Tax Havens Are Turning The U.S. Into An Unequal Aristocracy

To Gabriel Zucman, protégé of rock star French economist Thomas Piketty, the United States is starting to look a lot like Europe in the late 1800s.

“There’s been this great reversal where, in the 19th century, the U.S. was much more equal than Europe, and thought of Europe as being way too unequal,” Zucman, a native Parisian, told The Huffington Post in an interview on Tuesday. “Now, the U.S. is unequal and many people think Europe is too equal.”

The gaping chasm between the super-rich and the rest keeps widening. Now, the 28-year-old assistant professor at University of California, Berkeley hopes his newly-published 116-page book, The Hidden Wealth of Nations, will jolt lawmakers into tackling a key agent of income inequality: tax havens.

Thanks to a confluence of regulatory and geographic advantages, Switzerland positioned itself as the first major tax haven just after World War I, providing shelter to the wealth of European nobles as France and other allies levied heavy taxes to pay off public debt and compensate war victims. Until then, European governments had hardly taxed income generated from stocks and property.

By the outbreak of World War II, the tiny alpine nation made itself even more attractive by passing bank secrecy laws. The legislation purportedly protected the wealth of persecuted Jews. Instead, according to Zucman, Jews made up just 1.5 percent of those with assets in Swiss banks. 

That set the standard for Bermuda, the Virgin Islands and other secretive wealth refuges.

“The substantial revenue that’s lost has to be made up for by taxing middle class people,” Zucman said. 

But the problem isn’t just about rich individuals stashing their assets in offshore accounts.

Despite increased financial scrutiny following the Great Recession, corporate behemoths such as Apple, Starbucks and Microsoft continue to funnel their profits through subsidiaries in countries with favorable tax policies, outrageously slashing their U.S. tax bills. The result, Zucman argues, is that 8 percent of the world's financial wealth is held offshore, resulting in a tax revenue loss of at least $200 billion.

That, Zucman says, is a problem. But he has solutions.

First, he believes the U.S. and other large economies should impose economic sanctions on tax havens, forcing them to make up the difference in lost revenue through trade tariffs.

“The idea is that we need to change the incentives [that enable] tax havens to facilitate tax avoidance and tax evasion,” Zucman said.

Then, countries such as the U.S. should reform their corporate tax policies to geographically bind taxable profits to the location of the sales that generated them. For example, he said that if Microsoft theoretically makes 50 percent of its sales in the U.S., then 50 percent of its global profits should be taxed in the U.S.

“It’s very easy for firms to move profits to Bermuda,” Zucman said. “But they cannot move their customers to Bermuda.”

Still, Zucman said he recognizes that the political appetite for curbing tax havens is weak. None of the current crop of presidential candidates -- ranging from populists (albeit of opposite political ilks) like Bernie Sanders and Donald Trump to establishment candidates like Hillary Clinton and Jeb Bush -- has produced any concrete plan to overhaul the tax system, he said.

Zucman fears the risk of inaction.

“There is a tipping point above which inequality becomes detrimental to growth and dangerous to society,” he said. “Nobody knows whether we are far or close from this tipping point, but it is there and it is coming.”

Also on HuffPost:

Shell To Cease Costly Alaska Arctic Exploration

ANCHORAGE, Alaska (AP) — Royal Dutch Shell will cease exploration in Arctic waters off Alaska's coast following disappointing results from an exploratory well it just completed.

Shell found indications of oil and gas in the well in the Chukchi Sea about 80 miles off Alaska's northwest coast, the company said Monday in a release from The Hague, Netherlands. However, the petroleum was not in quantities sufficient to warrant additional exploration in that portion of the basin, the company said.

"Shell continues to see important exploration potential in the basin, and the area is likely to ultimately be of strategic importance to Alaska and the U.S.," said Marvin Odum, president of Shell USA, in the announcement. "However, this is a clearly disappointing exploration outcome for this part of the basin."

Shell will end exploration off Alaska "for the foreseeable future," the company said.

The decision reflects the results of the exploratory well in the Burger J lease, the high costs associated with Alaska offshore drilling and the challenging and unpredictable federal regulatory environment in offshore Alaska, the company said.

Shell has spent upward of $7 billion on Arctic offshore development in the Chukchi and Beaufort seas.

Monday was Shell's final day to drill this year in petroleum-bearing rock under its federal permit. Regulators required Shell to stop a month before sea ice is expected to re-form in the lease area.

The company reached a depth of 6,800 feet with the exploratory well drilling in about 150 feet of water.

