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Bipartisan Attempt to Regulate Some of America's Tax Havens

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#1 LFC

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Posted 05 June 2019 - 04:12 PM

The U.S. has become a great place to dodge taxes and launder money. A bipartisan bill is attempting to change that at least a bit.


The United States has earned a place alongside Switzerland and Panama as one of the world’s most lucrative tax havens and money laundering hotspots—a shameful situation that policymakers are finally trying to address. Several bipartisan bills are trekking through Congress that aim at halting money laundering, tax avoidance, and the use of anonymous shell companies for potentially nefarious purposes. One of the bills, the Corporate Transparency Act of 2019, has been in the works for more than a decade, and would require full disclosure of company owners’ true names and addresses to the Treasury Department.

The bill was endorsed last month by Treasury Secretary Steve Mnuchin, who said he believes it is “headed in the right direction” and worthy of bipartisan support. The bill’s lead sponsor, Congresswoman Carolyn Maloney, has called it “absurd that the U.S. allows criminals to launder their money here.” Maloney’s bill nevertheless faces a steep climb to become law. Although it’s backed by over 100 groups, including the national District Attorneys Association and the Bank Policy Institute, it is opposed by other powerful institutions, including the American Bar Association and the U.S. Chamber of Commerce.

Delaware is, of course, the big example.


The bill also faces a rocky road because it proposes restricting loopholes that are used by powerful companies and politicians—including President Donald Trump. This is particularly the case in Delaware—or, as Democratic presidential contender Joe Biden termed it recently at a private fundraiser for wealthy donors, “the corporate state of Delaware.” The First State has made its status as a shell company mecca and tax haven a cornerstone of its economy. It now has more corporate entities than it has residents.

Around two million corporations and LLCs (limited liability companies) are registered annually, and many states, notably Delaware, don’t require specification as to who their true owners are. If there’s now a bipartisan effort to resolve this lack of transparency, it’s also a bipartisan problem. Trump himself has over 500 LLCs, the majority of which are registered in Delaware—curiously enough, at the same address in Wilmington where Hillary Clinton previously had companies registered. And Trump and Clinton are not outliers—the state brags that “more than 50% of all publicly-traded companies in the U.S. including 64% of the Fortune 500 have chosen Delaware as their legal home.”

Thanks in part to the opaque financial flows of these anonymous companies, last year the United States was ranked the second-most financially non-transparent jurisdiction in the world, behind only Switzerland. Let that sink in—the United States was rated less financially transparent than the infamous Cayman Islands.

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