Tax Havens For the Wealthy, But What About the Rest of Us?


Respectfully submitted by Lawrence E. Rafferty (rafflaw)- Guest Blogger

Recently, the ICIJ, better known as the International Consortium of Investigative Journalists released a report detailing hundreds of thousands of off-shore companies whose sole product or service is to hide income from many countries tax authorities.  “A cache of 2.5 million files has cracked open the secrets of more than 120,000 offshore companies and trusts, exposing hidden dealings of politicians, con men and the mega-rich the world over.

The secret records obtained by the International Consortium of Investigative Journalists lay bare the names behind covert companies and private trusts in the British Virgin Islands, the Cook Islands and other offshore hideaways.

They include American doctors and dentists and middle-class Greek villagers as well as families and associates of long-time despots, Wall Street swindlers, Eastern European and Indonesian billionaires, Russian corporate executives, international arms dealers and a sham-director-fronted company that the European Union has labeled as a cog in Iran’s nuclear-development program.”  

When I read this article several days ago, I was struck by the sheer volume of money and the huge numbers of companies and wealthy individuals who were allegedly hiding income from their respective country’s tax authorities.  As the above quote noted, there are more than 120,000 companies vying for the tax evasion business from countless numbers of the ubber wealthy who just can’t find it in their hearts to pay their fair share of taxes.

We always here the argument in this country from the wealthy and those supporting the wealthy in Congress and the Senate, that the wealthy already pay more than enough and the poor and middle class don’t pay enough taxes!  If I understand the ICIJ report, all of those people whose names were disclosed as evading taxes were all wealthy people.  I was sure that I would find somewhere in the report that the rest of us tax paying poor and middle class must have some sort of tax haven in order to hide a buck or two from the IRS.

As hard as could search, I was unable to find a single company trying to sell tax evasion funds and depositary accounts for someone making $50,000  or less a year.  I guess that this tax evasion gap was just an oversight by the international tax evasion community.  Surely they pine for the opportunity to offer their “services” to the vast and under served silent, but poorer majority.

Two prominent and wealthy Americans made this auspicious list of alleged tax evaders.  “Among nearly 4,000 American names is Denise Rich, a Grammy-nominated songwriter whose ex-husband was at the center of an American pardon scandal that erupted as President Bill Clinton left office.  A Congressional investigation found that Rich, who raised millions of dollars for Democratic politicians, played a key role in the campaign that persuaded Clinton to pardon her ex-spouse, Marc Rich, an oil trader who had been wanted in the U.S. on tax evasion and racketeering charges.

Records obtained by ICIJ show she had $144 million in April 2006 in a trust in the Cook Islands, a chain of coral atolls and volcanic outcroppings nearly 7,000 miles from her home at the time in Manhattan.  The trust’s holdings included a yacht called the Lady Joy, where Rich often entertained celebrities and raised money for charity.  Rich, who gave up her U.S. citizenship in 2011 and now maintains citizenship in Austria, did not reply to questions about her offshore trust.

Another prominent American in the files who gave up his citizenship is a member of the Mellon dynasty, which started landmark companies such as Gulf Oil and Mellon Bank. James R. Mellon – an author of books about Abraham Lincoln and his family’s founding patriarch, Thomas Mellon – used four companies in the BVI and Lichtenstein to trade securities and transfer tens of millions of dollars among offshore bank accounts he controlled.

Like many offshore players, Mellon appears to have taken steps to distance himself from his offshore interests, the documents show. He often used third parties’ names as directors and shareholders of his companies rather than his own, a legal tool that owners of offshore entities often use to preserve anonymity.”

I realize that the quoted article notes above that Ms. Rich gave up her American citizenship in 2011, but I wonder if she knew that her name would be disclosed along with such auspicious company? Mr. Mellon seems to have made a career or a profession out of allegedly evading the IRS.  Shouldn’t the rest of us have the opportunity to hide our hundreds in these off shore accounts?  What’s good for the goose is supposed to be good for the gander.  Isn’t it?

After this report broke, it seems that the IRS and its fellow tax collectors around the globe suddenly became interested that thousands of its citizens may be evading taxes!

“It appears our international investigation of offshore tax havens may have prompted government tax authorities to go public with their own data digging operations in pursuit of international tax evasion.