Environmental groups oppose Arctic offshore drilling and say industrial activity and more greenhouse gases will harm polar bears, walrus and ice seals.

Over the summer, protesters in kayaks unsuccessfully tried to block Arctic-bound Shell vessels in Seattle and Portland, Oregon.

 

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Here's The Joke Of A Sustainability Report That VW Put Out Last Year

Now that we know Volkswagen purposefully rigged 11 million vehicles to circumvent environmental rules, releasing an enormous amount of pollutants into the atmosphere, the company’s Sustainability Report from 2014 comes off as a horrible joke.

"It's a jaw-dropper. So unbelievable," Linda Greer, a senior scientist at the Natural Resources Defense Council told The Huffington Post.

In the report, which was reviewed by consulting firm PricewaterhouseCoopers, the automaker details its commitment to the customer, its employees and, of course, to the environment. “Environment” is mentioned 335 times over 156-pages -- an average of twice per page. 

“The Volkswagen Group has a long tradition of resolute commitment to environmental protection.” -- page 86.

“We intend to put our creative powers to good use for the benefit of people and the environment." -- page 14.

As we now know, Volkswagen put its creative powers to use in a far less noble way, devising software to purposefully cheat on emissions tests and secretly installing it its diesel vehicles. On Wednesday, chief executive Martin Winterkorn was forced to quit his job at the world’s largest automaker in the wake of the growing scandal and in anticipation of billions in fines, lawsuits and increasing customer rage. More firings are on deck.

VW’s report follows a long tradition of companies using self-reported data -- sometimes certified by well-paid consulting firms -- to make broad declarations of ethical commitment, used to reassure the public that companies aren't just profit-seeking monsters. These are called “corporate social responsibility” reports, "CSR" is the biz lingo. This is a huge movement; most corporations produce these things. Here’s Coca-Cola’s. And Ikea’s. And Exxon-Mobil’s.

And, of course, not all of these efforts are mere publicity ploys. Some companies take this stuff very seriously, even tying environmental goals to executive pay -- an extremely sigficant matter. But in the wake of the VW scandal, it’s going to be harder for anyone to believe a word in these reports.

“[Volkswagen] will probably severely tarnish this entire movement,” writes Greer in a blog post. She’s written before about the key danger of CSR programs: that they end up as merely shiny promotional efforts that allow businesses to sidestep true responsibility for their endeavors.

"There are some companies doing good things," Greer told HuffPost. "Oftentimes they're just doing it and not necessarily putting it in a report."

Yet many efforts are sideshows. Companies give money to philanthropies, for example, but fail to examine the core parts of their businesses that need attention.

Volkswagen will probably severely tarnish this entire movement. Linda Greer, a senior scientist at the Natural Resources Defense Council.

Greer is working with Target now on cleaning up environmental issues in the retailer's supply chain. She also commends Apple for dealing with pollution issues overseas. "They have a CSR report, but I think they are walking the walk more than just talking the talk," she said of Apple.

VW’s absurd document follows a long tradition. BP is also notorious for the false promise of its environmental slogans. The oil company won plaudits for acknowledging the reality of global warming and for the slogan “Beyond Petroleum” back in 2000. Then, in 2010, BP caused one of the worst oil spills in history. 

By contrast, Exxon Mobil after the Exxon Valdez disaster became “religious about safety standards,” writes Chrystia Freeland for the Washington Post in 2010. Getting the oil out of the ground and moving it around the world without killing anyone or destroying the ocean is a core social responsibility.

So is adhering to environmental regulations, which VW brazenly decided to forgo.

Companies need to start with those simple goals before moving on to marketing materials.

Volkswagen May Never Recover From This Mess

It took Volkswagen years to build its reputation in the United States as a hip, countercultural brand -- so cool that an ad for the company is used in an episode of "Mad Men" to signal the fast-changing advertising landscape.

That carefully cultivated brand quickly lost its magic after the Environmental Protection Agency charged the automaker with purposefully designing software for Volkswagen diesel vehicles that skirted environmental regulations.  

On Wednesday, chief executive Martin Winterkorn announced he would step down from the company in the wake of the scandal. "As CEO I accept responsibility for the irregularities that have been found in diesel engines," he said in a statement. "Volkswagen needs a fresh start -- also in terms of personnel. I am clearing the way for this fresh start with my resignation."

Volkswagen’s brand perception plummeted into negative territory this week -- meaning more people are hearing bad things about the automaker than good things -- for the first time in six years, according to new data from YouGov's BrandIndex, which tracks consumers views on various companies. 

