- Currently, billions of dollars in assets are held in secret trusts across the country.
- 13 states are “subordinate to trust”, according to a new report, aimed at the ultra-rich.
- In these states, billions of dollars remain intact and untaxed.
The idea of billionaires hoarding their wealth in distant tax havens is far from new, with trillions of dollars in assets parked between beaches and palm trees. But for many Americans, billions of dollars in untaxed wealth might actually be hiding in their backyards.
“The United States has become a tax haven,” Chuck Collins, director of the Inequality and Common Good program at the Institute for Left-Wing Policy Studies, told Insider. “Wealthy people around the world are bringing their assets and wealth to the United States to park and avoid liability.”
A new report from IPS, co-authored by Collins and Kalena Thomhave, finds that global elites can stay in the United States if they want to store their wealth without paying taxes. That’s because 13 US states have turned, or are turning, into fortresses where untaxed wealth can flourish in trusts. These untaxed assets can stay and grow for generations, without a dollar going to public services.
In South Dakota, Nevada, Alaska and Delaware, which the report identifies as the “greatest enablers,” an estimated $575 billion is invested in trusts. In Nevada, a trust can remain intact for 365 years, while in other states it can exist indefinitely, with the exception of real estate in Delaware. Essentially, this means that there are no safeguards indicating that trusts must be dissolved at some point and these assets must be sold and taxed.
Meanwhile, the report called Tennessee, Wyoming and New Hampshire “bad actors” with at least $800 billion in trust. Rhode Island, Ohio, Missouri, Illinois, Florida and Texas host over $300 billion as “emerging enablers”.
“There’s kind of a race to the bottom to see who will lower their standards, who will require the least oversight, and who will be the most trustworthy,” Collins said.
All of these states are trust-friendly, which means they have legislation or other measures in place that allow trusts holding assets to often remain anonymous or confidential, and allow such trusts to exist in perpetuity or for hundreds of years – meaning the assets never have to be sold or taxed when the trust assets are received.
In total, inequality researchers Gabriel Zucman, Thomas Piketty and Emmanuel Saez estimate that in 2021 there was $5.626 trillion in trusts and estates.
“We can safely say that we’re talking about hundreds of billions of dollars a year, probably trillions, that are not subject to tax,” Collins said. A telltale sign, he said, is that “the federal estate tax raised an appallingly small amount of money last year.” According to IRSinheritance and gift taxes brought in about $27 billion last year, or 0.7% of all taxes collected.
“It’s costing the rest of us taxpayers billions and hundreds of billions of dollars in lost revenue,” Collins said.
The amount of money hidden in trusts is one of the mechanisms America’s wealthiest use to reduce their tax burden. Last year a Explosive ProPublica report uncovered that some American billionaires pay little or no income tax. The whole methodology used by billionaires for their tax bills was perfectly legal, exposing what experts say are some of the holes currently embedded in the tax code.
According to the report and Collins, federal prohibitions on certain types of trusts with unclear ownership, requiring trusts to be registered and disclosed, and federal legislation that would not allow trusts to exist indefinitely could restrict the practice. .
“From an inequality perspective, this is a key mechanism of how intergenerational inequality is perpetuated,” Collins said.