Americans are expressing anger at the revelation that Donald Trump, the billionaire businessman running for president, may not be paying federal taxes. When Hilary Clinton brought it up in last week’s debate, Trump responded it “makes me smart.”
And he was right. The world’s wealthiest people use tax laws and legal loopholes to shift around their money in order to avoid paying taxes. If Trump’s smug response makes you mad, then you should be pissed off at the global scale of the problem and its impacts on the world’s poor.
Corporations are particularly skilled at not paying taxes. U.S. corporations are hiding an estimated $1.4 trillion in tax havens, Oxfam estimated earlier this year. The money saved lines the pockets of investors in companies like Apple, General Electric and Walmart. A leak of 11.5 million documents in April provided new insights into how the world’s wealthiest people use tax havens. The ‘Panama Papers’ raised awareness about the issue, but the practice continues today.
Just like Trump, these businesses and individuals are smart enough and have the resources to shift around their money to keep it away from the tax man. Nobody will get arrested. More likely someone will get a promotion for following the law and increasing profits.
As a result, between $77 billion and $111 billion in tax revenues are lost each year in the U.S. from corporate avoidance. It is not just a U.S. problem. Poor countries lose out on $100 billion a year. Those numbers don’t capture the individuals who, like Trump, pay little to nothing each year. Some $21 trillion in financial assets were transferred to offshore tax havens in 2010. Nearly half of that was owned by 91,000 individual people. That money could help fund access to health care, better schools and improved infrastructure.
Advocacy campaigns by ActionAid, Oxfam, the One Campaign and others have attempted to raise awareness and force leaders to enact reforms on tax avoidance. They make the case that the problem does most harm to the world’s poor.
“For too long, G20 countries have turned a blind eye to massive financial outflows from developing countries which are channeled through offshore bank accounts and secret companies,” said Kenyan anti-corruption campaigner John Githongo, in a statement supporting the One Campaign’s effort to pressure world leaders to act on the problem. “Introducing smart policies could help end this trillion dollar scandal and reap massive benefits for our people at virtually no cost. The G20 should make those changes now.”
Trump’s taxes will remain a talking point until next month’s election whether he releases his records or not. What we know is that he is just like every American; he uses the tax code to his advantage to pay as little as possible. The major difference is that he is a billionaire and the code allows him to pay nothing. Totally legal.