To the next President of the United States of America, please find a way to level the playing field economically and financially for all citizens. Not only do Americans suffer and struggle in a country that has considerable wealth, but the rest of the developed countries around the world are experiencing the same. While the average American lives with the knowledge that there is a class of people who feel their needs are above the majority of the rest of the planet, it is a bitter pill that gets harder and harder for the working middle-class society to keep swallowing. The blood recently drained out of my face reading the news regarding the Panama Papers. What gives the elite the right to hoard billions and trillions of dollars in attempts to evade taxes when millions of other people in the world watch their lifestyles diminish each decade?
A Gross Need for Greed
A report by the International Consortium of Investigative Journalists recently describes a yearlong investigation in cooperation with more than 100 other media organizations, including the BBC, The Guardian, Univision, and McClatchy. Some documents came to light by an anonymous source who went to a German newspaper who then shared it with the ICIJ. They reference decades worth of information regarding 12 current or former world leaders and 128 other politicians and public officials, include over 11 million emails, documents, and client records allegedly leaked from Mossack Fonseca, a law firm based in Panama.
Big banks and financial companies based in the U.K. including UBS, Credit Suisse, and HSBC used the law firm to help clients hide cash in offshore shell companies. As usual, the banks and the law firm deny the allegations. This law firm also helped create more than 1,000 companies in the United States, through a Las Vegas subsidiary.
The ICIJ reports already ignited a government crisis in Iceland and the Prime Minister Sigmundur David Gunnlaugsson resigned on Tuesday as alleged links related to holdings in Iceland’s collapsed banks and triggered mass protests in the country’s capital. China has been restricting search results and discussions on social media using the terms “Panama Papers” and “Panama” and blocking the use of names of relatives of current and former Chinese leaders. This smacks of guilt, but will somehow get swept under the rug if past history of accountability gives any indication.
More allegations are directed at associates of Vladimir Putin, FIFA, Argentina’s President Mauricio Macri, the father of British Prime Minister David Cameron, Ukraine’s President Petro Poroshenko and others, each one outraged about the accusations as expected.
The ICIJ reports claim that Mossack Fonseca’s clients included at least 33 people and companies blacklisted by the U.S. government because of links to drug trafficking and terrorism. That means that these are people already suspected of criminal activity who have reason to hide the real origin of their money through money laundering.
Thankfully, governments in the U.K., France, Belgium, Australia and Mexico have pledged to investigate the leaks for possible cases of tax evasion. Even if it’s a false front, it looks better than immediate denial and depending on what results, possible points for creativity.
Two years ago, the International Monetary Fund stated that “Panama’s open economy, strategic location, and developed offshore financial services sector put the country at a high risk of being used for money laundering”. It has been on an international watch list due to weak anti-money laundering laws and blacklisted in Europe for being a non-cooperative jurisdiction and tax haven.
The Finances of the Average Citizen, US and Abroad
The fact that seventy-one percent of the world’s population remain low-income or poor, living on $10 or less a day is both devastating and embarrassing to consider from a middle-class perspective, let alone from the upper class. While middle America and middle-class citizens around the world continue to lose what little money they have and face serious concerns about their futures, the wealthiest have seen their net worth soar since 2000. They sailed through any hiccups or repercussions during the US historical downturn of 2008, untouched by the concept of morals or laws. Back in 2010, it took 388 mega-rich people to own half the world. Today it only takes 62. The top 1% own more than everyone else combined according to an Oxfam annual report based on Forbes annual list of billionaires and Credit Suisse’s Global Wealth Databook .
For many of us, that seems inconceivable, similar to imagining the size of the galaxy or knowing what infinity looks like. “The top 62 saw their net worth rise by more half a trillion dollars between 2010 and 2015 while the 3.6 billion people in the bottom half of the heap lost a trillion dollars. Each group has $1.76 trillion”.
Tax Laws Considered and in Existence in the US:
The Buffett Rule, named after legendary investor Warren Buffett, is a consideration designed to ensure those with net incomes of more than $1 million pay a tax rate of at least 30%, after allowing for charitable contributions.
Beyond the Buffett Rule, Clinton is currently proposing a 4% surcharge on income over $5 million creating a new tax bracket with a top income tax rate of 43.6%, up from 39.6% today. The surcharge would hit 0.02% of filers.
Ways of reducing higher income tax liability come in the form of estate taxes exempting the first 5.45 million of an estate and investment taxes to lower the income tax rate from 39.6% to 23.8% . There are still legal loopholes to shelter additional millions offshore and in IRAs.
Currently, those making more than $1 million will pay about 28% of their earnings in federal income and payroll taxes for 2015, according to estimates from the Tax Policy Center. By contrast, those making between $50,000 and $75,000 will pay 11% while households with incomes between $75,000 and $100,000 will pay 13.4% on average.
So, dear future President of the United States, please put this in perspective for the rest of us. I’ve been writing articles for the past few weeks for different political websites. I think my grasp of our political system and it’s process is pretty up to date with regard to the upcoming elections. No matter who gets elected, I am non-biased due to having equally low expectations for all candidates. There seems to be a choice between a lack of experience or trustworthy behavior, some having neither. I would welcome the chance to be proven wrong in the next 4-8 years. Economic gaps are widening as we speak and the middle class has less and less to show for their efforts; they are scrambling for creative ways to sustain themselves and preserve happiness. Putting a few trillion dollars back into circulation could do wonders.
If you would care to comment, please feel free to leave one below.
Resources and links:
LinkedIn Pulse’s series for #nextpresident
Kottasova, I., CNNMoney US, 2016. Mosssack Fonseca: The Law Firm at the Heart of the Panama Papers Scandal, http://money.cnn.com/2016/04/04/news/mossack-fonseca-panama-papers/index.html?iid=EL
CNNMoney US, 2016. The publication of the Panama Papers sent shock waves around the world. http://money.cnn.com/2016/04/05/news/panama-papers-things-to-know/index.html?iid=EL
CNNMoney US, 2016. How Hillary Clinton Wants to Make Rich Pay Their ‘Fair Share’, http://money.cnn.com/2016/01/12/pf/taxes/hillary-clinton-taxes-rich/index.html?iid=EL
CNNMoney US, 2016. Luhby, T., The 62 Richest People Have as Much Wealth as Half the World, http://money.cnn.com/2016/01/17/news/economy/oxfam-wealth/?iid=EL
Mullen, J. CNNMoney US, 2016. Panama Papers: Rich and Powerful Respond to Claims they Hid Billions Offshore, http://money.cnn.com/2016/04/04/news/panama-papers-offshore-accounts-investigation/index.html?iid=EL
Kottasova I., CNNMoney US, 2016. British Banks Forced to Disclose Links to Panama Papers Firm, http://money.cnn.com/2016/04/07/news/panama-papers-banks-uk/index.html