The Pandora Papers

WM: Oversight: The Pandora Papers and Hidden Wealth, December 8, 2021

No one was very much surprised at what was revealed in the Pandora Papers, although going over the details is great fun. The excesses of the rich and proud need to be laid bare occasionally. The challenge, however, is to craft ways to move beyond a world where the super-wealthy can accumulate fantastic wealth. The more important portion of that task is to strip the wealthy few of the power they have over workers, voters and elected officials.

Earlier this year, we submitted comments to the Special Revenue Measures Subcommittee on how the tax code treats the wealthy. A portion of these comments are attached. They emphasize who the wealthy buy, rather than just what, the valuation of unrealized income and why a wealth tax falls short. The main reasons for the latter are that the wealthy find ways to spread the burden of such taxation elsewhere.  

While it is impossible to squeeze more out of low wage workers, there are plenty of things the wealthy can do to transfer their obligations. That is the point of today’s hearing.

As members and staff well know, our  go-to solution for economic justice is tax reform. The latest iteration of our plan is also attached. The bones are the same, but the proposed tax rates and brackets have been adjusted to reflect the recent compromises which will pay for us to Build Back Better. 

Our approach is to shift most taxation to transactions rather than people and corporate profits. This includes individual consumption, vehicles for distributing tax benefits for families through employers (regardless of ownership class), shifting debt holding to tax prepayment by the very wealthy, improving retirement equity by the equal dollar funding of the employer contribution to Social Security, taxing asset gains and returns on a transaction basis rather than the end of the year results for each investor and expanding the benefits of transferring wealth from the investment sector to the employee-ownership sector. 

That last point is the most important. Until employee-ownership becomes a viable replacement for capitalism, human resources will be human assets. Such assets are more precious, but are not treated as such by those hiding in Pandora’s Box.

Asset value added taxes do not care where assets are parked, just when and how they are sold. When the wealthy sell financial assets to each other, or try to unload junk onto retirement funds and small investors), a tax should be paid. The tax should be high enough to stop the junk flowing into the system and to give heirs an incentive to sell out to workers rather than arranging for mergers and acquisitions. 

Many critics of the value added tax (some of whom are well funded) cite their regressivity, but if adequate family income is provided through tax benefits to employers (or government subsidies when those benefits are unused), the wealthy will find that, like buying investments burdened by an asset value added tax, buying luxury goods can be expensive. 

It is impossible to dodge value added taxes in the same way that life insurance, retirement funds (especially Roth IRAs) and loans against liquid assets when everything these funds buy is taxed at between 13% and 28.8%. This is more revenue than a wealth tax will ever provide.

Pandora has shown us that international cooperation is needed to collect such taxes and repatriate the funds to both countries of purchase and countries of residence. There is no crisis, however, if the idle rich spend money on painted canvas of no intrinsic value if these purchases mean the emancipation of workers from authoritarian capitalism to self-ownership. Note well, there is no such thing as free market capitalism - capitalism implies obedience, not a free market.

Attachment - Reforming the Tax Code's Advantageous Treatment of the Wealthy, May 12, 2021

Attachment: Tax Reform