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An interview with Chuck Collins (Jan 2021)

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FYI, an article worth a read:

The author Chuck Collins gave away his inheritance at the age of 26 and says: "There are many lost souls among the super-rich."

Chuck Collins, 59, heads the Inequality program at the Institute for Policy Studies in Washington. Among other things, he deals with the question of how wealth grows over generations.
"If the concentration of their wealth continues unchecked, the super-rich will soon be more powerful than governments."
At the end of 2019, private wealth worldwide was just under $ 400,000 billion. In Switzerland hardly any money is hidden from the tax authorities.


Interviewer: You come from a wealthy family but you donated your half a million dollar inheritance to charitable organizations when you were 26 years old. Why?

Chuck Collins: I was interested in how people earn their money and what injustices arise. In 1983 I had a key experience.

You have to tell us.

An asset management company invited heirs like me to Boston for a private occasion. We were told how important it was to preserve family wealth. Specialists told us an old anecdote: A wealthy patrician walks past a prostitute in Boston at night and recognizes his cousin. He asks: "Addy, what happened to you?" She replies: "I've touched my inheritance!" They taught us the tricks of protecting our capital - and how to bypass the tax authorities. It all repelled me.

You donated the money your family made from selling hot dogs. How did your parents react to this decision?

At first they were horrified. My father feared that I had mutated into a Marxist. But gradually they strengthened me. I didn't have to make too big a sacrifice anyway. As a white man who got an academic education without debt, many doors were and still are open to me in America. In the meantime I have heard from some relatives and from my old circle of friends that I was at least able to inspire them to make larger donations.

In your book you write of a so-called refeudalization, i.e. the return of a form of society from the Middle Ages in which a small upper class owned everything and ruled over everyone else. Is that a global problem?

Yes, the number of ultra-rich people and families is growing worldwide. This can be seen from the increase in family offices. In 1980 there were a few hundred, today around 10,000 worldwide. They manage private assets of mostly over $ 250 million. Up to 7,000 of these asset managers are located in the USA. In addition, there are 1,000 in London. In Asia this number has grown to 1,400. However, the UK and the US play a key role.

How so?

Because of their historical role as imperial centers of capital and financial services. Many tax havens are now under the influence of these powers, such as the Cayman and Bermuda Islands, Panama and Guernsey. The City of London is a tax haven within Great Britain. And the USA is increasingly becoming the most important tax haven worldwide. For Swiss readers this may sound almost ironic.

You mean, because Barack Obama's administration took massive action against UBS and other Swiss banks in 2009?

I can well understand that the Swiss now see this as hypocrisy. Over a fifth of offshore assets are now in the United States. America has become the magnet for flight capital from all over the world.

In 2010, the US Congress ruled that US citizens must disclose their overseas accounts - the end of banking secrecy. Can Switzerland still be a tax haven?

Today, financial advisors steer clear of Switzerland. They are looking for smaller banks in countries that do not have to disclose their investors. At the same time, US states such as Delaware, South Dakota and New Hampshire have massively expanded the possibilities for trusts - anonymous foundations - and mailbox companies. The US government acts unilaterally and does not pass on information about foreign capital in this country to the countries of origin. So where are African dictators or Russian oligarchs smuggling their dirty money? To the USA, of course. Here trusts can anonymously buy land or make other investments without disclosing the owners of the capital.

You are targeting the tax consultancy and legal profession. The "New York Times" showed this week how she operates using the example of the infamous Jeffrey Epstein.

Let's say a rich person somewhere in Europe wants to hide half a billion dollars. The investment advisor Jeffrey Epstein, who died in 2019, would have said: “Open an anonymous account in Luxembourg and one or more letterbox companies in Panama or Mauritius. You could buy a luxury apartment on their behalf in London neighborhoods like Mayfair or Kensington. If British authorities comply with demands for more transparency in such transactions, you should sell the property to a trust that you have set up in the USA. "

Epstein could do that just like that?

He was particularly fond of using an instrument called the Granter Retained Annuity Trust (GRAT). These escrow accounts are tax-free and non-reportable. From these anonymous foundations it is easy to channel money for personal use to other letterbox companies. Epstein has received fees of ten percent for this service.

Is that a lot for this industry?

Yes, a lot. These consultants are specialists in tax evasion and are part of a powerful new branch: the “Wealth Defense Industry”, or WDI for short. It makes wealth disappear and the connection between the rich and their money invisible. Capital flows into complex trust assets and from there moves on to all possible investment vehicles and forms of investment. But with this decoupling not only taxes are lost to the general public. The rich slip away from their social responsibility. Your advisors, on the other hand, describe their mission as follows: "We help dynastic families." This sentence alone shocks me.

You mean because the US emerged from an uprising against the dynastic monarchy in Great Britain?

Yes, and now we're supposed to get new dynasties here and be proud of them? This development threatens the future of American democracy. We will have a two-class society with the super-rich and large sections of the population struggling to survive every day. Today, the three richest US families are already sitting on more wealth than the poorest 50 percent of Americans. This phenomenon applies worldwide, precisely because the WDI operates globally. A modern society, however, cannot prosper without state investment in education, research, health or infrastructure.

