When taxes are cut for the rich, that money doesn’t trickle down, it gets funneled offshore, according to a new report. Whereas Uncle Sam goes after you for underpaying your taxes, it is perfectly legal for the super-rich to send their money offshore to evade taxation.
The report, released by James Henry, former chief economist at consultancy McKinsey and an expert on tax havens, compiled the most detailed estimates yet of the size of the offshore economy in a new report, The Price of Offshore Revisited.
In the report he shows that anywhere from 13 to 20 trillion British pounds have gone to offshore tax havens like as the ones in the Caymen Islands and Switzerland.
From The Guardian:
Their wealth is, as Henry puts it, “protected by a highly paid, industrious bevy of professional enablers in the private banking, legal, accounting and investment industries taking advantage of the increasingly borderless, frictionless global economy”. According to Henry’s research, the top 10 private banks, which include UBS and Credit Suisse in Switzerland, as well as the US investment bank Goldman Sachs, managed more than £4tn in 2010, a sharp rise from £1.5tn five years earlier.
The sheer size of the cash pile sitting out of reach of tax authorities is so great that it suggests standard measures of inequality radically underestimate the true gap between rich and poor. According to Henry’s calculations, £6.3tn of assets is owned by only 92,000 people, or 0.001% of the world’s population – a tiny class of the mega-rich who have more in common with each other than those at the bottom of the income scale in their own societies.
Hence, the reason the world’s economy is in a financial ruin isn’t because regular people need to tighten their belts, it’s because the super-rich are no longer contributing to the system. If the 21 trillion dollars held in offshore accounts were taxed at just 30%, that alone would generate nearly 200 billion in revenue for countries.