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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsThe great American tax haven: why the super-rich love South Dakota
Its known for being the home of Mount Rushmore and not much else. But thanks to its relish for deregulation, the state is fast becoming the most profitable place for the mega-wealthy to park their billions.
By Oliver Bullough
Late last year, as the Chinese government prepared to enact tough new tax rules, the billionaire Sun Hongbin quietly transferred $4.5bn worth of shares in his Chinese real estate firm to a company on a street corner in Sioux Falls, South Dakota, one of the least populated and least known states in the US. Sioux Falls is a pleasant city of 180,000 people, situated where the Big Sioux River tumbles off a red granite cliff. It has some decent bars downtown, and a charming array of sculptures dotting the streets, but there doesnt seem to be much to attract a Chinese multi-billionaire. Its a town that even few Americans have been to.
The money of the worlds mega-wealthy, though, is heading there in ever-larger volumes. In the past decade, hundreds of billions of dollars have poured out of traditional offshore jurisdictions such as Switzerland and Jersey, and into a small number of American states: Delaware, Nevada, Wyoming and, above all, South Dakota. To some, South Dakota is a fly-over state, the chief justice of the states supreme court said in a speech to the legislature in January. While many people may find a way to fly over South Dakota, somehow their dollars find a way to land here.
Super-rich people choose between jurisdictions in the same way that middle-class people choose between ISAs: they want the best security, the best income and the lowest costs. That is why so many super-rich people are choosing South Dakota, which has created the most potent force-field money can buy a South Dakotan trust. If an ordinary person puts money in the bank, the government taxes what little interest it earns. Even if that money is protected from taxes by an ISA, you can still lose it through divorce or legal proceedings. A South Dakotan trust changes all that: it protects assets from claims from ex-spouses, disgruntled business partners, creditors, litigious clients and pretty much anyone else. It wont protect you from criminal prosecution, but it does prevent information on your assets from leaking out in a way that might spark interest from the police. And it shields your wealth from the government, since South Dakota has no income tax, no inheritance tax and no capital gains tax.
A decade ago, South Dakotan trust companies held $57.3bn in assets. By the end of 2020, that total will have risen to $355.2bn. Those hundreds of billions of dollars are being regulated by a state with a population smaller than Norfolk, a part-time legislature heavily lobbied by trust lawyers, and an administration committed to welcoming as much of the worlds money as it can. US politicians like to boast that their country is the best place in the world to get rich, but South Dakota has become something else: the best place in the world to stay rich.
https://www.theguardian.com/world/2019/nov/14/the-great-american-tax-haven-why-the-super-rich-love-south-dakota-trust-laws
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Wismer is the only person I met in South Dakota who seemed to understand this. Ever since Ive been in the legislature, the trust taskforce has come to us with an updating bill, every year or every other year, and we just let it pass because none of us know what it is. Theyre monster bills. As Democrats, were such a small caucus, were the ones who ought to be the natural opponents of this, but we dont have the technical expertise and dont really even understand what were doing, she confessed, while we ate pancakes and drank coffee in a truck stop outside Sioux Falls. We dont have a clue what the consequences are to just regular people from what were doing.
That means legislators are nodding through bills that they do not understand, at the behest of an industry that is sucking in ever-greater volumes of money from all over the world. If this was happening on a Caribbean island, or a European micro-principality, it would not be surprising, but this is the US. Arent ordinary South Dakotans concerned about what their state is enabling?
The voters dont have a clue what this means. Theyve never seen a feudal society, they dont have a clue what theyre enabling, Wismer said. I dont think there are 100 people in this state who understand the ramifications of what weve done.
While over at the Pineridge and Rosebud Reservations,
D_Master81
(1,822 posts)I did a tax return for a guy who traveled all over the country doing work so he had like 7 or 8 state returns to file and he was from Indiana and was filing in Indiana but his residency he claimed as South Dakota because he worked there long enough to do that I guess. I asked him why and found out they have no state tax and apparently are pretty lenient on residency rules.