News Release

What’s the Matter with South Dakota? State an “Insanely Corrupt” Magnet for “Wealth-Hoarding Megarich”

CHUCK COLLINS, BOB LORD, KALENA THOMHAVE, via Olivia Alperstein, Olivia@ips-dc.org
    Following the release of the “Pandora Papers,” experts cited in the papers are highlighting the structures that allow billionaires to get away with avoiding paying taxes.

    Drawn by low taxes and some of the nation’s most generous trust laws, “shady billionaires from around the world are going to South Dakota,” says Collins, author of The Wealth Hoarders: How Billionaires Pay Millions to Hide Trillions, and co-editor of Inequality.org at the Institute for Policy Studies. See: “How ‘Insanely Corrupt’ South Dakota Became a Magnet for the Wealth-Hoarding Megarich.”

    The Mount Rushmore State “now rivals Switzerland, Panama, the Cayman Islands, and other famous tax havens as a premier venue for the international rich seeking to protect their assets from local taxes or the authorities,” The Guardian, one of the members of the International Consortium of Investigative Journalists which published the “Pandora Papers” reports.

    Collins writes: “Findings suggest that South Dakota has sheltered billions in wealth linked to wealthy individuals previously accused of serious financial crimes and labor violations. Two examples: Brazilian orange juice baron Horst Happel was fined $88 million in 2016 for underpaying his workers. In 2017, he moved substantial wealth to a trust in South Dakota. Carlos Morales Troncoso was the former vice president of the Dominican Republic. He ran a sugar company called Central Romana … that was accused of human rights violations. He set up trusts for his daughters in the Bahamas that were moved, after his death, to South Dakota.

    “Lawmakers should convene hearings on trust law and act at the federal level to shut down or discourage the formation of dynasty trusts and GRATs [Grantor Retained Annuity Trust] for the purposes of tax avoidance and dynastic succession,” he said. “Actions could include the passage of a federal ‘rule against perpetuities,’ banning certain trust arrangements, and taxing income and wealth in trusts.”

    Other U.S. states noted as problematic in the “Pandora Papers” include Delaware, Florida, Nevada, and Texas.

    “The world is going to be looking at us differently after the Pandora Papers,” said Collins. “They’re going to see that the United States is the weak link now in the system of global financial transparency.”

    Lord is a veteran tax attorney and associate fellow with the Program on Inequality at the Institute for Policy Studies. Thomhave is a researcher at the program.

    They just wrote the piece “Why Do South Dakota Politicians Help Billionaires?” which states: “South Dakota prides itself on being ‘the premier trust jurisdiction in the United States,’ according to its Division of Banking. After all, South Dakota is home to a task force of estate and trust professionals appointed by the governor to ensure that it remains the most ‘competitive’ place in the nation to establish a dynasty trust, with low taxes and fees and few regulations. … There are more than $500 billion in trust assets in South Dakota, managed by 105 state trust companies. … When politicians from South Dakota, Wyoming, and Alaska are doing the bidding of billionaires in New York and California, we should be deeply suspicious.”