The Tax Free Tour – VPRO documentary – 2013

“Where do multinationals pay taxes and how much?” Gaining insight from international tax experts, Backlight takes a look at tax havens, the people who live there and the routes along which tax is avoided globally. Those routes go by resounding names like ‘Cayman Special’, ‘Double Irish’, and ‘Dutch Sandwich’. A financial world operates in the shadows surrounded by a high level of secrecy. A place where sizeable capital streams travel the world at the speed of light and avoid paying tax. The Tax Free Tour is an economic thriller mapping the systemic risk for governments and citizens alike. Is this the price we have to pay for globalised capitalism? At the same time, the free online game “Taxodus” by Femke Herregraven is launched. In the game, the player can select the profile of a multinational and look for the global route to pay as little tax as possible. Originally broadcasted by VPRO in 2013.

Corporate Taxes: Last Week Tonight with John Oliver (HBO)

00:04
taxes essentially the government’s
00:06
GoFundMe page now
00:08
today is April 15th which means you have
00:10
just 45 minutes to file your taxes
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except relax don’t panic because thanks
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to the weekend and a holiday the
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deadline is actually April 17th
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this year except don’t relax do panic
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that’s still not enough time to do it
00:23
right you’re fucked you’re absolutely
00:25
fucked and you’re going to jail Anthony
00:28
many people are perplexed and mystified
00:31
by our tax system perhaps best
00:32
exemplified by this Instagram video from
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cardi B you know that government is
00:37
taking 40 percent of my taxes and Uncle
00:41
Sam I want to know what you’re doing
00:43
with my fucking tax money but why does
00:44
y’all niggas doing with my fucking money
00:46
what is your with my fucking money I
00:49
want to know I want receipts I wants
00:51
everything I wanna go to my cousin
00:54
weenie
00:54
[Applause]
00:58
whoa whoa cardi if you really want to
01:01
know where your money’s going may I
01:02
present to you the recently passed
01:04
omnibus spending package
01:09
[Applause]
01:10
because it turns out cardi your fucking
01:13
money goes to your fucking military your
01:15
fucking health care and your fucking
01:17
Social Security and veteran and
01:19
unemployment benefits everything else is
01:21
just on fucking discretionary shit and
01:22
of course interest now as you may recall
01:26
late last year Republicans passed and
01:28
Donald Trump signed a tax reform bill
01:30
and in selling it Trump made some clear
01:31
promises about who stood to benefit our
01:34
focus is on helping the folks who work
01:38
in the mail rooms and the machine shops
01:39
of America the plumbers the carpenters
01:42
the cops the teachers the truck drivers
01:44
the pipe fitters the people that like me
01:47
best well that that is clearly nonsense
01:51
because if this bill were really helping
01:53
the people that like Donald Trump best
01:55
it would exclusively benefit
01:57
Eric Trump Roseanne Barr and anyone
01:59
who’s ever looked both ways before
02:00
whispering it was the choose and the
02:04
truth is for all chumps talk of pipe
02:07
fitters the biggest tax rate cuts by far
02:10
actually goes to businesses with the top
02:12
federal corporate tax rate the tax on a
02:14
company’s profits going from thirty five
02:16
percent to just twenty one percent and
02:19
to be fair many policymakers on both
02:21
sides had argued at the 35 percent
02:23
federal rate among the highest in the
02:25
world
02:25
should actually come down but to be even
02:27
fairer most companies didn’t pay thirty
02:30
five percent in fact before the bill was
02:32
signed to the effective rate the amount
02:33
companies actually paid was closer to
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twenty four percent and some large
02:37
companies have historically paid far
02:39
less than that
02:40
you may remember a few years ago people
02:42
were furious about this ge had profits
02:45
of fourteen point two billion dollars in
02:47
2010 five billion dollars of that made
02:50
in the United States but the company’s
02:52
expected US tax bill a grand total of
02:56
zero dollars okay so when the total is
03:00
zero you can’t call it a grand total
03:02
there is literally no total less grand
03:05
except maybe total cereal and that’s
03:09
just because it tastes like your spoon
03:10
somehow missed the cereal and now you’re
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just eating the box that it came in
03:14
and GE may well say we’ll hold on that’s
03:17
just one year but a recent study found
03:20
that between 2008 and 2015 18 large
03:23
profitable companies including General
03:26
Electric paid no federal income tax at
03:28
all over the entire period not at all
03:31
and that is a staggering total which is
03:34
incidentally what they used to call
03:35
total with raisins until they got more
03:37
honest who changed it to total with
03:39
raises but who gives a shit
03:41
so tonight in honor of upcoming tax day
03:44
we thought we’d give you just a glimpse
03:46
of the lengths that companies will go to
03:48
to legally avoid taxes both here and
03:50
abroad
03:51
now corporate tax avoidance has a long
03:53
and infuriatingly proud history in the
03:56
1980s for instance a lawyer named John
03:58
Carroll jr. came up with a tactic to
04:00
move US companies offshore to avoid
04:02
taxes and his firm celebrated him with
04:05
and this is true a 13-minute operator
04:07
staged in his New York apartment and
04:10
I’ll give you just a very small taste
04:12
[Music]
04:21
Wow
04:22
we may have just found the only musical
04:26
resistant to race blind casting you
04:28
can’t go Hamilton on this one because
04:31
those people really have to be white now
04:34
now that the tax dodge being celebrated
04:37
they’re involved taking an American
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company and headquarter in it in Panama
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where taxes were lower something its
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creator called the Panama scoot which
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sounds like the name of a tiny elf in a
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cowboy hat
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my name’s Panama scoot and I sleep in
04:51
your boots and offshore scooting is
04:55
