The global 1 percent hold twenty-one to thirty-two trillion dollars in offshore havens in order to evade taxes, according to James S. Henry, the former chief economist at the global management consulting firm, McKinsey & Company. Based on data from the Bank for International Settlements, the International Monetary Fund, the World Bank, and 139 countries, Henry found that the top 1 percent hid more than the total annual economic output of the US and Japan combined. For perspective, this hidden wealth is at least seven times the amount—$3 trillion—that many estimates suggest would be necessary to end global poverty.
If this hidden wealth earned a modest rate of 3 percent interest and that interest income were taxed at just 30 percent, these investments would have generated income tax revenues between $190 and $280 billion, according to the analysis.
Domestically, the Federal Reserve reported that the top seven US banks hold more than $10 trillion in assets, recorded in over 14,000 created “subsidiaries” to avoid taxes.
Henry identified this hidden wealth as “a huge black hole in the world economy that has never before been measured,” and noted that the finding is particularly significant at a time when “governments around the world are starved for resources, and we are more conscious than ever of the costs of economic inequality.”
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Richest Global 1 Percent Hide Trillions in Tax Havens
Carl Herman, “1% Hide $21 Trillion and US Big Banks Hide $10 Trillion; Ending World poverty: $3 Trillion,” Washington’s Blog, July 24, 2012, http://www.washingtonsblog.com/2012/07/1-hide-21-trillion-us-big-banks-hide-10-trillion-ending-world-poverty-3-trillion.html.
James S. Henry, “The Cost of Offshore Revisited,” Tax Justice Network, July 2012, http://www.taxjustice.net/cms/upload/pdf/Price_of_Offshore_Revisited_120722.pdf.
Student Researcher: Lyndsey Casey (Sonoma State University)
Faculty Evaluator: Peter Phillips (Sonoma State University)