South Dakota Will Protect You From Virus Freaks AND THE TAXMAN
A true oasis of freedom and security indeed. God bless South Dakota!
South Dakota has become the world’s foremost tax haven — right up there with the Cayman Islands, and ahead of old-fashioned locations like Switzerland. That’s one of the clear messages from the Pandora Papers leak of confidential financial information about the world’s richest individuals.
Why it matters: The hundreds of billions of dollars sequestered in South Dakota trusts generate no taxes and are effectively off limits to anybody who might have a legitimate claim on them. [Or a “legitimate” claim.]
How it works: A South Dakota trust is “the most potent force-field money can buy,” in the words of the Guardian’s Oliver Bullough.
- Like most tax havens, South Dakota has no income tax, no inheritance tax and no capital gains tax. But the state has gone even further than that. South Dakota allows for extreme secrecy when law enforcement comes knocking, and protects assets from being claimed by creditors, ex-spouses, or pretty much anybody else.
- By setting up a trust, the “settlor” — think some billionaire wanting to keep his assets secure — gives those assets to a trustee in South Dakota to look after. The trustee then invests the assets for a “beneficiary” who is often a direct relative of the settlor. Neither the settlor nor the beneficiary ever needs to set foot in South Dakota, or even be able to find it on a map.
- All three parties — the settlor, the trustee, and the beneficiary — can legally claim that the money isn’t theirs. The settlor and the beneficiary can say they don’t have the money, it’s all in a trust run by someone else. The trustee can say that she is just looking after the money and doesn’t own it.
How it happened: South Dakota started carving out its position as the most laissez-faire state for financial services in 1981, when it abolished upper limits for credit-card interest rates. (That’s why the credit card in your wallet was almost certainly issued in South Dakota.)
- In 1983, South Dakota became the first state to allow perpetual trusts — money that can remain untouchable for centuries, with no one ever paying inheritance tax on it.
- Since then, South Dakota has continued to pass laws making its trusts more attractive to the world’s ultra-wealthy. It allowed trusts where the settlor and beneficiary can be the same person. It has also sealed all court documents setting up trusts, making it impossible to know — in the absence of Pandora Papers style leaks — who might have one.
- The Republican-controlled South Dakota legislature regularly rubber-stamps whatever bills are placed in front of it by the financial services industry. “Nobody understands any of them,” said Gene Abdallah, Republican chair of South Dakota’s Senate Judiciary Committee in 2007 — although it’s broadly understood that the laws help to support hundreds of financial-services jobs in Sioux Falls, as well as the lawmakers’ free-market bona fides.
Context: Since 2010, almost every country in the world has signed onto the Common Reporting Standard (CRS), whereby governments inform each other about assets held by foreigners. The United States is the only major country not to sign on to the CRS, making it much more attractive as a tax haven than places like the Bahamas or Panama.
- Who’s in: Ecuadoran President Guillermo Lasso, Chinese real-estate billionaire billionaire Sun Hongbin, and dozens of other high-profile tax optimizers — both foreigners and Americans —are sheltering their assets in South Dakota.
By the numbers: A decade ago, South Dakotan trust companies held $57 billion in assets. The current figure is about $360 billion — with similar trusts in other states bringing the total for the U.S. close to $1 trillion.
- The United States — not only South Dakota but also rival tax-haven states like Nevada and Delaware — now ranks second only to the Cayman Islands for financial secrecy.
The bottom line: “South Dakota offers the best privacy and asset protection laws in the country, and possibly in the world,” tax expert Harvey Bezozi told the Guardian.
That picture is great!
One has to wonder what the payoff is… and who to. No government provides this ‘service’ free.
The best government is no government.
“from its inception America has been informed by ubiquitous sleeze and hustling”. Walter MacDougal
“Tsarist Russia is more free and just than amerika where corporations rule and robbery and thievery is made official” Vissaron Belinsky