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HOW TO GET RICH SANS SWISS OR CAYMAN BANK ACCOUNTS (PART I)

December 4, 2014

HOW TO GET RICH SANS SWISS OR CAYMAN BANK ACCOUNTS (PART I)

One of the ways the superrich get richer is to hide their resources in friendly venues such as Switzerland, Luxembourg, the Caymans and other such jurisdictions, where the welcome mat is out via renting of their laws and regulations for what amounts to a relatively open conspiracy for tax avoidance or tax evasion, as the case may be. The billions in taxes that go unpaid to our treasury with such chicanery means that you and I with limited resources have to make up the difference in order to keep our government running with defense, education and other important initiatives we must fund.

It is especially egregious that the superrich who have been plied with corporate welfare and tax loopholes galore in making their fortunes now take such fortunes to places where they can avoid or evade taxation, which helps create the revenue shortfall you and I have to make up either with higher taxes or as an addition to our long term deficit (which you and I must also later pay.) I personally resent the old “make a bundle, ship it off to Zurich, and let the suckers pay our tax bills” ethos of individuals and multinational corporations (Apple, GE et al.), especially since it was us “suckers” who gave them all sorts of tax loopholes, basic R & D and corporate welfare (see Wal-Mart and others) to become so rich in the first place.

The New York Times just today noted that Republicans are now plotting a further drain on our treasury by a renewal of so-called  “bonus depreciation” for corporations which will cost you and me $300 billion over the next decade but allow corporate America to materially reduce their before-tax earnings even subject to tax. If it escapes veto, we can thank such “penny pinching” Republican legislators for adding $300 billion to our deficit. Query – whose pennies are they “pinching?” Answer – they are “pinching your pennies and mine with another such massive giveaway to corporate America at our expense.

Piketty with his r > g formula backed by 300 years of research tells us, among other things, that such shenanigans will ultimately hasten the downfall of capitalism. Many of us will not be around when the (“fundamental contradiction of capitalism if unattended to” per Piketty) comes to its imploding end, but we are still under some sort of duty while in the here and now to slow or if possible stop the increase of the r and simultaneously increase the g in his formula with the ideal of matching the two values.

Allowing the superrich to become even richer via tax game-playing is adding incrementally to the r value of his equation, and slowing or stopping it is not in my view a political process per se; it rather goes finally to whether we the people wish to have a capitalist economy or some other ism to describe our economy in our painful trek down the rocky economic road to implosion and disappearance of capitalism as our system of economic governance.

While the hour grows late, I still think that we can save capitalism from the capitalists, who seem hell-bent in their greed to add to the r value without regard to expansion of the g value of Piketty’s equation, but it won’t be easy. Greed as poison seems to have no antidote, and those immersed in it are quick to dismiss theoretical constructs as ivory tower hallucinations of academics (ignoring in this instance 300 years of research which makes fact out of theory with r > g). The end of capitalism (“unless attended to” per Piketty) is now fact and not just theory as proven by 300 years of research. We must “attend to it,” or else.

I see no alternative to political coercion as the means in “attending to it” if we are to save capitalism, and that will require a sea change in not only Congressional ideologues but also in the way we the people understand the enveloping disaster of r > g in its inexorable course. We have to start electing legislators who will represent our best interests and not those of the superrich for, ironically and ultimately, the benefit and best interests of both the superrich and the rest of us.

With the foregoing as prelude, let’s now go to an article by Laura Saunders in the WSJ which triggered this essay. It is very appropriately entitled “How IRAs Can Favor an Already-Affluent Elite.”Saunders starts her piece by noting that individual retirement accounts were created to help ordinary Americans build a nest egg for later life. I thought at the time it was started that it was a good idea for average folks to have a chance to supplement their social security with a bit extra in retirement, especially since social security is the only income millions of Americans have. I have a traditional IRA myself, but I might have been opposed to the program if I had known it was going to be used to enable rich investors to accumulate multi-million-dollar tax-sheltered accounts, some of which are not publicly traded, which is what is happening, as we shall see.

We should listen to an important arm of Congress, the Government Accountability Office (GAO), which in a recent report warns that unless Congress changes some of the tax rules, “the intended broad-based tax benefits of IRAs will continue to be skewed towards a select group of investors.” The superrich, as usual, have found a way to make a tax-sheltered fortune in plain view from a law that was originally passed for the benefit of ordinary Americans like you and me. More than 300 individuals or families have IRAs with balances greater than $25 million, while more than 9,000 have IRAs worth more than $5 million. For many, IRAs have become investment vehicles rather than social security supplements in retirement. In retrospect, it had to happen. Whenever there is a tax-shelter in the neighborhood, expect investors (and Wall Street) to come sniffing around for a place on that gravy train.

How have these people pulled this one off under the auspices of a statute designed to help you and me augment our social security upon retirement? That will be discussed in Part II. Stay tuned.    GERALD    E

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