On Thursday, the U.S. Internal Revenue Service, along with British and Australian tax authorities, jointly announced that the three nations “have each acquired a substantial amount of data revealing extensive use of such entities [tax havens] organized in a number of jurisdictions including Singapore, the British Virgin Islands, Cayman Islands and the Cook Islands.”  These are roughly the same jurisdictions being investigated using a similar amount of leaked data by the International Consortium of Investigative Journalists (ICIJ), the international arm of The Center for Public Integrity”

Did the IRS actually believe that the wealthy were being model citizens and paying all of the taxes that they should be according to the law?  Did they really not know of this community of alleged tax evaders before the stuff hit the proverbial fan?  Personally, I find it hard to believe that our IRS was caught with its pants down when it comes to wealthy citizens allegedly evading taxes.  Do you believe it?

While we are at it, the millions of poor and middle class citizens who are paying their fair share of Federal and state and local taxes have been accused by members of the media and members of Congress that we are not paying enough.  Is it wrong for a country to expect all of its citizens to pay their fair share of taxes?  What should our country do about the wealthy and corporations that continue to claim that they are overpaying, while the rest of us, in many cases, are paying at even higher percentages than our wealthier counterparts and our largest corporations?

The latest example of how the tax system and the economic system is skewed in favor of the wealthy and corporations is the latest deadline for student loan payers.  The interest rate for student loan is about to double unless Congress acts soon.  One Senator has introduced a bill that will mandate that the student loan rate should equal the same rate of interest that the big banks pay to the Federal Reserve for loans.

On July 1, without action from Congress, Stafford loan interest rates for some 7 million students are set to double from 3.4 percent to 6.8 percent….Warren…would prevent that hike and take the additional step of cutting the rate to 0.75 percent — the same rate that big banks are allowed to borrow at — for one year until Congress can achieve a more permanent fix.

“Our students are being crushed by debt,” Warren told TPM in an interview late Wednesday.  Under her legislation, the Federal Reserve would float money to the Department of Education, which would provide federally guaranteed student loans at 0.75 percent for all those who are currently eligible for them — at the same rate it offers banks.”  Truth-Out.Org

What a novel idea.  Senator Warren is suggesting that the common folk be treated just the same as those big banksters who broke the economy.  Maybe there is hope yet for the silent economic majority!  Then again, I wouldn’t hold your breath!

43 thoughts on “Tax Havens For the Wealthy, But What About the Rest of Us?

  1. Respectfully submitted by Lawrence E. Rafferty (rafflaw)- Guest Blogger
    I worked for the IRS for 4 years and 2 months. They fired me. I started in Chicago, and got fired in Milwaukee.

    Try to do what’s right. No deed goes unpunished.

  2. One of the names in there is Blind Melon Chitlington who used to frequent the marina here where us dogs hang out. He was sort of blind and not a Mellon of the East Coast version and not related to the musician with a similar name. He gave out the best dog biscuits of anyone at that time period. He had a boat called The Bundle. He sailed off a few years ago and said he was “going offshore to score”. We did not know what he meant.

  3. My first legal job was tax lawyer in a major city in the US, so I didn’t need to read the article. My hope is that folks like “Anonymous” will invade the accounts of the uber rich an “Robin Hood” it to a suitable location. Nice to dream, eh? Hey, I am old and naive.

  4. “Is it wrong for a country to expect all of its citizens to pay their fair share of taxes?”
    Yes, I think it is.
    Taxes seem fundamentally unreasonable; you do not get to choose your government (as many people who have voted will note, the person you vote for does not always win), or what taxes they set, or how those taxes are spent, except by leaving the country. And then you just have a different government that wants taxes from you.

  5. I already said I was AY2, a while ago. Just kidding. Somebody took offense then somebody else told me to use my real name so I did.

    The charter for the Federal Reserve expires in August, 2013.

  6. Can someone scroll the names and tell us if Mitt Romney is in there. I think the real name is Willard Milton Romney, but it might be under an a/k/a 47 such as Mittster.

  7. As is usually the case with any “expose” on tax avoidance schemes that is covered in most routine publications, the focus is on the small potatoes, not the big fish of tax avoidance. The really big tax dodgers are the major international corporations and the really wealthy (in which Denise Rich does not qualify). A very large percentage of the business of the major accounting firms is in helping those mega wealthy groups and individuals to dodge taxes. The fact is that the tax laws are written exclusively for the benefit of the mega wealthy, as the politicians are on their payroll. And even when the mega wealthy are caught red-handed, and there is no loophole for them, they will hire an army of tax lawyers and accountants to battle it out with the less knowledgeable and ill equipped IRS attorneys and accountants.

