Well, the word is out, according to the leaked documents known as the Panama Papers, the rich and famous and powerful hide their income so they don’t have to pay taxes. Oh, you knew that already? Yeah, so did I. But these documents are naming names and describing in some detail the means (some illegal) that these folks have used to avoid paying their “fair share”—they’ve been outed en masse.
Even though we have tacitly accepted, even approved of the practice of tax havens for many decades, the revelations in the Papers are likely to have serious repercussions for the prominent clients of Mossack Fonseca, the law firm from which the documents were taken. It’s noteworthy that Iceland’s Prime Minister, Sigmundur David Gunnlaugsson, has already been forced to resign because the Papers revealed that he sold his interest in an offshore company to his wife for $1 to avoid having to disclose a conflict of interest.
Now, no one really likes paying taxes and many of us do whatever we can to maximize our deductions in order to minimize our tax liability. But to me, that is different from hiding huge chunks of income in offshore tax havens so that it is not subject to the rules that govern taxation in the first place. If nothing else, the sheer scale of the hidden money is breathtaking—estimated by Gabriel Zucman in a 2014 paper in the Journal of Economic Perspectives to be $7.6 trillion of individual wealth – more than the gross domestic product of Germany and the UK combined.
Add to this, a taxation structure that favors rich people by taxing capital gains at a lower rate than earned income and you end up with the situation where low and middle-income people are paying a disproportionate share of the taxes that are used for shared infrastructure and services that are part of a civilized society (public schools, safe highways and bridges, and healthcare, for example.) As Warren Buffett famously said, his tax rate is lower than that of his secretary!
Fewer and fewer people have most of the money
The term, “the 1%”, is now ingrained in our psyche, but did you know that the richest 1% on the planet have more wealth than the rest of the world combined. An even more shocking statistic can be found in Oxfam’s 2016 report, “An Economy for the 1%”. In 2015, just 62 individuals (you can see who they are here) had the same wealth as 3.6 billion people in the bottom half of the economy. 62 people or 0.00000008384% of the population have wealth as much as the bottom 50% of earth’s inhabitants. That is shocking and appalling, but it hasn’t really spurred us to take meaningful action.
Of course, there are many reasons for our complacency about this enormous social injustice we call inequality. But in this post, I want to explore the role words play in lulling us into inaction.
Let’s start with how we describe the people getting the short end of the stick. We call them poor. They are the “lower” or “bottom” half of the population. These are all words with negative connotations in a global society that strives to be upwardly mobile, wealthy, or at least middle-class. Being in the bottom of anything (your class standing, your income, your IQ, your pool) is usually a bad thing. When we categorize people as poor, we dehumanize them and it makes it easier to shut your eyes to their plight.
On the other hand, being rich is good whether it refers to wealth, a chocolate cake or a good joke. Who doesn’t want to be rich? Perhaps that is why, according to the Oxfam report,
“Apologists for the status quo claim that concern about inequality is driven by ‘politics of envy.'”
Then there are the words we use to justify the shenanigans wealthy folks use to avoid contributing to the common good. Take the term tax haven. The word haven means a place of safety or refuge, as in a haven for wildlife. Hiding your money offshore is keeping it safe, protecting it like a mother would do for her child even though it is actually fraud. Per Oxfam,
“Tax avoidance has been described by the International Bar Association as an abuse of human rights and by the President of the World Bank as ‘a form of corruption that hurts the poor.'”
The report goes on to say,
“There will be no end to the inequality crisis until world leaders end the era of tax havens once and for all.”
Finally, let’s talk about how we have named the problem: inequality. Inequality means things being compared are different in size, degree, or circumstance. Things are unequal. But no one really expects everything to be equal do they? People are different in terms of capability, opportunity, intellect, health, and a whole host of different traits. Inequality is a relatively soft word for the harsh reality of people trying to scrape by on a pittance at the bottom of our grossly skewed society.
What if we were to call things like they are—call a spade a spade, so to speak? Would we think and act differently if we said, for example, “greedy, dishonest, obscenely rich people defraud governments and hurt millions of hard-working people when they illegally (or at least stealthily) hide their money from the authorities?” Perhaps. We have, after all, learned from the Real Donald Trump that names do matter (think “Little Marco” or “Lyin’ Ted”).
But we have to remember that for every voice calling out the crime, there are powerful people on the other side saying, “it just ain’t so.” For every Bernie, there is a Ted or a Mitt, a George or a Ronald, and they, my friends, have honed their story for years.