Tax dodging, legal and illegal must stop
SAM PIZZIGATI , Inequality.Org
We can choose to see the world of concentrated wealth
through the eyes of those who directly serve the richest among us, people like
the veteran Australian sea captain Brendan O’Shannassy, the author of Superyacht
Captain: Life and Leadership in the World’s Most Incredible Industry.
Floating palaces like the $500-million superyacht of
mega-billionaire Jeff Bezos can routinely run their
deep-pocketed owners over $130,000—per day—for basic upkeep. But these
same superyachts, O’Shannassy believes, still
constitute the finest investment individuals of immense wealth can make. They
offer their deep-pocketed owners both security and relaxation, with no whiff of
paparazzi.
Or we could choose to go in a starkly different direction
to better comprehend the wealth of our wealthiest. We could look at these
wealthy through the eyes of those who measure just how concentrated our world’s
wealth has become. Two just-released reports help us do exactly that.
The first comes from researchers at the Federal Reserve.
Every three years, these analysts release a deep dive into the distribution of
America’s income and wealth, a copiously detailed snapshot of
American household “balance sheets, pensions, income, and demographic
characteristics.”
The latest Fed Survey of Consumer Finances—released last week—covers the changes in American family finances between 2019 and 2022.
Over this three-year span, after taking inflation into
account, typical American family incomes inched up what the Fed describes as “a
relatively modest 3%.” But the incomes of high-income households, the Fed
points out, rose at a much more rapid rate, registering “one of the largest
three-year changes” that Fed researchers have ever encountered.
On the net-worth front, ordinary households taken as a
whole did register gains, the Fed notes, that “far outpaced inflation” between
2019 and 2022, gains that mostly reflect sizeable jumps in the value of
owner-occupied houses. But these same sizeable jumps also put home ownership
increasingly out of the reach of families seeking to become—for the first
time—homeowners.
By 2022, the value of America’s most typical homes was
running 4.6 times our nation’s most typical family incomes, an all-time record
gap. Financial advisors usually recommend that
families should spend no more than three times their annual
income for a home of their own.
Other analysts outside the Fed orbit have crunched the
new Survey of Consumer Finances raw data to paint a plainer
picture of how much wider the wealth gap in the United States has grown since
the Federal Reserve began publishing Survey of Consumer Finance reports
over three decades ago.
Over those decades, a DQYDJ analysis points out, the inflation-adjusted net
worth of the typical American household has gone from $108,501 in 1989 to
$192,084 in 2022.
The net worth of the nation’s richest 1% over that same
span? That wealth has gone, again after adjusting for inflation, from
$5,351,332 in 1989 to $13,666,778 some 33 years later.
Another analysis, from Matt Bruenig at the People’s
Policy Project, has used the new Fed data to calculate the
share of America’s wealth held by each decile—each 10%—of the nation’s
households.
“Overall,” Bruenig concludes, America’s “wealth
inequality remains quite high,” with the top 10% of households owning a
whopping 73% of the nation’s wealth and the bottom half of U.S. households
holding “just 2% of the nation’s wealth.”
The Fed data, analyses like Bruenig’s show, can help us
gain a much-needed sense of just how unequal the United States has become. But
the Fed’s Survey of Consumer Finances can only take us so far.
The Survey’s data shine no spotlight on the richest of our rich and
cover only pre-tax income.
For how the super rich make out after taxes,
we have to look elsewhere—and we now have an exceedingly revealing place to
look. The E.U. Tax Observatory, a research effort begun in 2021 with backing
from the European Union and a variety of academic institutions, has just released a
blockbuster new study entitled Global Tax Evasion Report 2024, “an
unprecedented international research collaboration building on the work of more
than 100 researchers globally.”
Our world’s richest, this new study details, now enjoy
“effective tax rates” that annually cost them no more than a mere 0.5% of their
personal wealth.
Over the last decade, the E.U. Tax Observatory study
notes, a number of individual governments have agreed on major
initiatives to counter international tax evasion. Since 2017, for instance,
banks have been “automatically” exchanging information helpful in identifying
tax evaders. And over 140 nations agreed in 2021 to set an annual 15% “global minimum
tax” on multinational corporations.
But assorted loopholes and “carve-outs” have undermined
these two reforms. Multinationals last year shifted some $1 trillion of their
treasure into tax havens, the equivalent of more than a third of the profits
multinationals booked in 2022 outside their headquarters country. And many
offshore financial institutions, the new E.U. Tax Observatory report adds, are
dragging their feet on deposit disclosure.
Even so, new exchanges of banking data have offshore tax
evasion down by a factor of three, and only 25% of financial wealth held
“offshore” is currently evading taxes. And the fledgling corporate minimum tax
put in place two years ago has generated considerable useful data of its own.
How can the nations of the world go beyond these two
initial reform efforts? The Global Tax Evasion Report 2024 identifies
a half-dozen specific steps the global community can take “to reconcile
globalization with tax justice.”
Three of these recommendations highlight common-sense
proposals that ought to be able to gain broad international support. One
recommendation, for instance, calls for “the creation of a Global Asset
Registry to better fight tax evasion.”
The other three recommendations on the E.U. Tax
Observatory’s reform agenda seem certain to face some serious political
pushback—from the fans of grand fortune.
One of these three bold proposals calls for new
mechanisms that would enable the taxing of wealthy people “who have been
long-term residents in a country and choose to move to a low-tax country.”
Another would “reform the international agreement on minimum corporate taxation
to implement a rate of 25% and remove the loopholes in it.”
The boldest proposal of all: a call for a new “global
minimum tax” on the world’s billionaires equal to 2% of their net worth.
Moving forward on proposals like these, the E.U. Tax
Observatory report stresses, wouldn’t immediately require thumbs-up from large
numbers of nations. Unilateral action by small groups of nations “can pave the
way” eventually for more “nearly global agreements.”
The reforms the E.U. Tax Observatory is advancing, the
Nobel Prize-winning economist Joseph Stiglitz adds in his introduction to the Global
Tax Evasion Report 2024, “may seem impossible to attain, but so was
undermining bank secrecy and introducing a minimum tax on corporations just a
few years ago.”
And if the world doesn’t continue moving boldly forward
on confronting corporate and billionaire tax evasion, what then? Failure on
that front, Stiglitz argues, would mean more than inadequate revenue for
confronting global inequalities, pandemics, and climate change.
“If citizens don’t believe that everyone is paying their
fair share of taxes—and especially if they see the rich and rich corporations
not paying their fair share—then they will begin to reject taxation,” Stiglitz
projects. “Why should they hand over their hard-earned money when the wealthy
don’t?”
In effect, Stiglitz concludes, the “glaring tax
disparity” that our richest now enjoy “undermines the proper functioning of our
democracy.”
We either fix that disparity or suffer the catastrophic
consequences.
SAM PIZZIGATI ,
veteran labor journalist and Institute for Policy Studies associate fellow,
edits Inequality.org. His recent books include: The Case for a Maximum Wage
(2018) and The Rich Don't Always Win: The Forgotten Triumph over Plutocracy
that Created the American Middle Class, 1900-1970 (2012).