I can’t wait until the first state lawmaker stands up at next year’s budget session and proclaims that Wyoming can’t possibly tax the income of wealthy individuals and corporations.
That person should be laughed out of the Capitol, but won’t be. You can bank on it. In fact, so many millionaires and billionaires have banked on it that Wyoming has become one of the biggest tax havens in the world, and a favorite place for questionable actors to warehouse dirty money.
The Washington Post revealed last week that one of the hundreds of people who park their fortunes in secretive private trusts in Wyoming is a billionaire Russian oligarch who is being investigated for alleged mob ties.
Then there’s the multi-millionaire matriarch of an Argentinian family, whose beverage company is the subject of two probes in that country for allegedly laundering money and polluting land and waterways.
Another beneficiary of Wyoming’s giveaway to the world’s wealthy exposed by The Post is the family of the late estate manager to a slain Dominican Republic dictator, whose regime ordered the murder of tens of thousands of Haitians. The manager died of COVID-19 last year, but don’t worry about his family; thanks to the Equality State’s unique trust laws, his relatives can avoid paying transfer taxes for up to 1,000 years.
The Post’s reporting about a dozen international clients who registered Wyoming trusts is based on the “Pandora Papers,” a trove of nearly 12 million records obtained by the International Consortium of Investigative Journalists.
The newspaper’s sleuths looked at the previously unexplored dark side of who benefits from the financial secrecy that’s baked into Wyoming’s trust laws. I believe their reporting has brought to light the state’s top public policy story in 2021, and not just because of the shady foreign characters the investigation unearthed.
It is a searing indictment of the state’s leadership for spending an enormous amount of time and resources on an economic development venture that is making the ultra-rich even wealthier but doing nothing to benefit the state or its tax-paying residents.
Wyoming’s drive to become the most business-friendly state in the nation has never been a secret. Many of its Republican leaders brag about how hard they’ve worked to accomplish that goal since 1977, when the Legislature authorized the nation’s first limited liability companies.
But the creation of LLCs was only a launching pad for more than 100 changes to the state’s trust laws that legislators would make over the next 34 years. A 2011 Wyoming Law Review article by Christopher Reimer stated that “individuals who once relied on foreign jurisdictions should consider taking advantage of Wyoming’s superior [trust] laws.”
Boy, did they ever. A 2020 Hebrew University of Jerusalem study found Wyoming to be one of the 10 least restrictive, most customer-friendly trust jurisdictions in the world.
The type of trust the state promotes even has a Wyoming-flavored name: the “Cowboy Cocktail.”
What are the ingredients? Most of the private trusts companies established in Wyoming are unregulated, so there is no state scrutiny of the assets. The trusts are legal agreements that must be managed by an entity in Wyoming, usually a law firm or estate planner, but the identity of the owners is shielded.
For an extra layer of secrecy, a second company can be created inside the trusts — a shell within a shell — to hold the assets. The Legislature has passed even more trust-industry-friendly laws in the past decade.
What’s the net effect of this legal maneuvering? In a video interview by Cheddar News, University of Richmond law professor Allison Tait explained that “at the end of the day, you’re taking money out of the tax base.”
Wyoming is in a warped competition for the secretive private trusts with states like South Dakota, Alaska, Nevada and Delaware. Tait said they are all “in a race to the bottom.
“Some economists have done studies speculating on how much money is going untaxed and what is the lost revenue, and it’s enormous,” Tait said. “It could pay for [the federal food stamp] program three times over in a year. You’re taking money away from things like roads and schools.”
Wyoming is struggling to fund the state government with shrinking tax revenues from the minerals industry. GOP lawmakers continually try to cut public schools and social services budgets, while flatly refusing to raise any taxes or pass an individual or corporate income tax, or even a gross receipts tax. The state’s sales tax and property taxes are among the lowest in the nation. Wyoming also has no estate or inheritance tax.
So, I think it’s more than fair for residents to ask legislators one burning question: Where are all the jobs and industries you promised would come from helping the super-wealthy hide their money? That’s how you sold this entire bill of goods to the public.
Ironically, it’s practically the only form of economic diversification away from minerals that the Legislature has ever wholeheartedly embraced. But it’s been a colossal flop, since none of the supposed economic benefits have materialized.
“If you come in as a trust company or a banker, you don’t pay your way,” Michael Von Flatern, a Republican former state senator from Gillette, told The Post. “We didn’t gain anything.”
I don’t expect the Legislature to even admit that it’s made a mistake by working feverishly to become the “onshore offshore” alternative to the Caymans at the expense of Wyoming’s lower-and-middle-income taxpayers. If our leaders devoted a fraction of their time to closing the huge income inequality rate — say, at a special session to revamp the state’s tax structure — we might be able to stop draconian budget cuts.
But no, the handwriting is on the wall, at least for the next few years — Wyoming will balance its books by spending federal COVID-19 relief funds and the Infrastructure Investment and Jobs Act monies. Lawmakers or citizens who want to see any other outcome can go to the back of the line.
At least some members of Congress want to stop the drain on federal and state tax revenues made possible by concoctions like the Cowboy Cocktail.
U.S. Rep. Bill Pascrell (D-New Jersey), chairman of the Ways and Means Oversight Subcommittee, held a hearing about the Pandora Papers documents earlier this month, when South Dakota’s lax trust laws were in the headlines.
“[The reporting] vividly demonstrates how the ultra-wealthy and powerful live under a different set of rules than everyone else,” Pascrell said at the hearing. “They are aided and abetted by a complex system of financial secrecy and accommodating laws that wealthy nations, including our own, created.”
Republican South Dakota Gov. Kristi Noem has stonewalled Pascrell’s attempts to get her to testify before the panel. Last Thursday, after The Post published its findings about Wyoming’s Cowboy Cocktail, the congressman sent a list of questions to Gov. Mark Gordon.
“Our witnesses have testified … that this secrecy enables illicit activities like money laundering and tax evasion,” Pascrell wrote. “At the very least, it appears to provide absolute asset protection for the wealthy against creditors, including for child and spousal support claims. How do you defend the Wyoming trust regime against these assertions?”
If I was the governor, I’d simply say, “I can’t,” and throw myself and legislators to the mercy of the committee. But I expect Gordon to do what comes naturally when dealing with D.C. power brokers, especially when they’re Democrats, and somehow blame the feds for our folly.
In Wyoming, that’s the politically correct way to do business.