Though automakers have a long history of trying to skirt environmental regulations -- indeed, VW was fined in 1973 for installing cheat devices, notes The New York Times -- the large scale of the issue this time and the brazen failure of the company to live up to its environmentally savvy reputation could be devastating.

"If VW gets its reputation back, it will be clawing up the side of a very high mountain," said Thomas Donaldson, a professor of business ethics at the University of Pennsylvania's Wharton School, referring to the scandal as a "corporate Watergate." When a company openly admits to the buying public -- a group it is trying to build trust with -- that it’s been cheating, that’s difficult to come back from.

The costs to the company may far exceed the approximately $7 billion its set aside to pay for its mistake. So far, its stock price has plummeted. But the big issue is future sales. VW just this year surpassed Toyota as the world’s largest automaker by sales -- but this scandal is clearly going to cost them customers.

"I’ll never entertain another Volkswagen again," said Tom Farmer, who lives in the Seattle area and leases a diesel Jetta partly because of its environmental credentials. He’s counting down the months until his lease runs out, he told The Huffington Post, echoing a chorus of betrayed VW owners.

Kevin Foster loved his 2013 Beetle, his first diesel, so much that he named it Beatrice. "I believe in global warming and I thought I was doing my part to help succeeding generations," Foster, an engineer who lives in northern Tennessee, told HuffPost. "And it has all been a lie."

It’s not clear if the automaker will ever recover its good name. A longtime company insider and the highest-paid CEO in Germany, the 68-year-old Winterkorn is known to be extremely attentive to details; his organization was run in a very top-down, centralized manner.

"I am not aware of any wrongdoing on my part," Winterkorn said during his statement on Wednesday. 

We don’t know if that's true or if he knew about the cheat devices -- but in the end, it did not matter.

"You may not have known about the iceberg, but you still need to be looking for it," Donaldson said.

VW CEO has stepped down to spend more time with his attorneys.

— Dugald Wilson (@DugaldWilson) September 23, 2015

Winterkorn dutifully delivered his apology the day before he stepped down. "I’m very sorry, I’m utterly sorry," he said in a video statement, a stunning acknowledgement that the automaker had knowingly cheated its customers.  

"Manipulation at VW must never happen again," Winterkorn said on Tuesday. "I am endlessly sorry that we betrayed the trust. I apologize profusely to our clients, to the authorities and the entire public for the wrongdoing."

Volkswagen said on Tuesday that as many as 11 million vehicles were installed with the cheat software. The program was engineered to sense when emissions were being tested. When there was no testing going on, emissions of nitrogen oxide were 40 times the legal limit. The chemical leads to smog, which is connected with asthma and other respiratory illnesses, as HuffPost's Jo Confino reported Monday.

For much of 2014, VW officials told regulators that the emissions issues with the diesel cars were just a glitch, according to The Wall Street Journal.

A New York Times graphic explains how it worked:

How Volkswagen got away with diesel deception http://t.co/WyWLcS8hs5 pic.twitter.com/usWVRiSuer

— The New York Times (@nytimes) September 22, 2015

The device appears to be relatively simple, but the fallout is going to be exceedingly complex. The New York State attorney general, along with his peers in other states, are investigating; the Federal Trade Commission, too, may begin an inquiry. Customers are looking for payback.  

The German government has also launched an investigation into VW, and YouGov found that the company's perception has suffered even more in its home country. 

A task force led by an external investigator is also prepared to look into the case, VW announced Wednesday.  

Still, automakers have proven to be a resilient group. It took Toyota a little more than a year to recover its brand perception after it faced a huge cover-up scandal over cars that suddenly accelerated, killing passengers, said a representative from YouGov. 

In the end, the VW situation may actually be worse than Toyota's, which didn't intentionally design vehicles to fail, Donaldson said.

But buyers have been through this before, and some won't be put off by this scandal -- sticking by a company with a reputation for making safe, quality cars. 

@EmilyRPeck @HuffingtonPost @HuffPostBiz all car makers haven't been honest, VW still a better car than most

— Ruben Marrero (@RGalaga) September 23, 2015

"When a company says to the people it is trying to build trust with that it's been cheating," that's particularly egregious, Donaldson said. "What takes years to cultivate can be destroyed in the blink of an eye."

The Unassuming Engineer Who Exposed Volkswagen

By David Morgan

MORGANTOWN, West Virginia, Sept 22 (Reuters) - Daniel Carder, an unassuming 45-year-old engineer with gray hair and blue jeans, appears an unlikely type to take down one of the world's most powerful companies.

