Ming the Mechanic:
Tax Haven Trillions

The NewsLog of Flemming Funch
 Tax Haven Trillions2005-05-09 22:31
11 comments
by Flemming Funch

According to this article it has been estimated that rich individuals have stashed away 11.5 trillion dollars in off-shore tax havens.
Although they have only 1 percent of the world's inhabitants, they hold a quarter of United States stocks and nearly a third of all the globe's assets.

They're tax havens: 70 mostly tiny nations that offer no-tax or low-tax status to the wealthy so they can stash their money. Usually, the process is so secret that it draws little attention. But the sums - and lost tax revenues - are growing so large that the havens are getting new and unaccustomed scrutiny.

Well, if I suddenly had a few hundred million lying around, I'd also right away be looking for where I could stash it away in order to pay as little tax as possible. Despite my most noble social intentions. So I can't say I can blame anybody for doing that. But it is an alarming figure. Essentially there are two different worlds to live in. If you're rich enough, it is no particular problem to place the majority of your wealth outside the system most of the rest of us are stuck in.


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11 comments

9 May 2005 @ 23:39 by Ed Dawson @66.245.206.12 : top AND bottom
Hi Flemming,

People at the bottom also operate outside of the system. Just look at the homeless and also the illegal immigrants in the USA.

A third group of criminals also operate outside the system, and they seem to have members at both top and bottom of the monetary heap! ;-)))

But these super-rich, they are really small fry: the REAL rich are people who own their own countries...
;-)
cheers
Ed  



10 May 2005 @ 13:30 by ming : Middle
Yeah, you're right, you can be outside the system too if you fall out the bottom. It is all the middle-class people who are the beasts of burden who pull the wheels of the machinery. The people who pay their taxes and their mortgages, go to work every day, trying to advance within the company they work for, who worry about their credit rating and their retirement, etc. A life of slavery. And they're the same people who are well watched and monitored. So when they try to cheat on their taxes, somebody is likely to notice. If there's any spot on their record, it will haunt them forever. Whereas the people below, above, or beside the system don't have the same kinds of issues. In part because they always manage to be in another jurisdiction. And better yet to own another jurisdiction.  


10 May 2005 @ 19:08 by Quirkeboy @209.92.185.200 : Middle class
I read a pretty scathing article about George Bushs new social security scheme.. I thought of it when you mentioned the middle class having to pull more than their weight.. part of the article points out something I didnt know: That you only have to contribute to social security up to $90,000.. anything over that is not taxed.. so Bill Gates only pays social security for the first $90,000 he makes.. (probably about a days work for him)
Heres the article:

