6 Things You Should Know About the $21 Trillion the World's Richest People Are Hiding In Tax Shelters
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Inequality has already been skyrocketing around the world, by the measures we currently use. If the top 1 percent in the US don't own just 35.6 percent of the wealth, for instance, but a much larger chunk that's hidden away somewhere, what does it mean for us? Don't forget, as the report notes, that “inequality is a political choice”--that we determine what to do as a society based on the amount of inequality we think is tolerable or just. If that number is far greater than we think, how is that skewing our priorities? Many Americans are already misinformed about our level of inequality—but this report confirms that even supposed experts were wildly underestimating the problem.
5. “Indebted” Countries Aren't in Debt After All
Henry's report breaks out a subgroup of 139 countries, mostly lower or middle-income ones, for further study, noting that by most calculations, those 139 countries had a combined debt of over $4 trillion at the end of 2010. But if you took into account all that money being held offshore, those countries actually had negative $10 trillion in debt—or as Henry writes, “[O]nce we take these hidden offshore assets and the earnings they produce into account, many erstwhile 'debtor' countries are in fact revealed to be wealthy. But the problem is, their wealth is now offshore, in the hands of their own elites and their private bankers.”
Henry further notes that the developing world as a whole turns out to be a creditor of the developed world, rather than a borrower, and has been so for more than a decade. “That means this is really a tax justice problem, not simply a 'debt' problem.”
But those debts, as we've noted, fall on the shoulders of the everyday working people of those countries, those who can't take advantage of sophisticated tax shelters.
And this, of course, isn't only a developing world problem. These days, Henry notes, the developed world has its own debt crisis (witness the ongoing troubles of the Eurozone). The French economist Thomas Piketty notes, “the wealth held in tax havens is probably sufficiently substantial to turn Europe into a very large net creditor with respect to the rest of the world."
6. How Much are We Losing?
That's the bottom line, isn't it? It's impossible to say for sure, of course, because these numbers are all just estimates, but Henry guesses that if this unreported $21 trillion earned a rate of return of 3 percent, and that income was taxed at 30 percent, that alone would generate income tax revenues of around $190 billion. If the total amount of money in tax havens is closer to his higher estimate, $32 trillion, it'd bring in closer to $280 billion—which is about twice the amount OECD countries spend on development assistance. In other words, a lot of money. And 3 percent returns are about as conservative as you can get.
That's just income taxes. Capital gains taxes, inheritance taxes, and other taxes would bring in even more.
That's why, at the end of the day, Henry says that we could look at this as good news. “The world has just located a huge pile of financial wealth that might be called upon to contribute to the solution of our most pressing global problems,” he writes. “We have an opportunity to think not only about how to prevent some of the abuses that have led to it, but also to think about how best to make use of the untaxed earnings that it generates.”