The Tax Havens of the Super-Rich
Are America’s rich getting richer? Certainly. Every official yardstick shows that America’s most affluent are upping their incomes much faster than everyone else.
How fast? Between 1980 and 2010, note economists Emmanuel Saez and Thomas Piketty, incomes for America’s top 1 percent more than doubled after inflation. They now average a little more than $1 million.
The top 0.1 percent saw their incomes more than triple, to $4.9 million, over that same span. And income more than quadrupled for the top 0.01 percent — the richest 16,000 Americans — to nearly $24 million.
And what about the rest of us? After inflation, average incomes for America’s bottom 90 percent actually fell — by 4.8 percent — between 1980 and 2010, from $31,337 to $29,840.
These numbers tell us how much people make. Measuring wealth gauges how much people have. The two, common sense tells us, ought to be related. If incomes are getting much more unequal, then the distribution of our national wealth ought to become much more unequal too.
But that doesn’t seem to be the case. A Congressional Research Service of new Federal Reserve data indicates that the gap between the wealth of America’s most awesomely affluent and everyone else is holding steady.
In 2010, the Fed data show, the top 1 percent held 34.5 percent of the nation’s wealth, almost the same exact share as in 1995, and not that much more than the 30.1 percent share they held in 1989.
These numbers just don’t add up — income is increasingly skewed toward the top, but wealth distribution is holding steady. What can explain this paradox?
Maybe the Federal Reserve isn’t doing a good job of assessing just how much wealth the wealthiest Americans own. Indeed, Fed researchers do acknowledge that they don’t take into account — for privacy reasons — the wealth of anyone listed in the Forbes magazine annual list of America’s 400 richest.
But including these 400 only moves the top 1 percent’s share of America’s wealth up by a bit over a percentage point. It isn’t enough to explain the disconnect between the extraordinary income gains of America’s rich and the modest rise in their share of national wealth.
Maybe the rich are simply living large, wasting their astronomical incomes on caviar, private jets, and other luxuries. But wasteful consumption can’t explain the inequality paradox either. Deep pockets in America’s top 0.01 percent could shell out $5,000 every single day of the year and still have 93 percent of their annual incomes left to spend.
So what in the end can explain the inequality paradox? The London-based Tax Justice Network has an answer. The world’s super rich, the group has just reported, are squirreling away — and concealing — phenomenal quantities of their cash in secret global tax havens.
The Network’s new tax-dodging study “conservatively” computes the total wealth stashed in these havens at $21 trillion. That total could plausibly run as high as $32 trillion.
Americans make up, we know from previous research, almost a third of the global super rich. That would put the American share of unrecorded offshore assets as high as $10 trillion.
Add this $10 trillion to the wealth of America’s top 1 percent and the inequality disconnect between wealth and income largely disappears. Paradox solved.
Now we have to tackle a much bigger challenge: ending the march to ever greater inequality. Shutting down tax havens would make a great place to start.
Sam Pizzigati is an associate fellow at the Institute for Policy Studies in Washington DC, editor of the journal Too Much and author of The Rich Don’t Always Win, Seven Stories Press, New York, forthcoming 2012.
This column is distributed by OtherWords.