actually something of a common theme in
04:57
corporate tax avoidance for decades
04:59
companies have hunted for ways to get
05:01
their money to friendlier tax havens
05:02
like the Cayman Islands you may remember
05:04
that during the 2012 election it emerged
05:06
that Mitt Romney had money in the in
05:08
companies in the Caymans which led to
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this magnificent clip of John Stossel
05:12
saying the one thing he probably
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shouldn’t be saying to the person he’s
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speaking to but Romney pays taxes and
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all the money earned from the cayman
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entities i would think it would be like
05:24
pirate heaven some pirates can’t say the
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word pirates
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to a guy with an eyepatch it can’t it’s
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not fair
05:39
it’s like me sitting down across from
05:41
you and calling you bootleg Geraldo yes
05:43
yes it’s obvious but it’s also lazy and
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hurtful that’s an indoor thought and tax
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havens have become magnets to
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corporations who try and shift as much
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of their profits there as possible it’s
05:56
a major reason why in 2016
05:58
nearly two-thirds of the profits made by
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American multinationals outside the US
06:02
were booked in just six low or zero tax
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countries and it’s a lot easier to move
06:08
profits offshore than you might think an
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increasingly popular way particularly
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pharmaceutical and high-tech companies
06:15
like Google avoid paying the 35% is to
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shift their patents computer code pill
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formulas even logos from their US bases
06:24
to their outposts in low tax countries
06:27
today
06:27
a company can move automatically all of
06:31
its assets just on paper you can push a
06:34
button and move your algorithms you know
06:37
could take the recipe out of the vault
06:39
yeah put it in a Swiss Fault and then
06:41
and then it’s Swiss yep coke could put
06:46
that recipe in a Swiss vault and their
06:48
profits would move offshore that is very
06:50
roughly how it works although for the
06:51
record just being in a Swiss vault
06:53
doesn’t automatically make something
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Swiss that’s why we don’t call this
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Swiss gold we call it Nazi gold
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those are Hitler bucks your Swiss fucks
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and this this happens all the time
07:05
and the best innovators in weasely
07:08
accounting have arguably been tech
07:09
companies look at Apple for years
07:11
they’ve been deferring paying US taxes
07:13
on foreign profits by stashing the money
07:15
overseas and not bringing it back so
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much so that at the end of last year
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they had 269 billion dollars parked
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overseas and when their CEO Tim Cook
07:24
appeared in front of Congress a few
07:25
years back he was very defensive about
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that
07:28
we pay all the taxes we owe every single
07:33
dollar we don’t move intellectual
07:35
property offshore and use it to sell our
07:38
products back to the United States to
07:40
avoid taxes we don’t stash money on some
07:44
Caribbean island now he was technically
07:47
correct there because Apple didn’t stash
07:49
their money on a Caribbean island they
07:52
did however have it stashed on this
07:54
island Ireland which is it is true not
07:58
in the Caribbean so one word made a lot
08:01
of difference there it’s like if
08:02
somebody said the one thing I can
08:04
promise you is that this refrigerator is
08:05
absolutely not
08:06
full of severed Caribbean heads maybe
08:10
that is technically true but I’m still
08:11
going to pass on a sparkling water and
08:13
when Ireland indicated that it planned
08:15
to change its tax laws Apple found a new
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shelter for profits on this island the
08:20
Isle of Jersey a tax haven in the
08:22
English Channel which is again not
08:24
technically in the Caribbean although
08:26
when you really look at it you could
08:28
almost mistake it for the Caribbean if
08:30
you squint a little drink 9 points of
08:32
beer and hold a picture of the Caribbean
08:34
in front of us
08:35
meanwhile Google used a slightly
08:38
different tax workaround sending its
08:39
money on something of a world tour
08:41
Google license some of the intellectual
08:44
property it created here in the US to a
08:46
subsidiary in Ireland but it turns out
08:49
Google’s overseas profits don’t even get
08:51
taxed there because Google then
08:53
reportedly funnels those profits through
08:55
the Netherlands and then to of all
08:57
places Bermuda where the corporate tax
09:00
rate is zero now that tax trick actually
09:04
has a name it’s called the double Irish
09:06
with a dutch sandwich it sounds like a
09:09
disgusting sex act or an even more
09:12
disgusting Waffle House menu item it’s
09:15
it’s when someone opens up a baked
09:17
potato farce in it and closes it again
09:19
really quick that’s one of it that
09:22
that’s that is exactly what it is and
09:24
when Google CFO was asked about their
09:27
tax policies at a conference his answer
09:29
nearly got him laughed off the stage we
09:31
pay our taxes in every jurisdiction to
09:34
the full extent that the law allows us
09:36
and that’s what we do we pay every penny
09:39
of tax we owe to everybody everywhere ok
09:43
the reaction to the sentence I pay all
my taxes should never be incredulous
laughter unless you are a very wealthy
09:50
dog who’s just spoken for the first time
09:52
and here is where I have some good news
09:55
and some bad news the good news is that
09:57
Trump’s tax bill actually forces
09:59
companies to pay taxes on all the money
10:01
they’ve stashed overseas the hope is
10:03
