South Dakota's tax avoidance schemes represent federalism at its worst

[Yo_Mama_Been_Loggin]

The Pandora Papers — the trove of more than 11.9 million confidential documents shared with The Washington Post and partner news organizations — shine a light on South Dakota’s role as an offshore financial center. For the most part, the revelations relate to the Mount Rushmore State’s status as a magnet for foreign wealth, including money derived from international drug smuggling and exploitative labor practices. But it’s not just foreigners who are moving assets to the “little tax haven on the prairie”: High-net-worth Americans also are shifting billions to South Dakota and a handful of other domestic havens, shortchanging federal and home-state tax collectors in the process.

The rise of domestic tax havens marks a troubling new chapter in the history of American federalism. Supreme Court Justice Louis Brandeis hailed states as “laboratories of democracy,” but increasingly U.S. states are becoming laboratories of sophisticated tax avoidance. So far, Congress and the states whose tax bases are being cannibalized by the domestic havens have done little to fight back. Hopefully, the Pandora Papers will catalyze a reaction that’s long overdue.

Congress, for example, could close the loopholes in federal tax law that domestic havens exploit. And the states that lose out from cross-border tax wars could bolster their own legal defenses. Of course, lawmakers in the domestic tax havens also could halt their efforts to emulate overseas havens such as Luxembourg and Switzerland.

There is nothing new — or terribly remarkable — about states competing to lure residents and businesses by offering low tax rates. New Yorkers have long moved to Florida, and Californians relocated to Nevada, to avoid state income taxes. Domestic havens such as South Dakota, however, allow high-net-worth clients to minimize taxes without leaving the comfort of their Manhattan condos and Napa Valley chalets.

https://www.washingtonpost.com/outlook/2021/10/07/tax-shelters-states-pandora/

[LT Barclay]

1. Wasn't there a journalist who was assassinated for being part of this investigation?

I think he was killed in Italy?

[Igel]

2. Perhaps.

But one of these things is not like the other.

As for tax avoidance, taking the SALT deduction were it to be upped to its former level is tax avoidance. Taking it now, at its reduced level, is tax avoidance.