Six on History: "our" Economy
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"The recent publication of the Pandora Papers adds to the recent bounty of investigative journalism chronicling how the super-wealthy play shell games with their tax obligations.
The Pandora Papers disclosures reveal the elaborate mechanisms that the wealthy deploy to shift funds between global jurisdictions, masking their true wealth and minimizing their tax obligations. It unmasks the U.S. as a tax haven — including the state of South Dakota with its proliferation of dynasty trusts.
Recently, ProPublica chronicled the proliferation of granter retained annuity trusts (GRATS) in enabling billionaires avoid estate tax and pass on democracy-distorting levels of wealth to their heirs. This and other tax dodges are the reason that the 400 wealthiest households paid an effective tax rate of 8.2 percent when the average taxpayer pays 14 percent, according to a White House analysis.
While we should hold the billionaire tax dodgers to account, not enough scrutiny is focused on the enablers, what social scientists describe as “the wealth defense industry.” These are the tax attorneys, accountants, wealth managers and family-office staffers that are paid millions to help billionaires sequester trillions.
These paid experts create dynasty trusts, anonymous shell companies, and construct complex alphabet soup of tax-dodging mechanisms such as GRATs. They take advantage of weak IRS oversight, offshore tax havens and competing state jurisdictions to help their super-rich clients move their treasure to the shadows.
The good news is with political leadership, we can shut down this corrupt hidden wealth system. At the end of 2020, with bipartisan leadership, Congress passed the Corporate Transparency Act to require limited liability companies to disclose their real owners to the law enforcement arm of the Treasury department.
It would be great if the wealth defense industry policed their own ranks, but we can’t wait for voluntary action. The next steps include outlawing particular trusts and loopholes, promoting further ownership transparency, passing global trade treaties that prohibit offshore practices (and consign rebel states to economic pariah status), as well as investing in robust enforcement.
A group of lawmakers has proposed the “Enablers Act,” an amendment to the Bank Secrecy Act, to establish due diligence laws for the attorneys, art dealers and other “middlemen” responsible for these systems.
To pay for his Build Back Better program, President Biden has proposed restoring higher corporate and individual tax rates and taxing millionaire income on capital gains at the same rate as wages. But lawmakers also need to back Biden’s plan to spend $80 billion over the next ten years to help enforce existing tax laws, a move that could raise an estimated $700 billion over the next decade.
Blocking the path of this necessary change won’t just be the super-wealthy, but this self-interested class of wealth advisers who thrive on complexity and trusts that live forever (and provide them with perpetual fees). Lawmakers should strive for tax transparency and simplicity and consider a radical solution: Outlaw all trusts except a few special-needs custodial arrangements for a publicly disclosed single beneficiary — and require an annual tax return for the trust.
Without these enablers, what sociologist Brooke Harrington calls the “agents of inequality,” the super-rich would still avoid taxes — but the scale of the heist would be considerably smaller."
Chuck Collins is the author of “The Wealth Hoarders: How Billionaires Pay Millions to Hide Trillions” (Polity Books). He directs the Program on Inequality at the Institute for Policy Studies where he co-edits the website, Inequality.org. Follow him on Twitter: @Chuck99to1
“Look at the American revolution,” Koch said, “the anti-slavery movement, the women’s suffrage movement, the civil rights movement. All of these struck a moral chord with the American people. They all sought to overcome an injustice. And we, too, are seeking to right injustices that are holding our country back.”
A staple argument among America’s conservative uber-rich, going all the way back to their reaction to Brown v. Board of Education in the 1950s, has been that the federal government needs to stop interfering with states, and that federal regulations and subsidies are distorting markets and holding back “the magic of the free market.”
They tried their experiments with Chile and Russia, “libertarianizing” those nations’ economies, and the results were less than spectacular. Perhaps they can do better with the states they already control (via Charles Koch’s ALEC, for example) once those states are unencumbered by federal taxes, regulations or the “stifling” effect of federal welfare and subsidy programs.
"With the nation's death toll from COVID-19 now having surpassed 700,000, now is the time to reckon with the question of how this disaster came to pass.
Some answers can be found in the mechanisms of public health and politics: Health agencies didn't move swiftly enough to address the mushrooming threat and spent months debating best practices — masks, school shutdowns, business closings, yes or no? Donald Trump and his fellow Republicans turned social distancing measures into partisan litmus tests. Charlatans promoted useless nostrums, diverting precious resources away from research into legitimately promising treatments.
To understand why that has happened, one has to delve deeper than the most evident bureaucratic failures and political malpractice. The root cause of our COVID failure is our increasing economic inequality.
The scandalously uneven and unjust distribution of America's economic gains over the past half-century has affected society in countless ways, visible in our systems of politics, governance, education and housing.
