Sources of Polarization of Income and Wealth: Offshore Financial Centers

Abstract

One cause of increasing polarization of income and wealth in the United States has been the shift in taxation, with corporate income tax revenues declining and individual income tax revenues rising as a share of total tax revenues. This change flows in part from a rise in the use of tax haven services by the wealthy and by corporations, as well as in innovation in the types of services tax havens provide. Available evidence shows that tax havens hold at least $10 trillion in assets, are used by a majority of large corporations, and account for lost tax revenue of hundreds of billions of dollars annually. Economic data are likely distorted by transfer pricing of activities related to tax havens, including exports and imports, value added, productivity, profit, current account balances, and the nature and size of investment flows across borders. This and other research questions should be near the top of the agenda for radical political economists.