that they’ll then bring it home in
10:04
something called repatriation the bad
10:06
news is the tax they’re being forced to
10:08
pay which may have once been 35%
10:10
remember has been slashed to as little
10:12
as eight to 15% which seems less like a
10:16
punishment and a lot more like actively
10:18
rewarding companies for tax avoidance
10:20
but Steve minuchin
10:22
Treasury secretary an objectively
10:23
good-looking man argues that this would
10:26
be a huge benefit to America’s workers
10:29
we will have a one-time tax on overseas
10:33
profits which will bring back trillions
10:36
of dollars that are offshore to be
10:38
invested here in the United States to
10:42
purchase capital and to create jobs now
10:45
I know it was hard to pay attention to
10:46
what he was saying because you were just
10:47
automatically undressing
10:49
to go with your eyes and you do it
10:51
whenever he opens his mouth I’m all
10:52
right I’m definitely right the guy’s a
10:55
California ten
10:56
he’s a smoke show but but what he’s
10:58
saying there is giving these companies a
11:01
break on the taxes they owe is worth it
11:03
because it will lead to job creation and
11:05
that is hard to completely disprove
11:07
because anything theoretically could
11:10
lead to jobs you can say I’m dipping
11:12
this badger in fudge to create jobs and
11:14
I can’t prove that you won’t create any
11:17
jobs by doing that but I would argue
11:19
that if creating jobs is your main goal
11:21
there are probably better ways to do it
11:23
now luckily we actually have the benefit
11:25
of a test case here because in 2004 we
11:27
basically did the exact same thing under
11:29
the American Jobs Creation Act it
11:31
offered a one-year tax holiday where
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companies could bring back overseas
11:35
profits and just a five percent tax
11:38
rates the idea was that they would then
11:39
create jobs but when the Senate looked
11:43
at the employment numbers of the 15
11:44
companies that brought back the most
11:45
money this is what they found
11:47
these are the average numbers of US jobs
11:50
at those companies over a five year span
11:52
here is where the big supposedly
11:55
job-creating tax holiday kicked in and
11:57
that is pretty fucking underwhelming I
11:59
would argue that’s the most useless
12:01
ineffective holiday since Arbor Day and
12:03
I’m sorry Arbor Day but your secretaries
12:06
day for trees and we all need to accept
12:07
that in fact instead of hiring workers
12:10
across the board companies mostly
12:13
rewarded their shareholders using 94
12:16
cents out of every dollar they brought
12:18
home on stock buybacks and dividends
12:20
something you can read about in the
12:21
best-selling book yeah no fucking shit
12:23
they did that by acclaimed author
12:25
everyone who knows anything about
12:27
corporations and look for many of those
12:30
companies that may have been the best
12:32
use of their money there is no point in
12:33
hiring people that you don’t need
12:35
but the Trump administration is fiercely
12:37
insisting that this time their tax
12:39
holiday is already creating jobs and
12:42
some companies have seemed happy to pay
12:43
along play-along Apple put out a press
12:46
release not long after the tax bill was
12:47
signed titled Apple accelerates US
12:50
investment and job creation bragging
12:52
they were about to create over 20,000
12:54
new jobs and Trump was quick to take
12:56
credit President Trump tweeting in
12:58
response quote I promised that my
13:00
policies would allow companies like
13:01
Apple to bring mass
13:02
of amounts of money back to the United
13:04
States great to see Apple follow through
13:05
as a result of tax cuts all caps okay
13:10
first that is a solid read from Jake
13:12
Tapper there in fact I think all anchors
13:15
should be forced to shout whenever Trump
13:17
uses all caps in tweets I’ll show you
13:19
this morning the president announced
13:22
that he was quote heading to see the
13:24
border wall prototypes in California or
13:28
today today the president wished all
13:32
Americans are happy Easter but but for
13:37
all the Trump’s excitement those 20,000
13:39
Apple jobs were probably going to happen
13:41
anyway given that the hole was entirely
13:43
consistent with what Apple was doing in
13:45
the United States before the tax cut
13:47
bill passed and Tim Cook knows this this
13:49
is how he responded when asked just how
13:51
much of his hiring spree was down to
13:54
Trump’s new tax plan there are large
13:56
parts of this that a result of the tax
13:58
reform and there’s large parts of this
14:00
that we would have done in in any
14:02
situation and so I haven’t spent a lot
14:04
of time in categorizing those two
14:06
because to me this is about America it’s
14:10
not about which bucket you put things in
14:12
yeah but actually it does matter which
14:16
bucket you put things in because I would
14:18
rather put things in a bucket labeled
14:19
smart economic policy than one labeled
14:22
put money in here I like money thanks
14:24
dummies Tim Cook and look look there are
14:27
legitimate debates over how and how much
14:30
we should tax corporate profits but we
14:32
just had a huge chance to reform our tax
14:34
code and we absolutely blew it because
14:37
effective tax reform is not just about
14:39
lowering rates
14:40
it’s about closing loopholes for
14:42
instance one reasonable idea raised last
14:44
year was forcing companies to pay a
14:46
minimum tax in every single country they
14:49
operate in it’s a bit complicated but
14:51
that may well have reduced their abuse
14:53
of tax havens but that proposal never
14:55
even got out of committee so the result
14:57
here is that our tax code is still full
14:59
of loopholes and however much Trump
15:01
talked about how tax reform would
15:03
benefit cops and pipefitters
15:05
it’s worth knowing that once he got
15:07
behind closed doors his message seemed
15:09
to change
15:09
we’re told the president is still
15:11
celebrating passage of the Republican
15:13
tax cut bill sources with firsthand
15:16
which tells CBS News that he told a
15:18
group of wealthy people at his exclusive
15:20
mar-a-lago estate quote you all just got
15:24
a lot richer that’s right so on Tuesday
15:28
as you scrape together your taxes and
15:30
like cardi B wonder what Uncle Sam is
15:32
doing with your motherfucking money rest
15:35
assured that Donald Trump’s tax reform
15:37
continues to let companies engage in
15:39
sophisticated tax avoidance schemes and
15:41
to those companies I say this on behalf
15:44
of America please enjoy this double
15:46
Irish with a Dutch sandwich I made it bu
15:49
myself eat it while it’s hot
15:52
[Applause]
16:00
you