When it comes to the pandemic, inequity has been manifested in what the indispensable Andy Slavitt, the former Medicare and Medicaid director under President Obama, described in a recent tweet as "denial of science, a health system marked by neglect, massive disparities between rich & poor and black & white, cruelty & bullying, [and] unmourned losses."
Friedman made the compelling case that a broad-based rising standard of living helps to sustain such positive social manifestations as "tolerance, openness of opportunity, generosity toward the disadvantaged, and commitment to democracy."
When the opposite occurs — stagnant or declining living standards — "the outcome is retrenchment and rigidification, often with disastrous consequences."
In that environment, Friedman observes, an instinct toward economic self-protection emerges. It is manifested in "intolerant, antidemocratic, and ungenerous behavior — racial and religious discrimination, antipathy toward immigrants, lack of generosity toward the poor."
There can be no doubt that America has been in the throes of economic inequality for its residents for decades.
In 1990, for instance, the nation's total income — that is, gross domestic product — was $5.96 trillion, meaning that its average income, that is, GDP divided by population, was $23,880 and that of the average household of, say, a family of four was about $95,500.
The median income, however — the point at which half the households earned more and half earned less — was $54,620. The average was skewed by earnings at the top of the ladder.
In 2020, GDP was $20.94 trillion, averaging out to $254,203 for a four-person household. Obviously, the typical household didn't collect that much. The median income was $79,900.
In other words, while the size of the U.S. economy has nearly quadrupled and the average economic share per person has gained about 2.6-fold, median household income has only risen by 46%. Much more wealth is flowing to the wealthy.
"No society," Friedman wrote in 2009, "is immune from seeing its basic democratic values at risk whenever the majority of its citizens lose their sense of forward economic progress."
That's where we are today. The outcomes are evident everywhere — in heightened anti-immigrant fervor, racial and ethnic discrimination, hostility to government assistance programs.
A dismayingly large share of Americans — not necessarily a majority, but a vocal plurality — see the national economy as a battle between "us" and "them."
That sense is exacerbated by the increasing political power of the very wealthy. That can be seen in their success in securing tax cuts that chiefly benefit them, impoverishing the IRS to the extent it can't adequately audit their tax returns, and fighting regulations on industry such as those aimed at addressing global warming.
The last element needed to hamstring policy that benefits ordinary Americans is also in place: Politicians and media organizations devoted to stoking economic resentment for their own profit — among them Trump and the Republican mainstream, Fox News, Facebook — by persuading people to vote against their own interests.
This has played out in the pandemic in numerous ways. Slavitt pinpointed several, including the notion, promoted by Trump and others of his ilk, that the pandemic was merely an affliction of "the others" — among them the poor, immigrants living packed too closely together, inmates and nursing home patients, the obese and others with medical conditions.
"Many began to protest they knew no one who had died of COVID," Slavitt tweeted. "An era of mocking disbelief & indifference assaulted families & medical workers."
In previous national crises, the country was able to come together in a spirit of shared sacrifice because there was a national sense that the sacrifice would be shared. That was true through two World Wars and the Great Depression. But that spirit seemed to be gone during the Great Recession earlier in this century; the result was a recovery program that was stunted and inadequate, and that produced an economic recovery that was unusually limited and slow.
By the time the pandemic arrived, there was no national consensus for sacrifice at all. Slavitt observes that the nation's complacency has defined our approach to many threats — school shootings, global warming, the lack of universal healthcare and poverty.
Refusal to participate in anti-pandemic measures is just another manifestation of our "practiced indifference," he wrote.
Friedman's observations about the rise of instinctual self-preservation in times of economic stagnation are perfectly borne out by our pandemic response.
The truculent refusal to don masks and get vaccinated, which are elements of a society-wide response, are couched in terms of individual "freedom" — never mind the threat that unvaccinated and unmasked individuals pose to everyone around them.
The defense of this selfish behavior has become febrile and hysterical, because it's blessed by cynical and hypocritical public figures such as Trump and the anchor lineup on Fox News — most of whom have probably been vaccinated themselves, but on-air depict vaccination mandates as government tyranny.
(Fox's company policy requires all employees to report their vaccination status to management and wear masks in indoor setting where social distancing isn't possible.)
Advances and retractions in tolerant national policies closely track economic inclusiveness and exclusivity: Waves of anti-immigrant prejudice and violence such as immigration quotas and the rise of the Ku Klux Klan in periods of economic limits, the expansion of access to healthcare and education such as Medicare and Medicaid and the growth of public higher education in period of broad-based prosperity.
Only rarely has the narrowing of economic opportunity had as immediate and drastic an impact on public welfare as now.
The undermining of public health policies by the distorted notions of individual responsibility that keep Americans from accepting mask-wearing and vaccination against disease — not even true sacrifices, but mere inconveniences — will lead to the deaths of thousands more in coming months and long-term disabilities for untold more.
If there are better grounds for a dramatic recasting of the foundations of the American economy, it's hard to conceive of them."
