#PanamaPapers and the Myths of Wealth
The recent data release is a tax activist’s Christmas. With approximately 2.6 TB of text; containing names and numbers of the world’s wealthiest and shadiest, we have evidence of what we have always known. Many politicians are crooks and show crook-like behaviour, because self- enrichment will always surmount the greater good of society. Off-shore, untraceable accounts serve only one purpose; to hide money. Money that is legitimately earned rarely needs to be hid. Money that is net of its contribution to society, because it acknowledges the role of societal public goods in its generation, does not need to reside in tax-free jurisdictions.
That said, besides opening up new avenues for the investigation of corruption, the leak reminds us that there are key myths, expounded by the wealthiest minority to protect them from their social responsibility, which are completely (or at least in our experience) false.
Myth 1- the hardworking rich
We are always sold this fairytale of hard-working men (sometimes women, if they are allowed in the room) who, through sweat, blood and unique intelligence, have legally and morally earned their riches. This is actually false. You will find that, a large majority of wealth is acquired through colonial era slavery and appropriation, exploitation, tax evasion, a variety of large scale crime syndicates and the inheritance of these. [1]
The data presented by the leak shows that the wealthy are not necessarily the smartest or most hardworking.[2] They might simply be the most morally numb. This, of course goes to banking systems who benefit substantially from their discretion. Further, the ability to spirit millions away to other countries is very classed, dependent on existing economic mobility and social positioning (which is often inherited).
Myth 2 — Trickle-down economics
I am most interested in this case because of its tax connection. Opponents of higher tax rates for the wealthy insist that they stifle the productivity of the rich and prevent the creation of jobs, by taking away incentive. They also insist that, the wealthy 1% would rather give directly to society (never mind that there is an insistence on a fund-collecting body to whom the poor and middle class still have to pay taxes to, instead of also contributing at their prerogative), through philanthropic efforts and so on.
Today’s income tax rates are strikingly low relative to the rates of the past century, especially for rich people.
(For countries with less structured tax systems, the rich can get away with paying no taxes). CEO salaries are the highest the world has ever witnessed and are also given major tax breaks. Even with all this reprieve for our “struggling” rich, you expect to see this so-called unicorn, the trickle-down effect.[3] But this is not the case. All these loopholes have succeeded in is fattening the pockets of the rich. Now, with increased global mobility of people, products and capital, our philanthropic 1% have found more creative means to ensure that they squeeze as much as they can out of society with meagre wages, stark working conditions and dismal world prices for raw materials, while also holding on to as much of their profit through off-shore accounts and firm locations. At the end of the day, nothing goes to the poor (who are still taxed at their regulated rates) while their real wages drop severely.
More than just the alleged illegality of these discovered financial flows and the lack of transparency afforded us by our leaders, the #PanamaPapers remind us that there’s only so much of the fantasy of the self-made millionaire and trickle-down economics we can actually believe.
Read more:
[1] http://www.independent.co.uk/news/uk/home-news/britains-colonial-shame-slave-owners-given-huge-payouts-after-abolition-8508358.html
[2]http://www.herinst.org/BusinessManagedDemocracy/culture/wealth/self-made.html
[3]http://www.americansfortaxfairness.org/tax-fairness-briefing-booklet/fact-sheet-offshore-corporate-tax-loopholes/