But he and his small research team at West Virginia University may have done exactly that, with a $50,000 study which produced early evidence that Volkswagen AG was cheating on U.S. vehicle emissions tests, setting off a scandal that threatens the German automaker's leadership, reputation and finances.

"The testing we did kind of opened the can of worms," Carder says of his five-member engineering team and the research project that found much higher on-road diesel emission levels for VW vehicles than what U.S. regulators were seeing in tests.

The results of that study, which was paid for by the nonprofit International Council on Clean Transportation (ICCT) in late 2013 and completed in May 2014, were later corroborated by the U.S. Environmental Protection Agency and California Air Resources Board (CARB).

Carder's team - a research professor, two graduate students, a faculty member and himself - performed road tests around Los Angeles and up the West Coast to Seattle that generated results so pronounced that they initially suspected a problem with their own research.

"The first thing you do is beat yourself up and say, 'Did we not do something right?' You always blame yourself," he told Reuters in an interview. "(We) saw huge discrepancies. There was one vehicle with 15 to 35 times the emissions levels and another vehicle with 10 to 20 times the emissions levels."

Despite the discrepancies, a fix shouldn't involve major changes. "It could be something very small," said Carder, who's the interim director of West Virginia University's Center for Alternative Fuels, Engines and Emissions in Morgantown, about 200 miles (320 km) west of Washington in the Appalachian foothills.

"It can simply be a change in the fuel injection strategy. What might be realized is a penalty in fuel economy in order to get these systems more active, to lower the emissions levels."

Carder said he's surprised to see such a hullabaloo now, because his team's findings were made public nearly a year and a half ago.

"We actually presented this data in a public forum and were actually questioned by Volkswagen," said Carder.

The ICCT's research contract to Carder's team was sparked by separate findings by the European Commission's Joint Research Centre, which showed a discrepancy between test results and real world performance in European diesel engines.

The diesel vehicles chosen for the West Virginia study were the VW Passat, the VW Jetta and the BMW X5. Unlike the VW vehicles, Carder said the BMW vehicle "performed very nicely - at, or below, the certification emission levels."

West Virginia University is not new to ground-breaking emissions research, having helped create the first technology to measure vehicle emissions on the road more than 15 years ago.

Carder belonged to a 15-member West Virginia University team that pioneered portable emissions testing as part of a 1998 settlement between the U.S. Justice Department and several heavy duty diesel engine makers including Caterpillar Inc and Cummins Engine Co.

The manufacturers agreed to pay $83.4 million in civil penalties after federal officials found evidence that they were selling heavy duty diesel engines equipped with "defeat devices" that allowed the engines to meet EPA emission standards during testing but disabled the emission control system during normal highway driving.

When the news about Volkswagen broke last Friday, Carder heard from some of the heavy diesel engine manufacturers that were part of the consent decree.

"They saw what had happened and called to say: 'Good job, you guys,'" Carder said. "Some folks said: 'How did they not learn from our mistakes 15 years ago?'"

Regarding his role in unearthing the current scandal, Carder said there was no particular sense of excitement when his team confirmed that the higher VW emission results were real and not a consequence of faulty measurements.

"There's no incentive for us to pass or fail," he said. "Obviously, we don't want to see something spewing emissions and polluting the environment. But we really have no horse in the race, as they say." (Editing by Soyoung Kim and John Pickering)

One Of The Most Popular Meditation Apps Is Coming To An Office Near You

Headspace is carving out a place for itself in the corporate world.

The meditation service, which closed a $30 million funding deal on Wednesday, plans to release an enterprise product next year for companies that want to provide mindfulness training to their employees, CEO Sean Brecker told The Huffington Post on Friday.

“It’s a huge opportunity,” he said, speaking by phone from the patio of the company’s headquarters in Venice Beach, Los Angeles' burgeoning tech hub. “We have a pipeline of potential clients.”

Headspace, a multimillion-dollar business with more than two million users, has become a major player in the fast-growing wellness industry. The app provides audio of guided meditation sessions and lets users track their progress. It also includes animations explaining the science of mindfulness and how meditation can improve mental and physical well-being. 

As more companies focus on employee health as a perk and a driver of productivity, Headspace has the potential to tap a larger pool of deep-pocketed clients. 

For now, the company has offered corporate packages on its app to a limited number of businesses and other institutions -- including HuffPost. A yearly subscription costs $95, which amounts to just under $8 per month.

But many of the potential clients who wanted to use the service requested special features that Headspace couldn’t provide -- until now.

