World's plutocrats have stashed at least $4.5 trillion in offshore tax havens

Paul Krugman has been writing some devastating columns of late, most notably his piece on the ripoff of high-frequency trading - Three Expensive Milliseconds. Perhaps missed by many readers, however, was his blog mention of a paper on underground wealth written by Gabriel Zucman, a colleague of Thomas Piketty, the famed French economist with whom he produced another recent paper mentioned by Krugman, "Wealth and Inheritance in the Long Run."The Zucman paper has a title that might be passed over as too wonky by many readers: "The Missing Wealth of Nations: Are Europe and the U.S. Net Debtors or Net Creditors," published by The Quarterly Journal of Economics, the oldest professional journal on economics in English. It's a stiff read for non-specialists. Krugman goes to the heart of it:

    What Zucman points out is that we have international data on investment positions, with each country reporting its assets abroad and foreign-owned assets at home. But the numbers don't add up: globally, liabilities are substantially larger than assets. That's mathematically impossible, but Zucman shows that it's what will appear in the statistics if a lot of money is run through offshore havens, so that the ownership doesn't show up in anyone's national statistics. And he uses other data and information to show that this is by far the most compelling explanation.

By means of a method he carefully describes, Zucman estimates that the world's wealthy are using tax havens, including Swiss banks, to hide at least $4.5 trillion but more likely $6 trillion from the tax collectors. Just to make it clear, that's $6,000,000,000,000 - in the neighborhood of six percent of the entire world's gross economic output for one year. In other words, not chickenfeed.

Krugman on tax havens and why the middle class carries more of the tax burden