With President Barack Obama and Senate Democrats eager to raise income taxes on higher-income earners — despite the fact that they already shoulder a substantial sum of the tax income burden, a new report shows that wealthy individuals may have as much as $32 trillion put away in off-shore accounts:
Wealthy individuals may have been hiding as much as $32 trillion offshore at the end of 2010, according to Tax Justice Network, a U.K.-based organization that campaigns for transparency in the financial system.
The estimate is almost three times the organization’s last estimate of $11.5 trillion in 2005. Fewer than 100,000 people own $9.8 trillion of offshore assets, according to the research, carried out by former McKinsey & Co. economist James Henry.
There is a “huge black hole in the world economy” of untaxed private wealth, Henry said in a statement. “The lost tax revenue implied by our estimates is huge.”
The amount held offshore means that 139 countries with external debts of $4.1 trillion at the end of 2010 would be creditors to the world, if as much as $9.3 trillion of cross- border holdings of their wealthiest citizens were taken into account, according to the research.
The reaction to this report by politicians in the United States will no doubt be one of contempt. They will no doubt use it as another reason to raise taxes, further driving home their class warfare rhetoric. But just as businesses in the United States are sitting on as much as $5 trillion in cash, the reason this money is sitting outside the country is because of our excessive tax burden, which discourages investment.
If politicians really want to see this money come home, they’ll lessen the tax burden and enact pro-growth policies, not react with regulations that will make American less competitive in the global economy.