The French Economist Who Helped Invent Elizabeth Warren’s Wealth Tax

To trace the progress of the wealth tax from a fringe academic idea to the center of the Democratic Presidential primary, it is helpful to begin a bit off-center. On September 15, 2008, the day that Lehman Brothers filed for bankruptcy, a twenty-one-year-old student of Thomas Piketty, Gabriel Zucman, started work as a trainee economic analyst in the offices of a Paris brokerage house called Exane. Zucman felt obviously underequipped for the task before him: to write memos to the brokerage house’s clients and traders helping to explain why the very durable and minutely engineered global financial system appeared to be on the verge of collapse. Poring over some of the data he was given, which concerned the international flows of investments, Zucman noticed some strange patterns. The amount of money that had been moving through a handful of very small economies (Luxembourg, the Cayman Islands, the tiny Channel Islands of Jersey and Guernsey) was staggering. “Hundreds of billions of dollars,” Zucman recalled recently, making the “B” in “billions” especially emphatic. Eventually, he would calculate that half of all foreign direct investment—half of the risk-seeking bets, placed from overseas in India, China, Brazil, and Silicon Valley, and of the safety-seeking investments, placed in the United States and Europe and stock indexes—was moving through offshore hubs like these.

Before the financial crisis, the rise of offshore tax havens hadn’t been ignored—one element of the Enron scandal of 2001, for instance, was the eight hundred and eighty-one overseas subsidiaries the company had created, which had helped it avoid paying federal taxes for three years—but those stories took place within a more confined and more frankly moral framework: it was a cat-and-mouse plot, about the mobility of wealth, and the fruitless efforts to pursue it. Zucman’s intuition was that these arrangements did not describe a moral or a legal drama but a macroeconomic one. That much wealth, poorly documented or regulated, might have helped to destabilize the global economy. It also seemed that, if economists were not attuned to the amount of wealth stored in offshore havens, they might also have missed the extent of global inequality, since it was billionaires who stored money in the Cayman Islands, not retirees. “You know, the way we study inequality is we use survey data, state-tax data,” Zucman told me, “and that’s not going to capture these Swiss bank accounts.” After half a year at Exane, Zucman was back in graduate school, working with Piketty on the study of wealth inequality in the United States and Europe that became Piketty’s landmark book, from 2013, “Capital in the Twenty-First Century,” as well as on his own fixation—on how big the island-shaped loopholes in the global economy would turn out to be.

