[Today is Tax Day, the deadline for Americans to pay their taxes.
One group that won’t be paying much today: the rich, who have
stashed $2 trillion in offshore tax havens.]
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YOU’RE PAYING TAXES TODAY. THE RICH AREN’T.  
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Andrew Perez, Matthew Cunningham-Cook, Rebecca Burns
April 18, 2023
Jacobin
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_ Today is Tax Day, the deadline for Americans to pay their taxes.
One group that won’t be paying much today: the rich, who have
stashed $2 trillion in offshore tax havens. _

A man walks into the IRS building in Washington, DC, on March 10,
2016., Andrew Caballero-Reynolds / AFP via Getty Images

 

Tax day is a costly annual annoyance for most, but for some of the
wealthiest people in the United States, this year’s April 18 tax
deadline might not mean much. That’s because according to a new
report, the richest sliver of our population has managed to avoid
billions in tax obligations by hiding their money offshore.

What’s more, it could get easier for the megarich to hide their
taxable income, thanks to efforts by the Supreme Court and the Biden
administration.

A recent study
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academic and Internal Revenue Service (IRS) researchers found that
wealthy Americans have stashed nearly $2 trillion in foreign tax
havens, with much of that fortune linked to a handful of the
country’s richest households.

That data arrived weeks after the US Supreme Court hobbled
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regulators’ efforts to combat international tax evasion schemes by
limiting fines for people who fail to disclose foreign bank accounts.
The study also follows a US Senate report warning of a glaring
loophole
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a law designed to combat the use of tax havens — a law that
Republican legislators have long been trying to repeal
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Compounding matters, earlier this year, the Biden administration gave
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banks a reprieve on tax reporting.

Together, the moves paint a picture of a tax day and many more to come
where ordinary Americans will pay what they owe, while the rich can
get off scot-free.

“Strong Concentration”

The new study
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published last month by the National Bureau of Economic Research,
found that US households held “just below $2 trillion” in 2018 in
financial accounts in places like Switzerland, Luxembourg, and the
Cayman Islands that are generally considered tax havens because they
have low effective tax rates.

Not surprisingly, a disproportionately high percentage of assets held
in offshore tax havens are owned by the top 0.01 percent of US
earners.

“We find a strong concentration of offshore assets at the very top
of the income distribution: Around 30 percent of all foreign assets
belong to the top 0.01 percent, with a particularly high share for
assets held through partnerships and assets held in tax havens,” the
researchers write.

They additionally note that “more than 60 percent of the individuals
in the top 0.01 percent of the income distribution own foreign
accounts, the vast majority in tax havens.”

The study is based on account information reported to the IRS by
foreign financial institutions under the Foreign Account Tax
Compliance Act (FATCA), a law passed in 2010 to help the government
crack down on offshore tax evasion.
 
Republicans, led
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by Sen. Rand Paul (R-KY), have introduced several bills
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to repeal the law, which requires foreign banks and financial
institutions to disclose accounts and assets held by US customers.

Major
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banks
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repeatedly enabled tax evasion schemes by the ultrawealthy. A
two-year investigation
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Credit Suisse by the Senate Finance Committee recently revealed that
employees of the crime-ridden
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and collapsed Swiss bank knowingly helped a US businessman conceal
$220 million from US authorities, even after the company pledged to
comply with all requirements of FATCA as part of its 2014 plea
agreement
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the Justice Department.

Limiting Enforcement
Last fall, the Senate Finance Committee released a report
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that loopholes and limited enforcement resources “have significantly
hindered” the effectiveness of FATCA. “As a result, wealthy
taxpayers continue to use schemes involving offshore entities and
secret bank accounts to successfully hide billions in income from the
IRS,” lawmakers wrote
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For much of FATCA’s history, its enforcement mechanism has not been
utilized. Banks that fail to comply with the law are supposed to be
hit with a 30 percent withholding tax on their US investment income.
For years, the IRS waived this requirement, before it finally went
into effect in 2020.

The clampdown didn’t last long. Earlier this year, the Biden
administration gave a new three-year grace period
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to some foreign banks that fail to disclose the tax identification
numbers of existing US account holders.

Due to significant historical underfunding
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the IRS, it is impossible to know whether or not the total amount of
money collected thanks to FATCA has met the original $8.7 billion
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when the bill was passed, because measuring the amount raised by
voluntary compliance is difficult.

Opponents [[link removed]] of FATCA —
like the Center for Freedom and Prosperity, a Koch-linked
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tank — have used this lack of information to argue in favor of the
law’s repeal, buttressing the Biden administration’s decisions to
water down enforcement.

A potential lifeline for tax enforcement emerged last summer, when
Congress passed the Inflation Reduction Act, which granted a $80
billion
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increase to the IRS over ten years.

However, a recent Supreme Court ruling will likely further complicate
efforts to reduce tax evasion by the ultrawealthy.

Last month, justices voted 5-4
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to limit penalties the government can issue against US citizens for
failing to file reports detailing their foreign bank accounts to the
IRS.

In doing so, the justices sided with powerful corporate lobbying
groups, including the US Chamber of Commerce
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the National Federation of Independent Business
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the American Farm Bureau Federation, and the Restaurant Law Center.

===

You can subscribe to David Sirota’s investigative journalism
project, the_ Lever_, here [[link removed]].

* Tax Day; Offshore Tax Evasion;
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