AUSTIN, Texas — Attention, all campers! Progressive indexing is just another phrase for cutting Social Security benefits. Do not be fooled by this idiot locution. Just as sure as extraordinary rendition now means shipping the guy to another country so he can be tortured, progressive indexing means cutting benefits. Got it?
In another interesting development from President Bush’s recent news conference, if you make more than $20,000 a year, you are wealthy. That’s what the president said — wealthy.
Would you hire this man as an investment consultant?
Bush said, “I know some Americans have reservations about investing in the stock market, so I propose that one investment option will consist entirely of treasury bonds, which are backed by the full faith and credit of the U. S. government.”
These are exactly the same treasury bonds that currently guarantee Social Security and have been described by Bush, including in the very same press conference as a cabinet full of worthless IOUs.
He continued, “Options like this will make voluntary personal-retirement accounts a safer investment that will allow an American to build a nest egg that he or she can pass on to whomever he or she chooses.”
Nope, under that option, what you get is not a nest egg, but a rotten egg.
Brad DeLong, the blogging economics professor who specializes in this subject, ran the numbers.
“The safest long-term investment the U.S. Treasury offers is the 20-year, inflation-protected TIP, “ DeLong said. “What Bush is not telling you is that, under the Bush plan, if you divert $1,000 from your Social Security to private accounts, that amount is clawed back — charged to an account associated with your normal Social Security benefit. That amount is then compounded at 3 percent per year plus the rate of inflation, and then after you retire, deducted over time from your normal Social Security benefit.
“If you are 45 and if Bush’s plan were available today ... follow George W. Bush’s advice, divert $1,000 into your private account, invest it in TIPS, and at the 1.85 percent per year interest rate you will indeed be able to collect an extra amount worth $10.11 a month in today’s dollars when you retire at 65. ...
“But the clawback would reduce your normal Social Security benefit by $14.16 a month. You’re $4.05 a month behind.”
That’s why privatizers never mention the clawback.
Basically, you have to beat 3 percent plus inflation to come out ahead, and the only way to do that is to gamble in the stock market.
Further technical analysis by Jason Furman shows how really badly the plan screws the middle class and that it would not close 70 percent of the shortfall problem, as Bush claimed, but 57 percent, including cuts for the disabled.
Bottom line, it’s a bad deal.
By the way, to the bird-brain on television who said it’s only 4 percent of your Social Security and who wouldn’t take some risks with a mere 4 percent? — jeez. The 4 percent they are talking about is 4 percent of the 12 percent in total Social Security tax. Four is one-third of 12, and that comes to 33 percent. It’s not that hard, honey.
Bush used another common disinformation claim out of Washington — we are not cutting the benefits, we are merely slowing the rate of growth in the benefits. This is a perennial form of government lying.
Of course we are not cutting Head Start. We are spending more money on Head Start than ever — look, here’s this figure in our budget, it is more than it was last year, and so that is an increase.
Except, since there are more kids who qualify for Head Start (even at the lowest level, the program has never been fully funded), when the increase in funding is way too small to cover the increase in the number of most needy kids, what you have effectively done is decreased the spending per child in the program, and that is, in fact, cutting the program. It will not work as well. That this old dog still hunts is a shame on the arithmetic teachers of America.
Look, Social Security has a long-term financing problem that is not particularly dire and in fact not nearly as troubling as the Medicare shortfall. The Social Security shortfall can be solved by any one of a number of combinations of benefit cuts and tax increases.
One thing you could do is let the Bush tax cuts expire at the end of 10 years, as they were originally supposed to do, or you could take the cap off Social Security taxes, which is now set at $90,000.
That means at present any income you make over $90,000 is not subject to Social Security taxes, one of the most flatly regressive features in the tax code. Removing the cap would solve the projected Social Security deficit, despite right-wing claims to the contrary.
And all I can say for Bush’s energy plan is, if he thinks Americans want to give even more huge tax breaks to the oil companies when they are already making obscene profits, he’s been talking to people on the wrong planet.
----- Molly Ivins  



11 May 2005 @ 02:31 by astrid : Those TRILLIONS
turn into TOILET PAPER, the day we, the People, in one unison voice, so decide!...
OR one by one... descreately... just giving up CONSUMERISM and ECCESS Convenience!  



12 May 2005 @ 20:20 by Greg Goebel @4.227.252.229 : Referrer Spam
Hullo: You might want to deal with the referrer "www.ua-princeton.com".
They're referrer spammers, pinging your site just to get on the referrer
list so they can pass an ad for gambling sites on to your readers. They're
pinging my site, too, which is irritating since I don't publish referrer
logs.  



23 May 2005 @ 12:06 by Vickram @202.63.165.254 : Stephen's comment (from ASCBlog)
http://www.acsblog.org/economic-regulation-employment-1311-super-rich-hide-115-trillion-in-tax-free-havens.html

That's the original blog quoted, and Stephen says, "If taxes were lower, many would not go to such extraordinary lengths to hide their money from the government."

For some reason, all those reading this comment on ASCBlog miscontrue it to suggesting tax avoidance. Not at all. Research conducted (in Israel, which is certainly not a tax haven, but not exactly an independent economy either) on university students indicates that people have a natural propensity to pay for public support programs (call it 'tax') but not beyond about ten per cent of their income.

Finance ministers in most countries seem to find such studies hard to digest. If not direct tax, they find creative ways to invent indirect taxes that still gouge more than the magic ten per cent from people's incomes.

Curiously enough, if taxes were a flat ten per cent, with no excuses, and no complications, states would spend minimally on collection, thus maximising the net collection.

Would this be enough to pay for social nets? Probably not by itself, but as Ming observes in a later blog, if goods were sold at the right price, without adding on huge amounts of 'marketing costs' which are really the cost of adding misleading descriptions to con people into believing the value is higher than what is being paid, then the cost of living would probably go down.

In the telecom world, it has been established by several studies that the cost of billing is too high. Flat rate accounts save telcos much more than the cost of billing and collection (and lawsuits) for complex 'deals'.

I suspect the same is true of taxes. Of course, I live in a country (India) where the taxes are too high (about one third of all income, before indirect taxes - on nearly all goods and most services) and social benefits too low, for any level of income. Even though the rich don't need social benefits the same way that middle and low income do, no matter where you live.  



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