For the next several years, Zucman followed two tracks. The first led deeper into the mists of offshore banking systems. In obscure monthly reports of the Swiss central bank he discovered that foreigners held $2.5 trillion in wealth there (Zucman would eventually calculate that $7.6 trillion, or eight per cent of global household wealth, was held in tax havens, three-quarters of it undeclared) and that these immense sums were mostly being diverted to mutual funds incorporated in Luxembourg, the Cayman Islands, and Ireland. The second track—the work he did first with Piketty and then with the Piketty collaborator and Berkeley economist Emmanuel Saez—mapped the acceleration of inequality around the world and in the United States. The American story was of a snowball effect, as Zucman described it, in which the very high top incomes of the nineteen-eighties and nineties were saved and invested, “and that creates a spiral which is potentially very powerful and leads to very, very high rates of wealth inequality.” The two stories were in fact one. The concentration of wealth in secretive tax havens was an expression of the broader wealth imbalance—the laissez-faire spirit of the Reagan era working its way through the country and then the world. “One thing that became clear in my mind when I did the study of the U.S. wealth inequality is how hard it is to stop the rise of wealth inequality if you don’t have progressive taxation and, in particular, progressive wealth taxation,” Zucman told me. Without it, the snowball just keeps growing.

This work took place during Obama’s Presidency, a period in which, a bit paradoxically, the global populist reaction to accumulated wealth was consolidating even as liberal institutions, belatedly, began to get a handle on the problem. In 2010, early in Zucman’s doctoral work, Congress had passed the Foreign Account Tax Compliance Act (fatca), which required tax havens to share banking information with the United States or suffer significant economic sanctions. The program worked, and, by the middle of the decade, European regulators had compelled tax havens to share the same information with them. “That actually had a very big impact on my thinking, because it showed that new forms of international coöperation can emerge very quickly,” Zucman told me. “In particular, sometimes we have this view that, ‘Oh, we can’t do anything about tax havens. Countries are entitled to their own laws, and, if they want to have a zero-per-cent corporate-tax rate of bank secrecy, that’s their own right.’ ” Bufatca had demonstrated that tax havens were not autonomous zones. “At the beginning of my Ph.D., whenever I or N.G.O.s would talk about having some automatic exchange of banking information, policymakers would say, ‘Oh, that’s a pipe dream.’ And so I witnessed the transition from pipe dream to now everybody does it.” He went on, “It can happen very fast.

As WikiLeaks oriented international relations around a central tension, between transparency and secrecy, similar themes and patterns were emerging in the area of wealth. To parse them required the tools of an investigative journalist, of discovery and cajoling. Zucman is an economist, but he also had some of the qualities—youth and fervency—that investigative reporters often have, and that made him someone people would go to when they thought something was very wrong. A leaked trove of foreign wealth data from the Swiss subsidiary of the banking giant H.S.B.C. made its way to various national tax authorities, and Scandinavian government officials shared it with Danish and Norweigan academics who were collaborating with Zucman. There were limits to what he could see in the H.S.B.C. trove, but it provided a suggestion of how much wealth from Scandinavian countries was being stored away in offshore hubs like Switzerland. In 2015, when the Panama Papers leaked, detailing the evasion efforts of the law firm Mossack Fonseca, it was possible to see the business of tax evasion in action—the lawyers, the pitch decks, the business analysts. Shrouding fortunes was the work of meticulous professionals; when Zucman and colleagues traced this wealth through tax shelters, they found it often was finally invested in ordinary stocks and bonds. “It was very mundane,” Zucman said.

Gradually, Zucman came to see tax evasion differently. “It’s not a psychological thing,” he said. There was a market. The key player wasn’t the billionaire, but the bankers and lawyers who Zucman came to think of as the tax-evasion industry. The professionals in this industry had bosses, and partners or shareholders; they worked within a regulated system. “If you have banks that feel that they are too big to indict then they will continue to commit some form of financial crimes,” Zucman said. “They will budget costs for fines.” In 2009, tax havens seemed like black holes, sucking out so much wealth that it warped the global economy. By 2019, they seemed dependent on the continued dormancy of the great liberal apparatus of international banking regulation, which could be quickly revived. “And the U.S.,” Zucman said, “you know, if there is a U.S. President that is serious about fighting global oligarchy, he or she has a ton of power.”

