William K. Black

A single Panamanian law firm—one of many hundreds of such firms in the world that specialize in aiding tens of thousands of elites to evade taxes—has had over a million of its documents leaked to a consortium of investigative journalists.  Neither the New York Times nor the Wall Street Journal are part of that consortium, and neither seems embarrassed about that failure.  Instead, they have filled their pages with pieces about the Panama leaks that are spun so brazenly and bizarrely that as a reader even I was shocked at their audacity.

The New York Times was late to the story, but its April 5, 2016, analytical piece Peter Eavis that bore this astonishing title:  “In Panama Papers, Finding the Good News in Widespread Tax Cheating.”  The Wall Street Journal, despite its less bizarre titles managed to surpass the NYT with the volume and the blatancy of its spin.  In an April 5, 2016, article entitled “Panama Papers: Hiding Cash Has Become Crummy Business.”  The thrust of that story is that laundering money and tax evasion is a “crummy business” not because it is immoral and destructive, but because it is purportedly experiencing reduced profitability.

But the WSJ’s editorial pages always trounce the increasing lunacy of their news pages.  News of endemic fraud by elites is simply an opportunity to attack the paper’s enemies.  Bret Stephens’ op ed has a title that exemplifies this attack syndrome: “‘C’ Is for Corruption: The Clintons are the Brazilianization of American politics.”  A reader might wonder what all of this had to do with the Panamanian leak.

This is Stephens’ explanation.

“China: A leak of 11.5 million documents from Panama-based law firm Mossack Fonseca—instantly dubbed ‘the Panama Papers’—implicate relatives of President Xi Jinping along with other top officials of sheltering fortunes in offshore tax havens. Mr. Xi is supposed to be leading an anti-corruption campaign.

“The Panama Papers have also exposed billions in assets belonging to close friends of Vladimir Putin …

“But nobody can be surprised by any of this. And nobody should look away from the central lesson of the scandal, though they’re trying. To wit, the story here isn’t about tax evaders and offshore accounts, deplorable as they may be. It’s about public policies and incentives that make a career in politics an expedient route to personal enrichment.”

See, the story isn’t really about corrupt private elites—it’s about corrupt government elites.  Except that from Murdoch’s perspective this means a chance to take a shot at the likely Democratic presidential nominee.

Fortunately, the WSJ’s entire editorial staff served the nation by putting “The Panama Papers in Perspective.”  The WSJ is shocked and distressed that the public is focusing on the wealthy engaging in tax abuse, including tax fraud.  The WSJ wants us to adopt the “perspective” that this is merely a “distraction” foisted by “the political class” from the real issue that government is corrupt.

“That’s not stopping the media from jumping to conclusions, and many are oddly focusing on tax avoidance. The claim is that these leaks show how easily wealthy individuals have been able to use Panamanian bank-secrecy laws—long a target of global tax campaigners—to ‘conceal’ their wealth.

“The ICIJ solicited comment from Gabriel Zucman, a student of left-wing economist Thomas Piketty who last year published a book decrying offshore tax havens, and he dutifully opined, ‘These findings show how deeply ingrained harmful practices and criminality are in the offshore world.’

“The Organization for Economic Cooperation and Development described Panama as the ‘last, ultimate tax haven’ and clearly hopes these reports will force the Central American country to abandon its secrecy laws.

“The far more important question is how so many public officials in so many governments managed to accumulate so much money.

“The mistake now would be to narrow the focus prematurely, zeroing in on tax avoidance that is a hobbyhorse of the political class but in this case is a distraction. The real news here are the incomes and far-flung bank accounts of the political class.”

See, we all have it all wrong.  We all need to read the WSJ and the NYT and celebrate the good news of massive tax fraud by business elites and join together to denounce government.  Ignore the tens of thousands of wealthy men behind the screen of bank secrecy evading taxes.  They are a “distraction.”

William K. Black is Associate Professor of Economics and Law, University of Missouri-Kansas City.

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