Isn't politics partly responsible? There have been significant tax cuts since the Reagan era - not least in inheritance tax.

That is the second goal of the WDI. The tax evasion professionals work in tandem with the “Anti-Tax” lobby. This is paid for by corporations, business associations and the super-rich like the Koch brothers and is effectively fighting for tax cuts on the political path. In the crosshairs is the inheritance tax. The capital hidden from the tax authorities then ends up in tax havens.

In 1988, the author Nelson Aldrich described in his classic "Old Money" how "old money" disappeared after a few generations. He is a great-grandson of the senator of the same name from Rhode Island and related to the Rockefellers. They say that has changed. How come?

Fortunes once went to their descendants, to charitable organizations and to the tax authorities. The WDI has reversed this process. Wealthy people and their advisors have become greedy and are constantly working to further minimize taxes. The public mostly looks at the new wealth in the technology or financial sector, at mega-billionaires like Jeff Bezos or Elon Musk. But among the roughly 660 billionaires in the US with total known wealth of just under four trillion dollars, there are about fifty families with enormous fortunes already in the third or fourth generation. The Rockefellers go back even further and are in the sixth generation.

What are America's richest names today?

At the top are the descendants of Walmart founder Sam Walton. According to the Forbes list of the richest Americans launched in 1982, there were 18 billionaires in the United States at the time. Sam Walton owned around $ 1.5 billion. Today the family is worth $ 215 billion. They are followed by Charles and his recently deceased brother David Koch with $ 100 billion from petrochemicals. The Mars family owns 94 billion thanks to confectionery. About half of the billionaires in the United States are no longer directly involved in wealth accumulation. But they deal with the new rich on Wall Street.

Can you explain this connection?

Today the hedge fund billionaires sit at the transfer offices of capital. By managing it, they collect tons of fees. Since the financial crisis of 2008, investors have also been buying single and multi-family houses on a large scale and benefiting directly from the rental income.

And that is where “old money” is used, money that has been held for generations?

Yes, and that is precisely why the redistribution of wealth to the top has picked up so much. When I was introduced to the existence of “family offices” as a young man, we invested conservatively in New England, for example in land. It's completely different now. These families and their advisors put perhaps a third into conservative investments. Depending on the willingness to take risks, huge sums of money go into the casino capitalism of hedge funds. You are looking for maximum returns around the world - for example by investing in rental apartments. In sought-after locations like Boston, high-rise buildings with luxury apartments are being built, most of which are vacant and only serve as capital investments for the rich from all over the world.

Does that explain the shortage of housing, high rents and rising homelessness?

The connections are very clear. Today's billionaire dynasties are actively involved in the markets. Even rich family philanthropic foundations act like this.

How about the Rockefeller Brothers Fund?

The family is so big that many members are no longer particularly wealthy. But through their seats in family foundations, they have a considerable influence on society. Foundations are an important aspect of increasing inequality. It's another form of capital conservation. If the concentration of their wealth continues unchecked, the super-rich will soon be more powerful than governments.

But isn't the hidden capital ultimately invested in research and development? In startups and thus in new positions?

Assets should always be tied to the real owner. This is the only way to hold them accountable: where their capital comes from, how it is invested and whether appropriate taxes are paid on it. But in New Hampshire it no longer matters whether the Angolan businesswoman Isabel dos Santos steals billions from her country and brings them to New England. That is very short-sighted. Because these transfers not only harm people in Angola, but also the reputation of the USA. How can it be that for every dollar of development aid, several dollars in escape funds are smuggled here?

But can flight capital from such countries really be compared with the wealth of old entrepreneurial dynasties?

There are no differences for the wealth defense industry. The industry treats flight money from Angola in exactly the same way as a legacy of the Mars family: the capital is released from the name of the owner via letterbox companies and trusts, "washed", then leaves this system "clean" and can be legally invested in Starbucks shares, for example will. In addition, the WDI has an enormous influence on the creation of rules and laws for dealing with capital.

But everything this industry does is legal.

These experts virtually ensure that their business is legal themselves. They write tax laws that lobbyists then push through parliaments. And they are constantly developing new, increasingly complicated hiding places from the tax authorities. This complexity aims to paralyze the US tax agency IRS. The IRS has been weakened for years by budget cuts anyway. Now she has surrendered to opaque trusts, instead tracking down middle-class families who made mistakes with child allowances.

How do the rich and their helpers actually justify this system?

The industry seeks to paint a picture of billionaires who virtuously run the economy, who create jobs, who work harder, who are more risk-taking, smarter, and generally better than the rest of humanity. The rest of us should please praise their benefits. In addition, higher taxes would be an imposition. In the US we have the myth: everyone has what they deserve.

Who is not rich is it because of its own fault?