Zucman works in a small, spare office next door to Saez’s, on the sixth floor of Evans Hall at U.C. Berkeley. The cinder-block walls are undecorated, and the only personal touch I could see, when we met there a few weeks ago, was a small espresso machine. Zucman is fair-skinned, with round cheeks, light brown hair, and a longish nose, and he was wearing a black V-neck T-shirt and jeans. (The next morning, when we met again, he would be wearing a different black V-neck T-shirt and a different pair of jeans.) The scene seemed a bit unadorned for someone who had, this year, been named by Prospect magazine, in the U.K., as one of the fifty most influential thinkers on the planet. He speaks with a French accent and has an outsider’s sweeping, offhand way of talking. For all of Piketty’s fame—and his own, and Saez’s—Zucman mentioned several times that the economics profession had been slow to recognize inequality as a legitimate topic. He still seemed to have the outlook of a less powerful person than he now is.

Saez and Zucman have written a book, published this month, called “The Triumph of Injustice,” which assembles their research into a policy plan. (Its subtitle is the instruction-manual-like “How the Rich Dodge Taxes and How to Make Them Pay.”) One way to understand the book is as marking a new phase in the project that Piketty, Saez, and Zucman share. Having done more than just about any other economists to describe the powerful effect that accumulated wealth has on global inequality, they are now advocating for a solution: a highly progressive annual tax on wealth, an idea that has been adopted by Elizabeth Warren and Bernie Sanders. Zucman is the junior partner in the enterprise, but he has also been its chief propagandist, duelling on Twitter with economists who raise objections or philosophical gripes, and so the wealth-tax cause has come to reflect some of his own attributes: his tremendous explanatory power, his comfort with being an outsider to the establishment, and his great optimism in what government can know and do about the concentration of wealth.

A few weeks ago, Saez and Zucman flew to Washington for a pair of panels at the Brookings Institution presenting their ideas—one closed to reporters, and the other open to them—and at the open session Zucman gave a ten-minute presentation of the book, which, with admirable concision, boiled the essential story of wealth and the tax code down to two slides. The first displayed the results of their study of the aggregate burden of all federal, state, and local taxes after the 2017 Trump tax cuts, which concluded that the United States no longer has a progressive tax system—statistically, the Trump cuts dealt it a death blow. Most Americans now pay about the same portion of their income to the government (the upper-middle class pays very slightly more), and the wealthiest pay less. The slide is titled “A Giant Flat Tax Which Is Regressive at the Top End.”

To explain how this could be, Zucman likes to use the example of Warren Buffett. Forbes had estimated Buffett’s wealth to be sixty billion dollars, which suggested that his wealth was growing by about three billion dollars per year. But Buffett reported to the I.R.S. capital gains of about ten million—based on his sales of some shares in his own company, Berkshire Hathaway. For many years, Buffett has been pointing out that his tax rate is too low—the line has often been that he pays a lower effective rate than his secretary—and urging politicians to turn the screws a bit tighter on the ultra-wealthy. In response, Barack Obama proposed the Buffett Rule, a principle adopted by Hillary Clinton, in which people making more than a million dollars a year would have a minimum federal tax rate of thirty per cent. As of a couple of years ago, this was the frontier of mainstream Democratic tax policy, but, to Zucman, it was outlandishly inadequate. Raising the rate on the ten million dollars that was accessible to the I.R.S. made no statistical difference at all. The issue was the $59,990,000,000 that they could not touch. Apply the Buffett Rule, don’t apply the Buffett Rule; it didn’t much matter. “Functionally, his tax rate is zero per cent,” Zucman said.

The second chart examines the share of wealth held by the Forbes 400, which has mushroomed from one per cent of total wealth, at the outset of the Reagan era, to well over three per cent today. Had Warren’s wealth tax been in place all along, the Forbes 400’s share would now be about two per cent. Zucman and Saez propose a stricter wealth tax (ten per cent annually), which they say would have held the Forbes 400’s share constant, around one per cent. If you wanted something like the more equal pre-Reagan America for which Democratic politicians often grow nostalgic, they suggest, it would take a tax like that.

At the end of last year, Saez got an e-mail from Bharat Ramamurti, a longtime economic policy adviser of Elizabeth Warren’s, who said that Warren was interested in proposing a tax on wealth in some form. Zucman and Saez created a spreadsheet, using their own estimates of wealth, that allowed the Warren campaign to play around with different thresholds and rates for the tax. At first, Ramamurti sketched out a plan that taxed fortunes of twenty million dollars or more at one per cent. But in Saez and Zucman’s analysis—on the spreadsheet—wealth was so concentrated at the highest end that a more radically progressive tax, one which targeted a relatively small number of households, could still generate trillions in revenue. Eventually, the Warren campaign settled on a plan that would tax fortunes over fifty million dollars at two per cent annually, and those over one billion at three per cent, which Saez and Zucman estimated would raise the astonishing sum of $2.75 trillion over the course of ten years. (The entire revenue of the federal government, in the current budget year, is $3.4 trillion.) To Zucman, the choice had the added effect of averting a political problem that had bedevilled European wealth taxes, which tended to start with much smaller fortunes. “Above fifty million, you can’t really argue that these people can’t afford to pay,” Zucman told me.