    Thus, Warren Buffett’s company owes more the $1 billion in back taxes, but he hasn’t paid a dime of that money, let alone any portion of the interest and penalties. If his company has to pay anything at all, it will be a settlement of pennies on the dollar.

    Many years ago, one small potato of the New York upper income crowd, Leona Helmsley, made the mistake of telling the dirty little secret of taxes. She said, “Only the little people pay taxes.” Truer words have not been spoken. But poor Leona had committed a terrible sin in doing so. She had broken the Code of Omertà among the wealthy that such secrets are not to be divulged by anyone within the group. Leona paid dearly for the sin of revealing the truth, and the IRS and the full weight of the US. Government proceeded to destroy her. Of course, the public and the media ate this story up, and looked at it as a come-uppance for the “evil” Ms. Helmsley. “See,” they would say, “the US Government isn’t in the pockets of the wealthy, and the fact that the Government went after Helmsley proves it.”

    The IRS had their poster-girl for tax evasion by the wealthy. But the real game continues and the big fish continue to get away.

  8. Raff,

    Excellent….. You know…. You’re right…. The way to do it in the US is to form a church or some other nonprofit and tax full advantage of the loopholes….

    If you’ll recall R Alan Stanford would not give up names like the US wanted….. So they railroaded him under a Ponzi scheme….. All because he said it was based on the value of the bank stock…… Him…. I have about a thousand shares of stock worth .0075 per share that I paid between $24.00 and $40.00 for….. I think I’d trust his Ponzi scheme over what’s happened here……the bank stock i have/had are or were reputable banks….

  9. Here’s hoping that the IRS follows up on every lead, gets all back taxes owed — every penny — levies fines of 150% of what’s owed …. and puts people in jail — I mean the Uber Rich …

    Regarding the list …. Not only look for Romney but his partners in crime the Koch Brothers !!!!

    Oh, sorry, I just woke up … It was all a dream

  10. WikiLeaks publisher Julian Assange stated “Visa thinks it can arbitrarily blockade publishers and businesses that Washington finds offensive. Visa is a threat to national economic sovereignty. Visa must be drummed out and replaced with independent payment schemes.”

    For the next 49 days you can donate to WikiLeaks

    Friday May 10th 2013, 23:55 BST

    After over two years of financial censorship, Visa opened today for donations to WikiLeaks for the first time since December 2010, after its contractor in Iceland, Valitor (formally Visa Iceland) was ordered to do so by Icelandic Supreme Court.

    At the same time Visa/Valitor decided to abuse a clause in its contract to terminate the service again as of 1 July 2013 again without any explanation. Direct credit card donations to WikiLeaks will be blockaded from midnight June 30. By engaging in such conduct Valitor and Visa Europe have decided to subvert a clear and decisive judgment from the highest court in Iceland. These credit card companies continue the politically motivated acts of censorship of WikiLeaks and continue taking part in the unlawful banking blockade against the media organisation alongside MasterCard, PayPal, Western Union and Bank of America. No court or administrative body, including the US treasury, has ever found in their favour in this matter.

    The service termination on July 1st by Visa through Valitor will be challenged in court. At the same time a compensation claim will prepared by WikiLeaks and its service provider in Iceland, DataCell, for the unlawful closing of the payment gateway from July 2011 until today.

    WikiLeaks publisher Julian Assange stated “Visa thinks it can arbitrarily blockade publishers and businesses that Washington finds offensive. Visa is a threat to national economic sovereignty. Visa must be drummed out and replaced with independent payment schemes.”

    Donate here:

  11. WikiLeaks publisher Julian Assange stated “Visa thinks it can arbitrarily blockade publishers and businesses that Washington finds offensive. Visa is a threat to national economic sovereignty. Visa must be drummed out and replaced with independent payment schemes.” -Julian Assange

  12. ap,

    Since you had several versions of essentially the same post, I approved the one with the fewest/cleanest links and was cleared by askimet. A couple were clearly flagged for link issues though as they were not cleared. Sorry for the inconvenience. Hopefully WP will have the spam filter back on its leash soon.

