The Panama Papers leak of millions of financial documents in 2016, and later the Pandora Papers in 2021, exposed the global offshore tax havens used by the world’s wealthiest and most powerful people to hide their wealth and avoid paying taxes.
But Morris Pearl and Erica Payne argue in their new book, “Tax the Rich! How Lies, Loopholes & Lobbyists Make the Rich Even Richer,” that the vast majority of America’s wealthiest families don’t need to deposit their money in off-shore accounts to evade taxes. Rather they say, America’s rich, with the help of politicians they control, legally use the U.S. tax code to minimize or evade paying their tax bill.
Between The Lines’ Scott Harris spoke with Pearl, a former managing director at BlackRock, the world’s largest asset manager who now chairs the Patriotic Millionaires, a group of hundreds of high net-worth Americans who work to ensure that corporations and millionaires and billionaires like themselves, pay their fair share of taxes. Here, Pearl discusses the inner workings of a system designed to make rich people richer and everyone else poorer.
MORRIS PEARL: What I figured out as we were writing the book and talking to people is that different types of people make money different ways.
Most people, most of you listening to this radio show right now get a paycheck every week or every month and attach a tax to that paycheck and you understand how much money you make and how much goes to taxes in your pay stubs.
However, it’s different if you’re very rich. I don’t get a paycheck. I just take money out of my brokerage account all the time. So wealthy people who are already rich don’t need any income. And we only tax income in this country.
So as long as I can spend a lot of money without having any income, I don’t have to pay any taxes. And if you are already rich, you don’t need any income. And that’s basically why those people who are already rich are getting richer and richer and richer because their money is growing as their investments are doing well and they don’t pay any income taxes. Whereas most people, even if they’re trying to save money, a huge amount of every paycheck goes to income taxes, so they fall farther and farther behind every single year. And we try to explain in the book how all these different tax rules work and why it is that the richest people among us don’t pay very much taxes at all in comparison to their income.
SCOTT HARRIS: How is it in the United States, Morris, that we don’t tax wealth and just tax income, as you just described? Are there other countries that tax the wealth of their citizens who evade income taxes?
MORRIS PEARL: We did have a wealth tax when the country was started, almost. Most taxes were real estate taxes back then, and most wealth was real estate. Everyone who was wealthy, owned land, and so they were taxed on their wealth.
And actually, most of you still are taxed on your wealth. If you’re a homeowner almost anywhere in the United States, you pay a wealth tax on most of your wealth, which is your home. You pay a real estate tax every year on that wealth, on that home, which is most of most people’s wealth.
I don’t pay a wealth tax being an investor because there’s no wealth tax on things like stocks and bonds and investments and pretty much anything else except for real estate. It’s not that our country’s changed the rules, it’s that things have evolved so that most wealth is now in the form of businesses and corporations and stock and not actual land, which is taxed through a wealth tax. So we need to change that. We feel that we need to get the richest people among us to pay a wealth tax, just like all of you are doing now.
SCOTT HARRIS: Elizabeth Warren was among some legislators who are proposing a specific wealth tax. What’s your view of what she’s proposed or what others have proposed that you think would work best?
MORRIS PEARL: I think we need something like that. And Sen. Ron Wyden of Oregon has made proposals that are actually fairly similar terms of taxing unrealized capital gains.
And we need something like that. And people say, “Oh, it’s too complicated. We can’t deal with it.” Well, the few people who have billions of dollars of wealth generally hire accountants any way to deal with their taxes.
They could deal with it. The country already assesses wealth when they do state taxes, so we can do this every year and they can have rules for dealing with things you don’t know what their value is and figuring it out and catching up later and mixing it up with interest or whatever.
So I’m not really worried about the complexities of this. I think we do need — not on regular people. That was the problem they had in France was they tried to get everyone to pay a wealth tax. And all the homeowners in France were pretty upset about that.
We need to charge a wealth tax not on people’s first million, not on the second million. Not even on their hundredth million. But we do need to charge a wealth tax on the second billion dollars of wealth, as Elizabeth Warren says.
For more information on Patriotic Millionaires, visit patrioticmillionaires.org.