Something quietly revolutionary was happening in these conversations, in January, between Ramamurti and the Berkeley economists, and between Ramamurti and his boss. For Democratic politicians and policymakers, taxes have generally served as a tool, to fund a program that they believe the people want. When Barack Obama proposed a broad expansion of public health insurance, his advisers developed an intricate, progressive system of taxes to pay for it, but the rates and thresholds for those taxes had been determined by the cost of the program. Ramamurti and Warren wanted to maximize revenue, and they also wanted to reduce inequality, which meant that they wanted a way to make the wealthy give up more of their fortunes. It wasn’t an ideological change so much as a conceptual one—about how pervasive and controlling the effects of inequality are. Taxing wealth to limit fortunes became a goal in itself.

Elizabeth Warren wasn’t the first candidate to consider tackling American wealth in this way. During the 2016 Presidential primaries, Zucman and Saez had an extended conversation with Warren Gunnels, Bernie Sanders’s longtime economic adviser, after Sanders had expressed interest in the idea of a wealth tax. The Berkeley economists scored various versions of the plan, estimating the revenue and economic effects, and eventually Gunnels brought a proposal to Sanders and the campaign. The reaction among his advisers was mixed, and, among the many other policy ideas the Sanders campaign was considering, this one simply drifted away. Sanders was already asking Americans to dream of a socialist society like Denmark’s or Sweden’s, and the wealth tax, which had not succeeded even in Europe, might have seemed especially exotic, and likely to trigger another round of denunciations in the American press.

After Hillary Clinton won the Democratic Presidential nomination, her advisers also spent several weeks considering whether to propose a wealth tax. As a matter of framing, one of her advisers explained to me, “There’s huge merit in the wealth tax—it does bring into sharp focus the inequity in our tax code as it relates to how you treat taxing income to wealth.” The campaign’s policy officials would evaluate how prone it might be to legal challenges, or to the wealthy avoiding or evading it—but it had an intuitive appeal. Because of the concentrations of wealth, the adviser said, “the sheer amount of money you can raise off a wealth tax is staggering.” Clinton herself was intrigued by the idea, and legal experts prepared memos about its constitutional viability, while Saez and Zucman helped Clinton’s tax advisers measure the revenue and economic impacts. But, as with the Sanders campaign, it was never formally proposed. The adviser went on, “It was a pretty exotic proposal. Given the way the election was shaping up, it didn’t seem like the proposal was going to alter the overarching narrative of the race. The reason I keep coming back to is inertia.”

But in 2016 not even the socialists had made the conceptual leap: that a wealth tax could have political appeal separate from, even exceeding, the appeal of the programs it funded. In September, eight months after Warren formally announced her proposal, Sanders introduced a wealth tax that was more extreme still: it starts at a one-per-cent marginal annual rate for households worth more than thirty-two million, and increases steeply, to eight per cent, on households worth more than ten billion. “What we are trying to do,” Sanders told reporters in September, “is demand and implement a policy which significantly reduces income and wealth inequality in America by telling the wealthiest families in this country they cannot have so much wealth.”

As a political matter, those eight months will be hard for Sanders to make up. The tax itself is now Warren’s signature proposal, and she has refined her campaign message around it. At rallies, she asks the crowd how many people own their own homes, and, once hands are in the air, points out that most Americans already pay a wealth tax on their biggest asset, they just call it a property tax. (“Great line,” the Clinton adviser told me. “We didn’t have that.”) “Your first fifty million is free and clear,” Warren likes to say on the campaign trail. “But your fifty millionth and first dollar, you gotta pitch in two cents, and two cents for every dollar after that.” By the time Warren held a rally before the brilliant edifice of the Washington Square arch last month, the crowds had begun to anticipate the line, and, as her speech wound toward the wealth tax, they chanted back at her, “Two cents! Two cents!” In 2016, Donald Trump would test out new lines at his rallies, little lures dropped into the depths of the crowd. Was there a bite? “Build the wall” and “Lock her up” came back at him, and eventually they became the substance of the campaign. Shout a slogan back to a candidate, and you have explained the campaign to itself.

The real resonance between Zucman and Saez’s proposals and the Presidential campaign of Elizabeth Warren, the champion of the Consumer Financial Protection Bureau, may be in their shared optimism about what the modern American administrative state can accomplish. When I asked William Gale, the co-director of the Urban-Brookings Tax Policy Center, what distinguished Saez and Zucman from the center-left policymakers who had preceded them, he mentioned two elements. First, he said, they wanted steeper taxes on the wealthy than even most progressives in Washingtonthey were left, not center-left. The second difference, Gale said, was more pronounced. “What I would describe as the previous center-left consensus is that we ought to raise taxes on the very rich, but that’s really hard to do,” Gale said. “Saez and Zucman come in and say, ‘In fact, it’s quite possible; it’s just a matter of enforcement and getting the taxes right—pushing on both fronts.’ Their policy optimism is very different from the conversations that people had in the Obama Administration, where it was often about how the wealthy had these tax-avoidance strategies, these armies of lawyers, that the administrative problems were extreme.”