  13. Well speaking of taxes and the IRS.
    Obama is going to end up being impeached over this IRS Scandal.

  14. Alexander D,
    He is not going to be impeached over anything. No more than Bush, who was far more deserving of impeachment. That is a conservative wet dream, just like some anti-2A people envision a Constitutional Convention so the Second Amendment can be revised or repealed. Not gonna happen.

    There have been far worse scandals in almost every Presidency since Washington. Hyperbole sells, common sense gets drowned out.

  15. Taxes are the cost of admission. You would not expect Disney World to be free, why would you expect your country to be free? We can argue about how the money is raised or how it is spent but anyone who says that taxes are theft of that there should be no taxes or that they should not have to pay has the reasoning power of a 4 year old – they want what they can get but do not want to pay for it.

  16. Thanks Gene!
    You are spot on with your comment concerning an impeachment being a wet dream.
    According to the wealthy and big corporations, taxes are other “people’s” problems.

  17. Rafflaw:

    if we would have an across the board tax on all income of any kind, passive or active of 10-15%, we would not need the IRS nor would we need the billions we spend each year on accountants to do tax work plus we would all pay the same percentage of our income and we would have all the money we needed.

    The bonus would be since there would be no deductions of any kind, there would be no reason for granting favors for tax concessions and the power of lobbyists would decrease.

  18. Bron,
    Do you think the wealthy are going to give up their break on investment income? The progressive ax system is not the problem. The problem is the wealthy are controlling who writes and enforces the tax laws.

  19. Bron = “if we would have an across the board tax on all income of any kind, passive or active of 10-15%, . . . and we would have all the money we needed.”

    Please provide some data that supports this. Back when Steve Forbes was pushing this bullshit he picked a 19% flat tax. The problem, in addition to greatly increasing the burden on lower incomes, was that it only returned about 66% of the current structure at the time. His claim was that the magic of trickle down would more than make up the difference. But we have pretty well demonstrated over the last 40 years that while what gets trickled down is golden it is not money

  20. AP:

    “Visa must be drummed out and replaced with independent payment schemes.” -Julian Assange”

    Damn straight! Although I would say we dont need to drum them out, just let the free market and a better idea take its course. Free from the fetters of government regulations which promote and prop up Visa at the expense to to rest of us of a better, more economical idea.

    let a billion ideas flourish, such is the power of the free market. It is coming and it is the only thing that will free the people from the tyranny of the duopoly; the nexus of wealth and government.

    If there is one thing I despise worse than government, it is rich people who use government to prosper to the detriment of the rest of us.

  21. frankly:

    Carville and Begalla say Reagan was responsible for the largest tax increase in history and he put the top rate at 35%. We had a top tax rate of 90% in the 50’s, Kennedy reduced it to 75% and the economy picked up, then Reagan reduced it to 35% and the same thing happened. I see a trend, reduce the top rate to 15% and exempt anyone making less than $35,000/year. Do it in 3 states for 2 years, if it doesnt work then dont implement it nation wide.

    You get all the money you need and you reduce the power of the wealthy to influence government to their benefit. I know it doesnt make sense to progressives and lefties but that is what will happen.

    What do you think we had at the beginning of this country? It was an aristocratic society that was far from the ideal of our founding. What do you think changed that? It wasnt the progressives contrary to their beliefs and progressive history. It was “almost laissez faire” capitalism, that was what broke the back of the moneyed interests back then, see Gibbons v. Ogden.

    “Gibbons v. Ogden, case decided in 1824 by the U.S. Supreme Court. Aaron Ogden, the plaintiff, had purchased an interest in the monopoly to operate steamboats that New York state had granted to Robert Fulton and Robert Livingston. Ogden brought suit in New York against Thomas Gibbons, the defendant, for operating a rival steamboat service between New York City and the New Jersey ports. Gibbons lost his case and appealed to the U.S. Supreme Court, which reversed the decision. At issue was the scope of the commerce clause of Article I, Section 8, of the Constitution; this provides that Congress shall have the power to “regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.” Chief Justice John Marshall held that the New York monopoly was an unconstitutional interference with the power of Congress over interstate commerce. He condemned the view that the states and the federal government are equal sovereignties. Federal power is specifically enumerated, but within its sphere Congress is supreme. State legislation may be enacted in areas reserved to the federal government only if concurrent jurisdiction is feasible (as in the case of taxation). The decision was highly influential in its explication of the federal structure of the United States.”

