The New Criminal Enterprise - Our Very Own Aristocracy

"We must make our choice. We may have democracy, or we may have wealth concentrated in the hands of a few, but we can't have both."

One thing that separated the aristocracy from the plebs was the rule of law. Sure, in theory you might hang a nobleman as quickly as you would hang a peasant for stealing a loaf of bread, but you weren't apt to find a nobleman so desperately short of sustenance.

Which brings us to Paul Krugman's Friday column in The New York Times. "Trump and the Aristocracy of Fraud: Government of tax cheats, by tax cheats, for tax cheats." Welcome to the 21st century.

Even among those unhappy at the extent to which we live in an era of soaring inequality and growing concentration of wealth at the top, there has been a tendency to believe that great wealth is, more often than not, earned more or less honestly. It’s only now that the amounts of sheer corruption and lawbreaking that underlie our march toward oligarchy have started to come into focus.

Until recently, my guess is that most economists, even tax experts, would have agreed that tax avoidance by corporations and the wealthy — which is legal — was a big issue, but tax evasion — hiding money from the tax man — was a lesser one. It was obvious that some rich people were exploiting legal if morally dubious loopholes in the tax code, but the prevailing view was that simply defrauding the tax authorities and hence the public wasn’t that widespread in advanced countries. 

But this view always rested on shaky foundations. After all, tax evasion, almost by definition, doesn’t show up in official statistics, and the super-wealthy aren’t in the habit of mouthing off about what great tax cheats they are. To get a real picture of how much fraud is going on, you either have to do what The Times did — exhaustively investigate the finances of a particular family — or rely on lucky breaks that reveal what was previously hidden. 

Two years ago, a huge lucky break came in the form of the Panama Papers, a trove of data leaked from a Panamanian law firm that specialized in helping people hide their wealth in offshore havens, and a smaller leak from HSBC. While the unsavory details revealed by these leaks made headlines right away, their true significance has only become clear with work done by Berkeley’s Gabriel Zucman and associates in cooperation with Scandinavian tax authorities.

...If America’s wealthy evade taxes on the same scale (which they almost surely do), they’re probably costing the government around as much as the food stamp program does. And they’re also using tax evasion to entrench their privilege and pass it on to their heirs, which is the real Trump story.

The obvious question is, what are our elected representatives doing about this epidemic of cheating? Well, Republicans in Congress have been on the case for years: They’ve been systematically defunding the Internal Revenue Service, crippling its ability to investigate tax fraud. We don’t just have government by tax cheats; we have government of tax cheats, for tax cheats.

What we’re learning, then, is that the story of what’s happening to our society is even worse than we thought. It’s not just that the president of the United States is, as veteran tax reporter David Cay Johnston put it, a “financial vampire,” cheating taxpayers the way he has cheated just about everyone else who deals with him. 

Beyond that, our trend toward oligarchy — rule by the few — is also looking more and more like kakistocracy — rule by the worst, or at least the most unscrupulous. The corruption isn’t subtle; on the contrary, it’s cruder than almost anyone imagined. It also runs deep, and it has infected our politics, quite literally up to its highest levels.

Trump promised the Gullibillies that he would drain the swamp. He is the swamp and they put him in power. Trump is the product of a family that itself was a criminal enterprise. It is in this context that his "tax reform" - a massive shift in tax burden from the rich to the poor, neatly masked by deficits few of Trump's base understand, must be seen. The trick is that it's all temporarily funded by foreign borrowings. Eventually, though, they'll turn on the Gullibillies to fund those tax cuts with commensurate cuts to medicare and social security.

And what of Canada? What of KPMG and the Isle of Man tax evasion scheme? That was outright criminality and yet the government looked the other way. Why have we not seen these unscrupulous tax wizards who masterminded and sold this scheme sitting in the prisoners' dock? Why did we settle with their clients, the tax scofflaws, for nominal sums?