In it, but not of it. TPM DC
What prompted you to create the offshore account?
I was interviewing all of these academics and spokespeople for offshore jurisdictions, and reading all this stuff about off-shore accounts, and there was this debate: are the rules now much, muchÂ tougher, are there far fewer people using these offshore accounts to either explicitly break the law or just to skirt the law? And it was one of those things where I talked to so many experts and I wasn't getting a clear picture, and then I just thought, Oh wait, I could just do it, and so why don't I just do it and find out for myself how easy or hard it would be?
My column is very much not a political column, and my goal is not to write about the presidential campaign, especially since I have to write it two weeks before it appears, so it's a bit foolish to chase the news cycle too aggressively. But I find generally, what I like to do, what I think Planet Money is good at and what I hope the column can be good at, is when there's some phrase or economic idea in the news a lot that people might find confusing, hopefully it can help people understand what that is.
What was it like dealing with the firms?
I gotta say, it was ridiculously easy. And I was nervous calling. It sort of felt like, I dunno, calling a drug dealer or a brothel or something. It felt like I'm crossing into some illicit world. And this was something I noticed in the Caymans when I was there, this whole world is set up to be as boring and mundane, Oh, we're not special, we're like your accountant's office, nothing interesting happening here, this is all very, very boring, routine, day-to-day business-type stuff. And that's exactly what the experience was. I'll say, there are so many of these websites, and a lot of them look like they're sort of hastily put together, and you do get the sense that some of these are just a guy with a cell phone, you know. But at first I was really nervous about revealing that I'm a journalist. And I did something I've never done before, which is I didn't reveal myself as a journalist -- I didn't lie, I just said I made money doing public speaking, which I don't do that much of, but I do sometimes, certainly wasn't a lie. But then pretty soon I revealed I'm a journalist. They said they don't want to be quoted in the Times, but they're very eager to do business with me. I really didn't need to worry.
What else surprised you about the process of calling up the firms and saying you wanted to start this off-shore account?
One thing that really surprised me is what a wink and a nod everything is. How explicit everyone was about, We know what we're doing here -- we're hiding money. So if you go to the websites, like apintertrust.com, which is the company that I mostly worked with, you'll see when they decide each ofÂ theseÂ potentialÂ jurisdictions, there's a lot of information about how hard it is for authorities to get your information and how safe and secure your information is fromÂ prying eyes. And so that was on all of the sites and every conversation just right away. And in this discussion of offshore accounts, there's a set phrase you hear every time from the offshore jurisdiction folks themselves, from government officials: There are many legal and totally legitimate uses of offshore accounts, but we're concerned about tax evasion, money laundering, terrorism financing, whatever. And I'm not saying there aren't legal uses, but it's really hard to think what advantage these have other than secrecy and other than hiding information. And and so surprise no. 1 was just how open theseÂ companiesÂ were aboutÂ how secretive everything is, how safe my information is, how incredibly difficult it might be for them to get any information about me. And surprise no. 2 was how little we know -- we have no idea.Â NobodyÂ hasÂ any idea how muchÂ moneyÂ is there, who has that money, how much of it is legal or illegal, how much of it is doing really shady criminal things and how much is totally legitimate. All we know is it's a lot. The OECD keeps data on deposits in foreign jurisdictions, on one country having deposits in anotherÂ country, and from that we know, there's many trillions of dollars, of real money, but the whole setup is to obfuscate where the money isÂ from. So it's just striking whoever you are, whoeverÂ wants to know what's going on with money, this is just this massive, massive black hole that we know very little about.
You wrote, it takes about 10 minutes to set up an account, but it would be better if the rules were simpler. What did you mean by that?
What I meant was, I think if there's one thing most economists, most tax experts would agree on, is that, broadly speaking, the U.S. tax laws are extremely complex in a way that's destructive to the economy. And so those tax laws, first of all, just broadly speaking, U.S. tax law, its very complexity encourages people in businesses with a lot of money to spend a disproportionate amount of money and time thinking of ways to take advantage of the tax system. It also encourages them to pollute our political process, encourages Congress to use their taxingÂ authorityÂ to benefit small groups at the expense of everyone else. And whatever your view is, whether your think we should have a lower tax burden overall or a higher tax burden overall, this isn't an argument about more or less taxes. This is an argument that I'd say most Republican-leaning economists and most Democratic-leaning economists would agree on. We can fight over what the taxation levels should be, but the tax system should be very, very simple and not distortionary. So when an American who lives in America and earns money in America has a lot of that money in overseas accounts, that suggests to me that there are things going on in our tax system that are allowing that behavior, encouraging people to pursue these loopholes. It does get into a complex area, because America doesn't' run the world. Every country gets to decide its own laws and citizens get to move around. You know, it's perfectly legal to have accounts in other countries, so it's not all to be blamed on the U.S. tax code. And maybe it's not all to be blamed on anything, maybe some of it is a perfectly good and beneficial thing. Again, we don't know -- because we just don't know much about the details -- but that's what I meant.
What does the presence of these accounts mean for regular folks who read your column? Why should people be interested in this activity?
The America that I think most Americans would want, most economists on the right or left would want, is one in which a smart, ambitious, hardworking person without a huge amount of of resources has a pretty good shot, in the end, of beating out a less smart, less ambitious, less hardworking rich person. The economy works best when better ideas win out over worse ideas, harder work wins out over less work, when it's a fair fight in the marketplace. And to me, this just strikes me as one more example of ways in which it's not a fair fight. You reach a certain wealth level -- which isn't to hate the rich, or to condemn success -- let's say you reach a wealth level purely through dint of your own hard work, and your own effort, and your own smarts -- but then it's just a little easier, that second billion, it's a little easier to make than the first billion, and easier than the little guy starting off. I think for me, and for many people, there's something repulsive about a system that is so beneficial to a tiny part of the country. And I really am fanatically nonpartisan, I really want to emphasize that. I hear these arguments from University of Chicago economists, I hear these arguments from libertarians. The progressives don't own this idea. It's not just an Occupy idea. Of course, this doesn't mean that, Oh boy, we should go back to the days where middle-class dentists could hide their money form the IRS. But it is just a reminder. When we talk about lobbying and the pervasive effect of lobbying, the return on investment for lobbying for special tax treatment is so massive, it's so huge. I was looking at some data on lobbying, and there are thousands and thousands and thousands of lobbyists for special interests on tax issues. There are, as far as I can tell, zero lobbyists for a broad simplification of the tax code. So this is where, when people talk about a perverse political system that rewards insider-ness, rewards wealth, this is what we're talking about.