- A crowd of nearly 12 million financial documents revealed how some of the world’s richest people are hiding money offshore.
- Pandora Papers, uncovered by ICIJ, show confidence around the world – including South Dakota.
- One of them is on land, inside the United States: South Dakota is where the powerful store billions in assets.
A bomb report from the International Consortium of Investigative Journalists found that some of the world’s richest and most powerful people are socking billions in offshore accounts – including the land-based continental state of South Dakota.
Chuck Collins has known this is a problem for years. Once heir to the Oscar Mayer Viennese fortune, he learned on his own how the wealthy hold on to their fortunes and gave his own away. Today, he is director of the program on inequality and the common good at the Institute for Policy Studies, where he dives deep into how the ultrawealthy evade taxes in America.
In March, he told Insider that Americans largely do not understand that “we are now the tax haven.” The United States is the No. 2 destination for “global kleptocratic capital,” he said, many of which end up in places like Delaware and Wyoming – and South Dakota.
The ICIJ confirmed Collins’ research and found that the volume of customer assets in South Dakota over the past decade has “more than quadrupled” to $ 360 billion. The ICIJ looked at nearly 12 million financial records describing more than 29,000 offshore accounts, viewed by hundreds of journalists around the world, in partnership with businesses including the Washington Post and the Guardian. The leak is called Pandora Papers, after similar leaks Panama Papers and Paradise Papers.
In all, 17 U.S. states are in the top 20 jurisdictions that “have the most liberal trust laws” in the world, according to a paper by Hebrew University law professor Adam Hofri-Winogradow, quoted by the ICIJ. The ICIJ alone found 81 trusts in South Dakota.
The Great Plain State changed its laws in the 1980s to become more favorable to this kind of trust, according to Collins, who recently wrote “The Wealth Hoarders,” a deep dive into the growth of what he calls ” the defense industry “. It’s the growing system of lawyers, family offices and more that helps wealthy clients evade taxes and hold on to wealth – and it’s ballooned in recent decades.
In 1983, South Dakota got away with its rule of eternity – what Collins calls an “eerie legal thing” that actually means that when you put money in a trust, it has to be dissolved at some point.
“At that point, there’s often a taxable moment,” Collins said. It may be something like property tax or gift tax, but “South Dakota said that ‘we’re going to attract trust by removing this law, making them anonymous, allowing you to open a trust and not actually have to. to live in the state. ‘”
This means that if you put money in a trust in South Dakota, “you are essentially putting money out of the reach of the IRS forever,” according to Collins. Eternity is another word forever.
If you live in South Dakota, you may be wondering where all that money is hiding. Collins said it is probably not physically in the state. Instead, it can be parked in luxury properties or art around the world. Only the trust itself should be legally filed in South Dakota.
“We are coming out of a pandemic where the most important people on the planet have figured out how to dispose of their wealth and avoid taxes,” Collins said.
Collins has several proposals for reforms, including federal legislation that could override states when they throw rules toward eternity, as South Dakota did; requires trusts to be registered and reveal to their owners a wealth tax of 1% of the assets’ interest. President Joe Biden has backed a central senator’s tax proposal on the richest assets, but in other respects Democrats have so far left many tax loopholes untouched.
One thing is overwhelmingly clear to Collins, and that should scare any American. “The world will look at us differently after the Pandora papers. They will see that the United States is the weak link now in the system of global financial transparency.”