Who Are The Non-Celebrities In The Panama Papers?

In the first stories about the Panama Papers, we got the names of a bunch of politicians, a few criminals, sports and other celebrities and one or two names of rich people. But in focusing solely on this kind of person, we miss the major point about tax havens. They are used by hundreds of thousands of people, including many who are not billionaires and who are not famous or otherwise newsworthy. They are commonly used by doctors, lawyers, accountants, small business owners and those who inherited money from such people.

Here’s a chart from the New York Times showing the mix of people making up the top 1% in income in the US; the chart is from 2012 and uses 2007 data. The cut-off for this level is the Census Bureau figure of $380K, while other studies put it higher. The Fed Survey of Consumer Finances, a better survey, has it at $690K in 2007. The cut-off for the top 1% in wealth was estimated at nearly $8.4 million in 2007. Those numbers went down after the Great Crash, but recovered smartly. By 2013, the cut-off for the top 1% in wealth was back to nearly $8 million, and climbing.

Lisa Kiester of Duke University, a sociologist who has published on the 1% describes a group she calls the double rich in this article. These are people who are in the top 1% in both income and wealth. Their median wealth was about $12 million in 2010, and their median income was in the range of $1.2 million. Both have no doubt risen since then. Kiester does not give an estimate of the number of the double rich, but this New York Times article, using 2007 data, says that there is about a 50% overlap between the two groups. There were about 117 million households in 2010 according to the Census Bureau. From that we can estimate that there are about 560,000 households making up the double rich.

Kiester examines the lack of discontent with wealth and income inequality in this 2014 paper. She offers five explanations with supporting evidence from research:

!. Homophily, the tendency to hang out with people like us. We aren’t often exposed to the impact or the magnitude of wealth inequality.

2. People think things will get better because they always have.

3. There is some evidence of social mobility, and it’s even possible for people to think they could move into the top 1%.

4. People are too busy, distracted and stressed to care.

5. People focus on poverty, not inequality. Academics are concerned about inequality because they think huge wealth gaps lead to power imbalances that favor the rich at the expense of the rest of us. That’s completely outside the scope of most people’s worries about money.

Gabriel Zucman, one of Piketty’s collaborators, estimates that individuals have approximately $962 billion of unreported assets in tax havens. Source: Data figure 4 tab 1 from a spreadsheet found here; click on Tables and figures included in the book. The book is The Hidden Wealth of Nations. For a description of Zucman’s methodology see this by Cass Sunstein.

Kiester says that 56% of the top 1% by net worth were self-employed in 2010. These are people who have the means to move money into tax havens, as are the rest of the top 1%. There are hundreds of thousands of US citizens who would benefit from tax havens, and there is so much money out there by Zucman’s estimate that it must be that case that tens of thousands of them have done so.

The ICIJ and its participating groups name politicians, celebrities, and crooks who hide their wealth in tax havens, and who won’t be prosecuted, but at least are shamed. But what about the huge number of the 1% who hide their wealth abroad and are not even shamed for their corruption?

This kind of disclosure would help break through the mental barriers to making inequality itself a force in politics.

Update April 15, 2016 From ICIJ:

The law firm’s [Mossack Fonseca] leaked internal files contain information on 214,488 offshore entities connected to people in more than 200 countries and territories. ICIJ will release the full list of companies and people linked to them in early May.

7 replies
  1. Denis says:

    If the cut-off for the 1% bracket is $8M and the median
    for that bracket is $12M and Bill Gates is worth $40B . . .
    man, what a huge spread in the top 50% of the top 1%.
    Seems inequitable to me.
    $8M to get into the top 1% doesn’t sound so bad. At the
    rate I’m going I’ll be there about the time Hawking’s
    nano-space ships get to Alpha Centauri.
    Sometimes I try to envision what it would look like if we
    bottom 50% got physical about it and rose up against the
    top 1%.
    Seems that the vast majority of all that wealth is in some
    sort of script or paper or digital accounts. I mean other than
    real estate — which would require title transfer — there is
    not a whole lot that is tangible that we rabble can get our
    fingers on even if we did get organized and there were enough
    pitch-forks to go around. Diamond bracelets, Bentleys, et al
    bling divided among 100 million households ain’t gonna’
    get the kids through school.
    We need someone who can force Congress to give the top
    people haircuts and transfer that wealth to our bank accounts.
    I am Bernie Sanders, and I approved this ad.

    • martin says:

      quote”Sometimes I try to envision what it would look like if we
      bottom 50% got physical about it and rose up against the
      top 1%.”unquote

      a. A bloody civil war.
      b. Envision Ukraine on steroids
      As for the Panama Papers…meh.
      Reason. .. Q. Ever wonder where your income tax withholding money goes when you send it to the IRS?
      A. The same place the 1% hides their wealth. Offshore accounts. In this case it’s a trust called Puerto Rico #62. Some contend it is the same thing as the IMF.

      btw 2. Try to trace it yourself. Also, trace the origins of the IRS. Then ask your self why it is called the Internal Revenue SERVICE.

      btw 3. If the answers were ever forthcoming.. you would see that bloody civil war, as they are at the heart of the inequality gap. But here’s a tip. Start with the Federal Reserve Act. Moreover..start here


      Warning, once you enter that rabbit hole you will never be the same. I offer 12 yrs of my life as living proof. Others have spent the entire lives. Like this man..


