Shine On, You Lazy Money River

 “The Wealth Hoarders – How Billionaires Pay Millions to Hide Trillions,” by Chuck Collins, 2021

This is written by a person who rejected his inheritance and instead works to limit the dynastic wealth of the .1%.  He calls it ‘The Money River.'  Collins takes the reader through the nuts and bolts of how the multi-millionaires and 2,153 billionaires protect their money in perpetuity through certain trusts, shell companies, family offices, tax havens and political power.  These same methods also work for embezzlers, money-launderers, crooks, debtors, kleptocrats and divorcees.  Collins thinks if the U.S. and the U.K. just got their act together, they could tax this money and limit inequality.  Collins assumes at this point that the capitalist system can be tweaked and its ruling class brought to heel by (their) concerned governments.  Let’s take him at his word for now.

Collins calls the army of tax and trust lawyers, accountants, advisors, charity and real estate agents the “Wealth Defense Industry” (WDI).  Much of what they do is legal. Which means the capitalist state has enabled and protected these oligarchs and even criminals world-wide.  In fact the U.S. is now the leading destination for hiding cash by kleptocrats and capitalists, far bigger than the Cayman Islands or Panama.  There is still no U.S. federal plan to prevent this ‘race to the bottom’ of avoiding taxes and guaranteeing generational wealth forever, as states 'rights’ dominates.  I’m going to highlight some main factual points so you can better understand how they do it.

     1.     “States’ Rights.”  Delaware is the top location for tens of thousands of LLC shell companies which allow the real owners to be hidden.  40% of U.S. ‘foreign direct investment’ (FDI) comes from shell companies! El Chapo, Madoff, the Malaysian Sovereign Wealth fund scandal, Michael Cohen and Paul Manfort all used its services.  Additionally Delaware does not tax trademarks, royalties, leases or copyrights.  Only in 2018 did Joe Biden, the long-time senator from Delaware’s banks, finally make a quiet noise about some of this.

     2.     South Dakota.  Passed a law that allows asset protection trusts to be ‘in perpetuity’ – which allows a wealth trust to exist forever while bypassing any tax event.  This enables generations of wealth.  It also does not tax credit card companies, the reason credit cards like Citibank moved there. South Dakota also repealed usury laws, which allows credit card companies to charge high interest rates.

3.     New Hampshire.  Created a non-charitable foundation that allows ownership to be hidden and transferred tax-free.

4.     The U.S. is not part of FACTA, an international compact which requires OTHER nations to provide the names of the beneficial owner of bank accounts in their home countries to the IRS.  But for the U.S., the reverse is not true.  Which is why the U.S. is such a great tax haven.

5.     The 2017 Trump tax bill further raised the amount of money that can be passed to a future generation without an estate tax to $11.4M for an individual and twice that for a couple.  “Only morons pay the estate tax” is a famous saying among the WDI.  It also lowered the tax rate for the top 400 families to 23% - which they don’t pay either. 

6.     Wealthy families (In the U.S. the Waltons on down…) establish unregulated ‘family offices’ set up to limit taxes, hide ownership, transfer as much money as possible to heirs and are becoming dark money pools for investing.  Between 7,000-10,000 now exist world-wide holding around $6 trillion in assets.

7.     Collins tells the stories of the founder of “Blue Hippo” who stole millions from customers and then successfully hid his money in a trust in the Cook Islands.  Or Isabel de Santos of Angola who siphoned millions from her country’s coffers, as exposed in Luanda Leaks.  Or a wealthy spouse who successfully hid assets from his ex-wife which she never recovered.

8.     U.S. banks must provide beneficiary information on account holders.  However tax and trust lawyers, accountants, wealth managers and ‘consultants’ are not required to ‘know their customer’ and can then serve the ‘anonymous.’

9.     Only a handful of ‘suspicious activity reports’ (SARS re money laundering or criminal activity) provided to FINCEN are acted upon.  In the same way, the IRS spends their time auditing poor people over the earned income credit instead of billionaires, due to lack of staff, funds and politics.

10.   Billions are being plowed into real estate in large cities like New York, San Francisco, Vancouver, Los Angeles, London, Hong Kong and Miami as ‘wealth storage units’ for the multi-millionaires and billionaires of the world, pushing gentrification to new heights, while leaving 30+% of this housing empty.

11.  A key part of the WDI and its associations is writing new laws to protect generational wealth.  The American Bar Association, McKinsey, Boston Consulting, the Chamber of Commerce and other groups back them up. 

12.  While the focus of the book is not on corporations, Collins mentions they use ‘transfer pricing’ to move profits and royalties out of the U.S. by having their ‘foreign’ subsidiaries in low tax or no tax jurisdictions bill them for things like patents or intellectual property.

13.  The Panama Papers revealed that one clerk at Mossack Fonseca in Panama was the director of 3,143 shell companies while making $4,800 a year.

14. There are actually ‘free trade zones’ (FTZ) in various countries, including the U.S., where art is stored as a wealth asset and unable to be taxed on purchase or sale.  Art has become another commodity for hiding money.

15. There is $21 trillion dollars in ‘offshore’ bank accounts, along with the trillions more in U.S. ‘on-shore’ ones. 

The libertarian WDI says they are ‘helping families,’ or ‘someone else will do it if we don’t’ or ‘protecting privacy’ or ‘obeying the law’ for their 'wealth creators.'  All of these excuses are rotten.  Collins has 7 sets of detailed suggestions about what to do with dynastic and perpetual wealth and tax evasion (which the WDI calls ‘tax avoidance.’)  In the process he mentions Bernie Sanders’ suggestion of shutting down a whole raft of crooked trusts or Elizabeth Warren’s desire, following Piketty, to tax billionaire and multi-millionaire wealth, not just income.  You can read the book to see his list of correcting policies.

The real question is, at this point can the wealth of the world-wide ruling class be reigned in by ‘good government’ methods?  Collins cites some examples of slow progress in law and enforcement.  But the essence of the system is class power, which shows up as political and legal power.  Both parties in the U.S. for instance are controlled by different – and sometimes the same – oligarchs and plutocrats.  Collins leans on the ‘ethics’ and ‘morality’ of the rich, Harvard grads, whistle-blowers and the WDI to reform themselves!  This is a thin reed. Even Collins’ recognizes that wealth-preservation and hiding is "not a sideshow" for the ruling elites.  It is their raison d’etre - wealth accumulation is the point of their lives and the system as a whole.  Without a massive class-based struggle for control of the U.S. the U.K. and the "English-speaking world" (the main centers of corruption) by the working-class most affected by these scams, no amount of targeted, individual laws will be able to counter this aristocratic endgame of wealth.

Nevertheless, Marxists would support some of Collins' moves.  Expropriation is the more complete answer to the permanent accumulation of multi-millionaire and billionaire wealth.  Collins never mentions that solution.

P.S. - Today Archegos, the family office of 'religious' financier Bill Hwang, "was forced to liquidate $20B in stocks," sending other bank shares sliding, with lossses at Credit Suisse and Nomura.  This is due to margin debt calls by contra-parties on massive derivatives trades. Family offices look like another source of financial instability.  (Bloomberg)

Prior blog reviews on this subject, use blog search box, upper left: “Perfectly Legal” (DC Johnson); “J is For Junk Economics” (Hudson); “Modern Monetary Theory” (Kelton); “Viking Economics” (Lakey);  “Capital in the 21^st Century” (Piketty); “Monopoly Capital” (Baran and Sweezy); “Trade Wars are Class Wars,” “Ozark,” “Yesterday’s Man.”

And I Bought it at May Day Books!

Red Frog

March 30, 2021