The Panama Papers and Their Widely Ignored Implications for Ordinary Folk in the USA
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First, the disclosure of Panama Papers has provided perhaps the most conclusive evidence yet to date for what has long been obvious to the more discerning followers of international tax policy: that a completely different set of rules currently exists for the wealthy. Whereas the average citizen must declare income and pay up to the IRS on tax day, it is now clearer than ever that the rich are allowed to hide incredible fortunes in offshore shell companies and foreign tax havens. Unfortunately for those of us who want to see greater transparency and more progressive taxation policies emerge throughout the world, such behavior is completely legal in most cases. In fact, the only cases in which taking advantage of these tax loopholes becomes illegal is if there is a clear conflict of interest, which incidentally is what toppled Gunnlaugsson, or in cases of tax evasion (deliberate hiding assets) or money laundering. But in just about all other scenarios, stashing money in these tax shelters allows the most privileged and powerful members of society to avoid paying their fair share of taxes without actually breaking any domestic or international law. Meanwhile, the rest of us are supposed to abide by a different set of rules that requires us to pay our taxes every April 15 without the benefit of tax relief.
Second, although few Americans have been directly named as actors in the scandal so far, this could paradoxically be even more disturbing for us as a nation since it suggests that the United States itself has become a tax haven for billionaires. As a matter of fact, last year multiple international organizations rated the United States as one of the world’s biggest tax havens.[1] Consequently, the rich hardly even need offshore accounts any more. Instead, many simply create anonymous shell companies in states like Delaware and Nevada, which are known for “loose regulations and low taxes, [which make] them attractive for people to hide their activities and assets behind a corporate façade.”[2] The gross economic inequality for which this has given rise has been compounded by regressive tax reforms that have been instituted by successive governments. As the United States’ 99% recently paid their taxes, the 1% are cashing in on the radical redistribution of wealth (from the bottom and middle to the top) that all U.S. administrations going back to at least the Reagan administration have presided over. Today, as a result of these legal and public policy changes the wealthiest Americans pay among the lowest taxes in the developed world.[3]
Third, the Panama Papers have both domestic and foreign policy implications for the upcoming U.S. presidential election. In domestic affairs, only one of the candidates running in the primaries of our two major political parties, Bernie Sanders, staked his campaign on reforming the unfair and unjust taxation system that over burdens working families while letting billionaires like Donald Trump and Wall Street executives take advantage of lucrative tax shelters. On the other hand, at least one high-dollar Clinton donor, a man also implicated in the Iran Contra Scandal, has been named in the Panama Papers.[4] To put it as generously as one possibly can, this should give us serious pause about Hillary Clinton’s ability, willingness, and commitment to reform the unfair tax structures of which many of her wealthy donors are direct beneficiaries. It should also remind us of the urgency of campaign finance reform, which is desperately needed to ensure our democracy’s grounding in the principle of one person, one vote.
Fourth, we should turn our attention to the manner in which so-called free trade agreements (FTAs) interact with the system of global tax avoidance. There is increasing evidence that FTAs like NAFTA and CAFTA have made monitoring, regulating, and closing down tax shelters and loopholes more difficult. It’s no wonder that public outcry against looming agreements like the Trans-Pacific Partnership (TPP) is growing and mobilizing voters in the upcoming election cycle. But even more relevant for understanding the Panama Papers is the rarely mentioned U.S.-Panama Free Trade Deal, an FTA that passed through Congress via the secretive and controversial “fast track” procedure. During debate on the Senate floor about whether to pass the agreement, Sanders offered an impassioned appeal explaining why he would never support such a deal. Citing research from Citizens for Tax Justice, he noted that tax havens have at least one of three characteristics: no or low income tax rates, bank secrecy laws, and a history of non-cooperation in exchanging tax information with other countries.[5] Panama, he noted, has all three of those and is among the worst offenders worldwide. Hillary Clinton, on the other hand, was, during her time as Secretary of State, a vocal advocate of not only the free trade deal with Panama, but also of similar treaties with Colombia and South Korea.[6] Looking back at this context, Sanders’ critique now sounds remarkably prescient, while Clinton appears to have long-ago sided with the global elite. Their diverging stances offer another example of how, when it comes to foreign policy at least, judgment trumps experience. The growing awareness amongst primary voters of such stark distinctions between the two candidates’ records surely goes a long way in explaining why the Sanders’ campaign gained so much momentum and made the race so much more competitive than Clinton and her party’s establishment had anticipated. Though the inherently rigged contest now seems to have reached its inevitable conclusion, Democratic party delegates and super-delegates would be well advised to take this history into consideration at the convention when deciding who to cast their vote for.
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