America is a new tax haven for the ultra-wealthy — and 13 states are holding billions in hidden assets

  • Right now, billions of dollars of assets are held in secretive trusts across the country.
  • 13 states are "trust-subservient," according to a new report, catering to the ultra-wealthy.
  • In those states, billions of dollars remain untouched and untaxed.

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The idea of billionaires squirreling away their wealth in far-flung 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 of untaxed wealth might actually be hiding in their backyards.

"The US has become a tax haven," Chuck Collins, the director of the Program on Inequality and the Common Good at the left-leaning Institute for Policy Studies, told Insider. "Wealthy people from around the world are bringing their assets and wealth to the United States to park it and avoid responsibility."

A new report from IPS, co-authored by Collins and Kalena Thomhave, finds that the world's elites can stay stateside if they want to stow away wealth without paying taxes. That's because 13 states in the US have transformed, or are in the process of transforming, into strongholds where untaxed wealth can flourish in trusts. Those untaxed assets can sit and grow for generations, without a dollar going towards public services.

In South Dakota, Nevada, Alaska, and Delaware, which the report identifies as the "Biggest Enablers," there's an estimated $575 billion socked away in trusts. In Nevada, a trust can remain untouched for 365 years, while in the other states they can exist indefinitely, with the exception of real estate in Delaware. Essentially, that means that there's no guardrails saying trusts have to be dissolved at some point and those assets sold off and taxed.

Meanwhile, the report dubbed Tennessee, Wyoming, and New Hampshire as "Bad Actors" with at least $800 billion stuffed in trusts. Rhode Island, Ohio, Missouri, Illinois, Florida, and Texas are hosting over $300 billion as "Emerging Enablers." 

"There's kind of a race to the bottom in terms of who will lower their standards, who will require the least oversight, and who will be the most trust-subservient," Collins said.

All of those states are trust friendly, meaning that they have legislation or other measures in place that allow trusts holding assets to often remain anonymous or confidential, and to allow those trusts to exist in perpetuity or for hundreds of years — meaning that the assets never have to be sold or taxed when assets from the trust are received. 

In total, inequality researchers Gabriel Zucman, Thomas Piketty, and Emmanuel Saez estimate that, as of 2021, there's $5.626 trillion in trusts and estates.

"We can safely say we're talking hundreds of billions of dollars a year, trillions probably, that are not being subject to tax," Collins said. One tell-tale sign, he said, is that "the federal estate tax last year raised an appallingly small amount of money." According to the IRS, estate and gift taxes brought in around $27 billion last year — 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 away in trusts is one of the mechanisms that America's wealthiest utilize to reduce their tax burdens. Last year, a bombshell ProPublica report found that some of America's billionaires pay little to nothing in income taxes. All of the methodology the billionaires used on their tax bills was perfectly legal, exposing what experts say are some of the holes currently baked into the tax code.

Federal bans on certain types of trusts in which ownership is unclear, forcing trusts to be registered and disclosed, and federal legislation that would not allow trusts to exist indefinitely could curtail the practice, according to the report and Collins.

"From a perspective of inequality, this is a key mechanism of how intergenerational inequality is perpetuated," Collins said.


Source: https://www.businessinsider.com/us-states-tax-haven-billions-hidden-untaxed-wealth-assets-2022-9