As Saez and Zucman’s ideas moved to Washington, they met points of resistance, small and big. Jason Furman, who chaired President Obama’s Council of Economic Advisers, recently suggested on Twitter that the rich paid slightly more in taxes than Zucman and Saez’s graphs suggested. But the broader critiques took aim at their administrative optimism. Since the spring, the former Treasury Secretary Larry Summers and his colleague Natasha Sarin, a law professor at the University of Pennsylvania, have been arguing that Zucman and Saez have radically overestimated how much revenue a wealth tax would generate, and that the more realistic return, based on what the I.R.S. had been able to recoup from the estate tax, might be as little as one-eighth of their projections. Sarin told me, “The excitement around the Warren proposal is that, by taxing seventy-five thousand households and imposing a relatively minor additional tax burden on them, we can pay for just about everything we want. If that sounds a little unbelievable, I think that’s because it is a little unbelievable.”

Zucman and Saez published a full response in June, pointing out that, in several European countries that had tried a wealth tax, as well as Colombia, the average avoidance rate was about fifteen per cent; Summers and Sarin, they argued, assumed tax-avoidance rates of between eighty and ninety per cent. “They start from the premise that the rich cannot be taxed, to arrive at the conclusion that a tax on the rich would not collect much,” Zucman and Saez wrote. Their more colloquial argument was that there was nothing mysterious about wealth. Seventy per cent of the wealth of the top 0.1 per cent, Zucman argued, was in the form of stocks, bonds, and real estate—it was easily valued. More portable forms of wealth, like art or jewelry, could be assessed through insurance estimates. The trickiest form of wealth for tax authorities to value is privately held businesses; Saez and Zucman propose in their book that the I.R.S. could make an assessment, and if anyone disagreed they could simply transfer two per cent of their shares in the business to the government, which would then sell them at auction. Zucman’s deeper theory seemed to be that no strong wealth tax had ever been tried. The European models had very low thresholds (often starting around a million dollars), which made them vulnerable to political attack and legislative exemptions. Enforcement was often nonexistent. The largest economy to tax wealth in recent years is France’s, and that levy, Zucman pointed out, relied on self-reporting. “There was a box on the return for wealth, and you wrote a number in the box. That was all.”

Liberals have been agitating, for many years, for an end to the Reagan regime. Now, in Elizabeth Warren, the Democrats have a leading Presidential candidate who intends to unwind that era, and the question—the anxiety—is about how much might come undone. Natasha Sarin, Summers’s co-author, told me, “There’s another conceptual point that I find interesting. Bill Clinton, when he was running for President, said the world would be better if there were more millionaires. I was kind of stunned when I heard Bernie Sanders say that billionaires should not exist. There is something about that view that seems deeply alien to what many progressives, I think, believe. And, economically, I worry, it is deeply inefficient.” Zucman, by contrast, said at the Brookings conference that Piketty’s next book, due out next spring, would advocate a wealth tax of ninety per cent for billionaires. “Really,” Zucman told me, “you could abolish billionaires if you wanted to.”

From Zucman’s office window in Berkeley, it is possible to see clear across the bay to San Francisco, where the escalating forces of inequality had sent housing prices sky-high and pushed working-class people to the periphery of urban life, as they had in Paris. The formative political event in Zucman’s life was the 2002 French Presidential election, when he was fifteen, in which the nationalist Jean-Marie Le Pen won nearly five million votes in the first round, making it into the runoff, in part because of the sense that all of the gains of society were being hoarded by élites.

“You know,” Zucman said, “when you have the fall of the U.S.S.R., the fall of the Berlin Wall, some people say it’s the triumph of the free-market economy, the end of history, you won’t do better than that. And, especially now, in a globalized, integrated world, there’s no viable progressive platform that’s possible. And the left became discouraged, as it does—you know, ‘This is all a messy failure. It’s game over,’ ” Zucman said. “And now, thirty years later, people are realizing that there are all kinds of contradictions in the way our economies work, and we can do better.” The United States is only four per cent of the global population, he went on, but much of the rest of the world had remade itself in our image thirty years ago, and—if a progressive administration in Washington could implement a wealth tax, and strengthen international coöperation for higher corporate tax rates against tax evasion and offshore havens—maybe it would do so again. “You could change the U.S., but you could also change the world,” Zucman said. “Actually, you could be much more radical.”