The U.S. is the new Switzerland

We're on track to become the new tax avoidance capital of the world.

“Where do you stash $21 trillion in hidden wealth?” Chuck Collins writes in his new book The Wealth Hoarders: How Billionaires Pay Millions to Hide Trillions. “It is tempting to think of it sitting on some Caribbean Island, sipping a fruity cocktail from a coconut shell.” But a lot of it, Collins writes, is hiding right here in the U.S. “The U.S.,” Collins writes, “is the new Switzerland.”

Switzerland lost much of its luster as the tax-avoidance capital of the world after 2009, Collins explains, when the Swiss bank UBS paid out nearly $1 billion in fines to the U.S. for enabling tax evasion by U.S. citizens. Similar efforts to recover funds were then initiated by Germany, France, Israel, and Belgium, and in 2010 Congress passed a law, the Foreign Accounts Tax Compliance Act, requiring greater disclosure from U.S. citizens of their overseas accounts. The G-20 and the Organization for Economic Cooperation and Development (OECD) followed suit in 2014 by establishing the Common Reporting Standard, which require signatories to obtain and exchange information from their financial institutions.

The United States is of course a member of the G-20 and the OECD. But it never signed onto the Common Reporting Standard. “As a result,” Collins writes,

the U.S. is now the supreme destination for wealthy foreigners looking to park their money outside their native lands…. According to the biennial Financial Secrecy Index 2020, produced by the U.K.-based Tax Justice Network, the United States is now the world’s second-largest tax haven…. Only the Cayman Islands are a more dangerous secrecy jurisdiction.

The U.S. is a pretty swell place for its own citizens to hide money from the Internal Revenue Service, too, thanks to a profusion of Delaware shell companies, South Dakota trust companies (stash untaxed income inside Teddy Roosevelt’s left nostril!), and other home-grown tax-avoidance vehicles. Now a new study led by IRS economists shows that tax avoidance in the U.S. skews even higher up the income scale than previously thought, led by people with incomes at or above $10 million. My latest New Republic article explains how this group—the top 0.01 percent in the nation’s income distribution, consisting of about 23,000 taxpayers—became, from the perspective of tax law, America’s criminal class.