    Read more: Gibbons v. Ogden |

  22. So other than anecdotes and a 130 year old irrelevant USSC ruling you got nothing. Don’t change the subject, show some proof that 10-15% flat tax would be enough to fund the Federal government. Please use actual numbers

  23. frankly:

    during Reagan, revenues were up substantially. The historical record is on the internet. You can look it up. But spending is the real culprit so it doesnt really matter what we do unless that is controlled. Congress could take in 12 trillion a year and they would spend it all.

    But based on what has happened historically, revenues would increase if the top rate was lowered to 15%. But then Reagan did let the interest rate from the FED be set by the market so who knows.

  24. rafflaw,

    This is another rut in that muddy, foggy road we call “U.S. History”, as a famous General long ago pointed out:

    “We are divided, in America, into two classes: The Tories on one side, a class of citizens who were raised to believe that the whole of this country was created for their sole benefit, and on the other side, the other 99 per cent of us, the soldier class, the class from which all of you soldiers came. That class hasn’t any privileges except to die when the Tories tell them. Every war that we have ever had was gotten, up by that class. They do all the beating of the drums. Away the rest of us go. When we leave, you know what happens. We march down the street with all the Sears-Roebuck soldiers standing on the sidewalk, all the dollar-a-year men with spurs, all the patriots who call themselves patriots, square-legged women in uniforms making Liberty Loan speeches. They promise you. You go down the street and they ring all the church bells. Promise you the sun, the moon, the stars and the earth,–anything to save them. Off you go. Then the looting commences while you are doing the fighting. This last war made over 6,000 millionaires. Today those fellows won’t help pay the bill.

    (The Universal Smedley, 1933 Speech). What passes for ‘history’ in our educational system is little more than the fog of lore.

    It is a fashion choice of the particular group we hang with.


    Former Enron CEO and current jailbird Jeffrey Skilling should be out of jail in just four years, skipping nearly a decade of his prison sentence for corporate fraud and graft.

    As the world’s richest people are prone to do, Skilling is getting out of jail early with a combination of cash payments and legal maneuvers.

    In exchange for early release, Skilling is paying Enron’s victims some $40 million in shut-up money and has generously agreed to stop suing everyone involved with his conviction and sentence in 2006.

    Skilling’s promised payments would equal 0.1% of the $40 billion Enron stole under Skilling’s leadership. He was originally sentenced to 24 years behind bars, but his total sentence would be half of that if his lawyers get approval on this latest scheme.

    Skilling’s appeal went to the Supreme Court in 2010, and the justices agreed with his attorneys that the original conviction was “based in part on an invalid legal theory known as the ‘theft of honest services.’”

    The same judge who sentenced Skilling will rule at the next hearing, on June 21 in Houston.

    Occupy Houston, game on.

  26. What about a story on how people with money get away with crimes while people without money are guilty the minute they step into a racist court room???


  27. The domestic tax shelters used by regular Americans are attacked and closed by the IRS, usually as having “no economic substance” instead of tax benefits.

    It’s funny that the overseas tax shelters used by big corporations and the wealthy are located in PO boxes in the Cayman’s or elsewhere. But these are never challenged by the IRS as having no “economic substance” except for their tax benefits. So what economic substance does a PO Box in a tax haven have?

    One treatment for the wealthy and powerful and another for everyone else.

  28. Bron,
    You are incorrect. It is not a spending problem. It is a problem of demand. Without out jobs people do not have the money to spend and create the demand necessary. The austerity nonsense just feeds into that. You may want to check your facts on Reagan again. He raised taxes numerous times and more than doubled the debt. He did create demand by massive military spending.

  29. Elder,
    you are right that the wealthy and large corporations have stacked the taxation deck in their favor. Maybe it is time to turn the tables on them?


    IRS Report Blames Management for ‘Inappropriate Criteria’
    An IRS watchdog report said the agency singled out conservative groups based on names and policy positions. The report blames the management for allowing “inappropriate criteria.”
    See More Coverage »
    No Shi+.


    Second Top IRS Official Is Leaving the Agency
    A second top Internal Revenue Official is leaving the agency amid the controversy over targeting of conservative groups. Joseph Grant, head of the tax-exempt and government-entities division, is retiring in June.
    The move came as President Obama named White House budget aide Daniel Werfel as acting IRS commissioner following the resignation a day ago of Steven Miller.
    See More Coverage »
    Good news all day long.

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