      The USG is STILL holding his legal actions in limbo…


  2. blueba says:

    I was a little critical of emptywheel for quickly casting suspensions on the ICIJ and the Panama leak. Now I recognize my mistake. There are a number of questions already about underlying issues of the security of the archive, the all US enemies (or almost) release of stuff on evilPutin, Assad and the Chinese senior officials and pretty much -0- about the US or other Western gov. – sure Iceland OK but just a tiny country with little global effect and Cameron was made uncomfortable for a few days until his PR got on track – here be a voyeur and look at my tax returns and like magic the subject is changed.

    Here are some questions I have for ICIJ:

    Security – Is the archive encrypted? what precautions have been made to protect the archive from NSA et al? Has it always been encrypted while in ICIJ’s possession?

    As mentioned, are we to believe that there are no US citizens in the archive? What is the explanation for the lack of Western political or business names exposed so far?

    As these documents do not pertain to matters which might be life threatening why are such a minuscule number of documents available? Can we ever expect to see the entire archive? If not why not?

    First Snowden, then LuxLeaks now Panama in every case only a tiny fraction of the archives have ever been released what is going on in journalism that it appears so cowed by the Julian Assange “document dump of diplomatic cables” they self-censor in the extreme for fear of retaliation?

    All this is quite murky and for me there are real concerns about whether or not we are being played by unknown actors.

    Suddenly there are reports from various places about tax shelters – why?

    The threat is that the top wealth class the 0.1% have amassed vast fortunes and power, now there is fight back so they release stuff about some minor players, talk all about being on our side and taxing those evil corporations which receive more in subsidies than they “pay” in tax. So they sacrifice some people distract from the real issues.

    It’s the same old story that has been going on a long time the rich take and take and amass vast fortunes then when too many people are starving and rise up they give back 1 or 2% of their gains (or actually forgo some profits for a year or two) to deflect attention and life goes on. The rich stay rich and powerful and nothing changes really.

    Maybe I am completely clueless about how journalism works but I really don’t understand why so very few documents in these huge leaks are ever made public. Not to mention that the rich and the US gov which operates their empire for them just shrug this stuff off and arrogantly thumb their noses at the hoi polli. The short term effect of Snowden has been stronger more aggressive spying on the entire world – nobody in government cares a damn about what emptywheel turns up it doesn’t matter, their power is so great they really don’t care.

    What can possibly be disclosed that power can’t just shrug off? Whatever that is if anything we are nowhere close to finding out.

  3. earlofhuntingdon says:

    Yes, wealth and income inequality lead to widespread social dysfunction, more than just more wealth and income inequality. As poll after poll shows, for example, politicians pay attention to those who do most to get them elected: that’s the top 1% AND the corporations, foundations and lobbying arms they control. The Groucho one liner, one dollar, one vote, is becoming real. The 1% are beginning to brag about it. Their priorities are radically different than the 20-80% range, and not just because some of the 1% are radically right wing. As Marcy points out, they live in different worlds than do the rest of us. Many politicians are 1%’ers. And because they can, they direct government to attend to the needs of their world first and only, leaving the rest of America, which has no need or access to offshore tax havens, to pay for it.

  4. earlofhuntingdon says:

    In one of the papers Marcy cites, Keister exposes a great American myth, used to justify the claim that we’re all middle class, or could be. That is, “upward mobility of any sort is rather rare.”

    There was a blip, from 1945-80. It might be explained by such things as post-war optimism, American expansion at the expense of exhausted competitors, new technologies, a corporate class still willing to compromise with labor over spreading the wealth, optimistic social programs enacted for good reason as well as opportunistic political gain, government programs designed to forestall social revolution/reform and as a thank-you for wartime sacrifices and victory. Those conditions no longer apply; some of them are inverted, pushing us hard in the opposite direction.

    Keister also lists a number characteristics of top wealth and (as the usually delicate English put it, earned and unearned) income brackets: parental wealth, educational patterns, marriage and fertility patterns. For example, just under half in the top bracket inherited their way into it. The so-called entrepreneurial bootstraps of Gates, Buffett, Zuckerberg, et al, more often than not came from parents with the money and social standing to put their children through Ivy League schools and fund their start-ups. American mythology praises the idea that anyone can start a mega-business in the family garage (or get into the NBA). It happens rarely, and usually to those hardy spirits who have an engineering degree from Stanford or MIT, and the money, early life and wealth to get in and compete academically and socially when there.

