Super rich are even richer than thought as increasingly they hide money in overseas tax havens
- As much as six per cent of all world wealth is hidden in tax shelters, according to a new study
- ‘One per centers’ earned an average of $1.2million in 2012, the most recent year data is available for, but the top 0.01 per cent earned over $30million
- One per centers’ incomes have remained flat, but the super rich 0.01 per cent have seen incomes sky rocket by 1,300 per cent since the early 1990s
As much as six per cent of all world wealth is hidden in tax shelters, according to a new study
‘One per centers’ earned an average of $1.2million in 2012, the most recent year data is available for, but the top 0.01 per cent earned over $30million
One per centers’ incomes have remained flat, but the super rich 0.01 per cent have seen incomes sky rocket by 1,300 per cent since the early 1990s
he richest of the rich are amassing wealth at an astonishing rate and increasingly hiding it in offshore bank accounts, a new report claims.
Those at the top 0.01 per cent of the tax bracket are hiding at least six per cent of their assets offshore, and their expatriation of wealth to tax havens is flying under the radar of even the authorities, according to UC Berkley professor Gabriel Zucman.
‘Ofﬁcial statistics substantially underestimate the net foreign asset positions of rich countries because they fail to capture most of the assets held by households in offshore tax havens,’
Zucman explained that simple accounting proves his theory when surveying statistics on known investments held both inside and outside a number of countries.
‘The numbers don’t add up: globally, liabilities are substantially larger than assets,’ the New York Times wrote in summary. ‘That’s mathematically impossible.’
‘Around 8% of the global ﬁnancial wealth of households is held in tax havens, three-quarters of which goes unrecorded,’ Zucman wrote in the study.
Indeed, if money wasn’t hidden in tax havens, liabilities and assets would match up similar to how the ledger of any large company is required to balance out – but they don’t.
Money run through so-called tax havens would appear that way in official records since it isn’t clear exactly who the owner is, Zucman explained to the paper.
Assets held in Switzerland by foreign nationals more than doubles Swiss citizens, according to a survey cited by Zucman.
This ‘offshoring’ of wealth is also hurting national governments by hindering their ability to collect taxes despite the ever-rising portfolios of the super-rich.
The average household in the top one per cent earned more than $1.2million in 2012, about 41 times the average American income, but the top 0.1 per cent earned almost $6.4million. Diving deeper, the top 0.01 per cent of homes made north of $30million.
The majority of those in the top 0.1 per cent work in finance and live in Chicago, Houston, Los Angeles, New York, San Francisco or Washington, D.C., a Sadoff Investment Research report cited by USA Today found.
Most one per centers have seen their incomes remain almost flat since the 1970s, a report in The Atlantic showed, but the cream that crop has seen a dramatic increase in incomes.
Those in the top 0.1 per cent have seen incomes drop from a high of almost $8million in 2007 to $6,373,782 in 2012, but earnings are still double what they were 20 years ago, and many multiples higher than in the 1970s, said the magazine.
Their earnings still work out to 206 times the average household income of $30,997, according to USA Today.
Even greater, is the growth of the super wealthy 0.01 per cent – athletes, actors, CEOs and the like – their incomes have shot up to almost $31million from a relatively paltry $12 million in 1994, and just under $5million in 1970.
‘The 0.01 percent has essentially quadrupled its share of the country’s wealth in half a century,’ said The Atlantic.
For those wondering how this has happened, outside of free agency being introduced in sports, of course, one need look no further than the stock market.
The ‘Fortunate 400,’ as the Internal Revenue Service likes to call them, let their money work for them.
Their incomes have risen and fallen almost exactly as the Standard & Poor’s 500 (S&P 500) Index has – going back 100 years.
The S&P 500 is a broad mix of 500 stocks across multiple sectors, it is a much more accurate gauge of market sentiment than the more well-known Dow Jones Industrial Average – which tracks only 30 stocks.
‘At the very tippy-top of the economy, the 400 richest tax returns analyzed by the IRS take home about 50 percent of their income from capital gains,’ said the Atlantic.
Capital gains are income earned through investments, and they shot up 1,300 per cent since 1992, the government said.
Among the 3,762 different taxpayers in the Fortunate 400 between 1992 and 2008, according to The Atlantic, only four households appeared every year.
The majority of ’99 per centers’ treat refunds like bonus checks and keep them in regular checking or savings accounts.