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South Dakota Gov. Kristi Noem speaks at the NRA convension

South Dakota's Republican Gov. Kristi Noem speaks during the National Rifle Association convention on May 27, 2022 in Houston, Texas. (Photo: Brandon Bell/Getty Images)

New Report Reveals How 13 US States 'Shield the Fortunes of the World's Richest People'

"The concept of the 'offshore' tax haven has very much washed ashore," says the Institute for Policy Studies.

Kenny Stancil

Research published Wednesday details how a handful of U.S. states that are "subservient to the trust industry" are helping oligarchs and money launderers from around the globe evade taxes and hide their wealth within the nation's borders.

"The wealth of nations is hidden in states like Wyoming, Delaware, Nevada, and South Dakota."

Titled Billionaire Enabler States: How U.S. States Captured by the Trust Industry Help the World's Wealthy Hide Their Fortunes, the new report from the Institute for Policy Studies (IPS) estimates that the United States is host to $5.6 trillion in trust and estate assets belonging to super-wealthy elites, both foreign and domestic.

"The concept of the 'offshore' tax haven has very much washed ashore," says the report, which exposes how 13 U.S. states "shield the fortunes of the world's richest people."

According to a summary of the report:

  • The "Biggest Enablers" are South Dakota, Nevada, Alaska, and Delaware, which the report calls "the shadow states in the darkest corners of the wealth management industry";
  • The report names Tennessee, Wyoming, and New Hampshire as "Bad Actors" that actively aid and abet the wealth defense industry; and
  • The report identifies Rhode Island, Ohio, Missouri, Illinois, Florida, and Texas as "Emerging Enablers" that are becoming key tools for trusts to shield hidden wealth.

"Thirteen U.S. states are in a race to the bottom to weaken trust oversight and manipulate the rules to attract billionaire tax dodgers and money launderers," Kalena Thomhave, co-author of the report and researcher at the Program on Inequality and the Common Good at IPS, said in a statement. "The wealth of nations is hidden in states like Wyoming, Delaware, Nevada, and South Dakota."

"The clandestine world of financial secrecy stretches around the world, all the way back to the United States," says the report, which comes one year after the groundbreaking Pandora Papers investigation revealed how the U.S. has become a major player in the international wealth-hiding system—on par with Switzerland, Panama, the Cayman Islands, and other well-known tax havens.

"Trusts are key to this story," states IPS. These financial vehicles make it possible to camouflage ill-gotten gains, enabling a small number of billionaires to elude public scrutiny and taxation, with negative consequences for billions of people worldwide.

By providing a place to park illicit wealth abroad, roughly a dozen U.S. states are helping kleptocrats from around the world "avoid accountability at home," the report explains. They are also enabling ultra-rich Americans to dodge federal taxes, "cheating the U.S. out of revenue with which it could combat poverty or invest in infrastructure."

Other key findings from IPS include:

  • Three key ingredientslow or no taxes, secrecy, and trust longevitymake certain U.S. states particularly attractive to wealth defenders. These states pass laws to cut or abolish taxes or hide trust records from prying eyes. More than two-thirds of states allow trusts to last for at least 150 years or forever. Additionally, more than a third of states allow trusts to be established by the person benefiting from the trust, shielding their assets from creditors and tax authorities.
  • There is a significant correlation between regressive state taxation systems, which hurt the poorest residents, and trust-subservient state laws. Of the 13 states captured by the trust industry we have profiled here, eight are among the 15 most regressive tax states in the country. These states often cut taxes for the wealthiest residents and instead rely on the low and middle class, who pay a disproportionate amount of their income in taxes.
  • The trust industry says it simply helps its clients obey lawsbut in reality it often writes the laws. As our report shows, the trust industry is the driving force for trust deregulation. Trust and estate lawyers regularly lobby state legislatures and sometimes work in official capacities with states to write legislation favorable to the industry. In small states with part-time or "citizen" legislatures, there is no countervailing power that matches the clout of the financial services industry. And this trust deregulation is often bipartisan.
  • The trust industry offers little benefit to states. Contrary to what trust and estate lawyers may claim about increased economic development and boosted state revenue, states largely do not benefit from trusts. Though billions may be held in trust in a state, state coffers—and the public—will never see it. States charge only small fees to trust companies; the trust industry creates very few jobs; and trust owners have no reason to physically move to or even visit the states where they have established trusts.

"The wealth managers and tax attorneys serving the ultra-wealthy will claim they are just aiding their clients to obey the law," said Chuck Collins, co-author of the report and director of the Program on Inequality and the Common Good at IPS.

"It's past time to curb wealth hiding in these states and enact policies to hold billionaires and their bureaucratic enablers accountable."

"But our report reveals how they are actively writing the laws and lobbying for changes in certain U.S. states to shield hidden wealth from accountability," Collins added.

As IPS research has consistently shown, billionaire wealth has soared over the past several years, especially during the Covid-19 pandemic. Since the coronavirus crisis emerged in the U.S. in March 2020, the known net worth of the world's billionaires has grown by more than 50%, reaching nearly $5 trillion.

"Trillions more are probably secretly sequestered in trusts," the report notes. "This swelling tide of wealth is not lifting all boats. As wages continue to stagnate and everyday Americans still face health and economic harms from the pandemic, wealth inequality is a yawning chasm."

With states "engaged in a rapid race to the bottom... federal action is needed," the authors add. "States may see a few jobs created by the trust industry and determine that is worth the detrimental effect of trusts on the rest of the country. It is in the federal government's interest, therefore, to curb state laws that enable illicit wealth hiding and tax avoidance."

To crack down on this worsening problem, IPS urges congressional lawmakers to take the following steps:

  • Boost state and federal oversight of complex trust transactions;
  • Require trust registration and disclosure;
  • Outlaw trusts designed to obfuscate ownership;
  • Establish a federal rule against perpetuities; and
  • Reform estate, gift, and generation-skipping taxes.

"The same states that morph their trust laws to help billionaires are often the same states that have the most regressive tax systems that overtax working people," said Collins. "It's past time to curb wealth hiding in these states and enact policies to hold billionaires and their bureaucratic enablers accountable."


Our work is licensed under Creative Commons (CC BY-NC-ND 3.0). Feel free to republish and share widely.

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