    Social patterns start early and remain consistent. How different are the odds of your neighbor’s child entering Harvard vs. the child both of whose parents graduated from Harvard? American mythology sustains our optimism. It also has the intended effect of lowering our demand for social reform. Reagan demonized the sixties radicals to that end. His heirs still do. More importantly, Reagan and his heirs, as state politicians, cut access to public higher education, cut state support for it, privatized it where possible, and dramatically raised the lifetime cost of getting that degree, making us all more vulnerable, less secure and less competitive.

    We need more than outdated myths to reform America; dropping some of them would be a good place to start.

  5. Ian says:

    Gabriel Zucman, one of Piketty’s collaborators, estimates that individuals have approximately $962 billion of unreported assets in tax havens

    I SAY:
    Well the NY Times Book review of Jan 2016 linked to actually uses a figure of $7.6 trillion TOTAL ASSETS [which makes a great deal of sense as a) individuals using tax havens/offshore finance centers rarely use their own human persons for ownership documents—they usually use a legal person such as a corporation or a trust and b) the figure of $8 trillion was quoted by The Economist magazine Special Report of Feb 16,2013 titled: “Offshore Private Finance” citing an earlier Boston Consulting Group study of 2011
    Can I take the liberty of throwing some more numbers onto the page which tend to support many of the arguments Ed Walkers is making. Some of these figures I had already posted on April 6,2016 before Rayne—I hope they are useful—but obviously all welcome to use their own figures and judgement and discard whenever it suits themselves.BE AWARE that the 2016 updating of reports from within the USA was intended to deal with the puzzling question about the released “Panama Papers”—lots of politicians of “foreign countries” but no American citizens or prominent US politicians—why?
    In the Feb 16 2013 edition of The ECONOMIST weekly magazine [edited in London, England with a circulation of almost 1.5m of which 50% is in Anglophone North America] published a Special Report covering the world’s Offshore Private Finance centers often referred to as Tax Haven’s.
    They described the strange world of Tax Havens thus:
    “The world has 50-60 active tax havens, mostly clustered in the Caribbean, parts of the United States (such as Delaware), Europe, South-East Asia and the Indian and Pacific oceans. They serve as domicile for more than 2m paper companies, thousands of banks, funds and insurers and at least half of all registered ships above 100 tonnes. The amount of money booked in those havens is unknowable, and so is the proportion that is illicit. The data gaps are “daunting”, says Gian Maria Milesi-Ferretti of the IMF. The Boston Consulting Group reckons that on paper roughly $8 trillion of private financial wealth out of a global total of $123 trillion sits offshore, but this excludes property, yachts and other fixed assets. James Henry, a former chief economist with McKinsey who advises the Tax Justice Network, a pressure group, believes the amount invested virtually tax-free offshore tops $21 trillion. His methodology is reasonably sophisticated but he admits his calculation is still “an exercise in night vision”.
    (As an aside $123 trillion of the world’s TOTAL WEALTH [estimated] should be compared to the world’s ANNUAL GROSS NATIONAL PRODUCT (2015—$75.6trillion-taked from The Economist POCKET WORLD IN FIGURES 2016 edition)
    Using the Boston Consulting Group’s lower estimate of $8 trillion of “private financial wealth” they produced a graphic which showed that North Americans had placed about:
    $400bn of Private Financial Wealth under jurisdictions in the “Caribbean & Panama” and also placed about $200bn under jurisdictions in “Britain, Channel Islands & Ireland”.
    The “Caribbean & Panama” portion assigned to North American owners was about 40% of the total, & a further 20% of the “Britain, Channel Islands & Ireland” total was assigned to unknown North American owners.
    The argument that by 2016 almost ALL of the 40% of the “Caribbean & Panama” Personal Financial Wealth had transferred into the US States of Nevada [which has NO Information Sharing Agreement with the (Federal) IRS] or into Delaware [which DOES have an Information Sharing Agreement with the IRS & when you file the paperwork into the [Delaware] Secretary of State’s Office you WILL have to show your (earlier applied for) Federal Tax ID # —-similar to a human’s Social Security # but for legal person’s not human persons—-without anyone noticing in the hundred’s of thousands of documents hacked from the email server—-or without anyone in Washington DC noticing and complaining about/taking credit for it —is politely referred to as “unlikely”.

    If you want to see the original Special Report the links are:
    The Editorial: The missing $20 trillion</a
    The graphic & the quotation:
    The 40% of North Americans graphic
    How the 2013 Special Report explains the rise of Tax Havens: A brief history of tax havens
    During 2016 both Bloomberg News & The Economist(again) referred to how the US States had become a very obvious Tax Haven center:

    Bloomberg’ s link is: Bloomberg’s view of the USA being part of the problem rather than part of the solution
    The Economist looks at the USA’s standing in the world being reduced by always being hypocritical—saying one thing while taking great care to do another is at:
    The USA [in 2016 rather than 2011] has become a big part of the problem & NOT part of the solution

Comments are closed.