from 28% in 1980 to 33% today, and where the bottom 75% share remains around 10%.
Growing wealth and wealth concentration, as well as unprecedented corporate profits, are results of a decades long trend by U.S. lawmakers to transform this country into a tax paradise. South Dakota, for example, as revealed by the Panama Papers, imposes zero income tax, inheritance tax, or zero capital gains tax. Without fail Congress has eroded fair tax laws, give more favorable treatment to corporations and those with an already large sums of wealth.
The Gurdian reports that “South Dakota’s burgeoning trust industry holds an estimated $367bn (£273bn) in assets, a sum approaching the annual economic output of the Republic of Ireland – up from $75.5bn in 2011. The phenomenal growth has been supercharged by the state’s aggressive drive to attract money by shielding trust owners’ assets from foreign governments, taxes and even former spouses.” Further, the Pandora Papers reveal the effectiveness of how the deregulation of trusts in South Dakota makes it easy to stay rich, continuing to profit off your wealth alone.
Clearly, if you want to grow your wealth with little obstacles and get away with tax avoidance, the United States is your utopia. But in a fair and healthy society, we would perhaps not be living in our current reality, where the poor are demonized and where people are going bankrupt in attempt to afford their insulin (often while still working full time). These are the other pandemics that could be alleviated if we decided to simply taxed the wealth of the wealthiest 10 billionaires, forcing them to “pay their fair share”.
We have the legal tools to implement a truly fair tax system, where we would not give preferential treatment to those with massive or dynastic wealth, and it would not be only nominally progressive. We could make sure that there’s an equitable distribution of the economy’s total wealth, deconcentrating the enormous political power that our corporate overlords posses. Warren Buffet would not pay less of a proportion of his billions of dollars in taxes than his secretary. And we would have the necessary public infrastructure to support society’s needs.