The industry is convinced of its own superiority and makes sentences like this: "We attended Harvard Business School, worked our way around the clock as a beginner at tax firms and therefore earned our good salaries." These experts are fighting vehemently for their assets, for example against the demand that foundations should pay out more than five percent of their capital every year. Preserving wealth forever has become a fetish.

Don't you have any like-minded people among the super-rich?

Yes. When future US President George W. Bush pleaded for the abolition of inheritance tax during the 2000 election campaign, Bill Gates Senior, the father of the Microsoft founder, called me. He wanted to keep the inheritance tax. Otherwise America would become an oligarchy. We got together, and finally 1,000 millionaires and billionaires signed an appeal to keep this levy. I later helped found the Patriotic Millionaires.

Why do these millionaires want higher taxes on big incomes and wealth?

The WDI stands up for the interests of its classes and almost urges its clients to avoid taxes. But by doing so, they suppress a fact that is inevitable for billionaires: "Nobody lives forever, and the last shirt has no pockets!" Chuck Feeney should be the role model here. He got very rich with duty free shops. Then he set up the "The Atlantic Philanthropies" foundation and donated eight billion dollars. Feeney is now 89 years old, no longer rich, lives in a small apartment in San Francisco and is the happiest man on earth. He decided: “Enough is enough. I had a very good life. " He gave his money away as long as he could still enjoy it himself.

What do you mean?

Should the grandchildren of the super-rich grow up in a kind of apartheid society and rely on bodyguards to protect them from the hungry masses? So my message is: get your money back from the shadows and become members of society again. The industrialist Andrew Carnegie once said: "I'd rather put a curse on my sons than a fortune." There are many lost souls among the super rich.

Chuck Collins: The Wealth Hoarders: How Billionaires Pay Millions to Hide Trillions. 212 pages, Polity Press, 2021.


How money disappears
The helpers in the service of rich families


In April 2016, the so-called Panama Papers put a largely unknown industry in the spotlight: investment advisors and tax lawyers who protect the wealth of the super-rich worldwide from access by the tax authorities. Your assistants are lobbyists who advocate tax cuts and special rules for the wealthy in parliaments.

An army of advisors

The US author Chuck Collins calls these service providers for the rich the "Wealth Defense Industry" (WDI). In the US alone, the sector employs over 250,000 people with an annual income of around $ 20 billion. Collins presents the WDI and its clients in his new book "The Wealth Hoarders". There is a lot of money involved. According to Credit Suisse, private wealth is around $ 400 trillion worldwide. Collins estimates that almost ten percent is hidden in tax havens. The International Monetary Fund assumes an annual 15 trillion dollars, which flow past the tax authorities into letterbox companies.

The arsenal

The soldiers of the super-rich have a diverse arsenal. You rely on so-called Limited Liability Companies (LLC). These are ramified companies that are founded in tax havens without any requirements regarding the identity of the owner. There are particularly many of these LLCs in US states such as New Hampshire and South Dakota. The center, however, is Delaware on the US east coast, for which President Joe Biden served as a senator for decades. Tax-exempt foundations - so-called trusts - help to avoid inheritance and profit taxes. Rich people acquire real estate, art, yachts or other valuables through anonymous companies. With fictitious transactions, they produce losses on paper. Island states like Bermuda grant foreign investors banking secrecy. Around 10,000 family offices use such instruments. The goal is always the same: to make wealth invisible to the tax authorities - and to increase it. Author Collins gives several examples of this, such as that of the casino magnate Sheldon Adelson, who died in mid-January. Using complex trust structures, he was able to pass on around 8 billion dollars of his assets of 32 billion dollars to the heirs. He saved 2.8 billion in taxes.
 
Really nice read, tanks for sharing.
 
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Reactions: Sir Gelato
A billion 20 years ago isn't worth a billion now. The major fault is of the Fed\EZB\BOJ and other central banks.

By printing trillions of currency and lowering the interest rate, anybody that could leverage himself and take debt became rich on cheap other-people's-money. Everybody with real estate\stocks (usually the rich) made a lot of money, and normal savers\workers got poorer.

Interesting read. Personally I find inheritance tax immoral, assuming you already paid tax on it why would it need to be taxed again. But it's redundant to stress this point in this forum...

As for the guy himself, typical "champagne socialist" heir that doesn't appreciate what his parents worked hard to create. Also If his inheritance is only half a million dollars he is not even rich, so his whole story sounds a bit fake to me... Any bum whose parents bought an apartment in London is gonna inherit a lot more than $500K
 
A billion 20 years ago isn't worth a billion now. The major fault is of the Fed\EZB\BOJ and other central banks.
+1
By printing trillions of currency and lowering the interest rate, anybody that could leverage himself and take debt became rich on cheap other-people's-money. Everybody with real estate\stocks (usually the rich) made a lot of money, and normal savers\workers got poorer.
+1!
As for the guy himself, typical "champagne socialist" heir that doesn't appreciate what his parents worked hard to create.
Spot on. He has never gone through the hardship of winning over one single customer over his competitors.
 

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