“Every enterprise wanted something pretty bespoke,” Brecker said. “They may want different live manifestations of the product, or they may want people from Headspace to do lectures on their campus.”

Other companies, he said, requested reporting tools to help managers understand how employees used the product.

With its latest funding round, led by the investment firm Chernin Group, Headspace plans to hire more engineers, salespeople, designers, marketers and content creators to service companies, universities and other groups willing to pay for its service.

No stranger to the idea of patience, the company is not in a rush to launch its enterprise product, which it plans to release sometime next year.

“We’ll only tackle that enterprise market when we feel like we have the resources to build out the product,” Brecker said. “We’ll do it when the time is right, and we have the right product and we have the right team to build that product."

New Orleans Eatery 'Crazy Lobster' Is Clawing Its Way Back After Katrina

During the first days of fall in 2005, Anna Tusa and her husband A.J. watched from the roof of their New Orleans condo as fires broke out in nearby buildings and military trucks rolled in and out of the devastated city.

The couple had just opened a new restaurant, Crazy Lobster Bar and Grill, eight weeks before Hurricane Katrina tore through. But as their eyes swept over what looked like a war zone unfolding before them, it dawned on them that they wouldn’t be able to simply walk the two blocks over to the restaurant, patch up the windows and resume business.

“This isn’t going to come back in a few weeks. This is going to take a long time,” Anna Tusa recalled thinking.

Over 80 percent of the city was underwater after Katrina struck on Aug. 29, 2005, and water levels rose as high as 20 feet in some areas. Over 1,400 people were killed in Louisiana, which suffered the greatest losses after the levees broke, flooding New Orleans and many outlying regions.

Crazy Lobster, which overlooks the Mississippi River at the edge of the city's more elevated French Quarter district, was largely untouched by the flooding that wrecked much of the New Orleans metropolitan region. But like many properties, it was heavily looted in the chaotic days that followed the storm, as refugees piled into shelters and officials tried to restore order. Equipment was damaged and people had defecated in the refrigerators, Tusa said, and it stopped only when the restaurant began to serve as temporary lodging for the National Guard.

“It was discouraging. You never thought you’d see anything like that,” she said of the havoc inflicted by Katrina. “Seeing people steal televisions, setting buildings on fire, it was kind of surreal." 

Ten years later, Crazy Lobster is among the hundreds of businesses reinvigorating downtown. New Orleans is currently enjoying a booming tourism industry. Hotel occupancy rates are high, and the number of annual visitors has nearly tripled since before the disaster. New Orleans now hosts 600 more restaurants than it did in 2005.

It was a long path to recovery for Crazy Lobster, which reopened its doors on June 13, 2008, nearly three years after Katrina. Repairs had cost nearly $300,000. Anna Tusa and her husband, who also own restaurants in Destin, Florida, juggled the responsibilities of hiring staff, cleaning the property and finalizing insurance claims. They had even paid their management team a full year’s salary after the storm, anticipating at the time a quicker reopening.

“New Orleans is in your blood,” said Tusa, who was born and raised in the city. “The attitude was, we’re going to do this, we’re going to open back up, slowly but surely.”

Crazy Lobster, which sits on the waterfront not too far from the Warehouse District, has an industrial vibe. The restaurant has glass and metal walls, and nautical light fixtures hang from the ceiling. A statue of a large crawfish greets customers out by the patio. Families stop by after visiting the Audubon Aquarium, just a five-minute walk away, and the restaurant gets a lot of tourist traffic from events at the Morial Convention Center.

Inside, customers feast on the restaurant’s signature seafood bucket, stuffed to the brim with a two-pound lobster, crab, shrimp, crawfish, clams and mussels. Some go for the house voodoo juice, a potent mix of four types of rum -- coconut, melon, light and 151 -- and pineapple juice. The couple would like to expand the restaurant and add more tables, but “we’ve got no place to grow but into the river,” Tusa said.

The transformation of New Orleans from a city whose population was decimated after the storm to one bursting with tourists and small businesses has been “breathtaking,” said Richard Haase, president of the real estate firm Latter and Blum. New business owners were able to take advantage of lower rents in the years immediately following the storm, and the job market was buoyed by the billions of dollars of federal aid that poured into the region.

Rents for retail spaces in the Central Business District, which remained stagnant for several years after Katrina, have been steadily climbing since 2009, according to data from the Institute for Economic Development and Real Estate Research at the University of New Orleans. The Data Center, a local policy institute, found that the city is also seeing 64 percent more startups per capita than the national average. Before Katrina, New Orleans lagged behind by 25 percent.

“The climate post-Katrina certainly gave rise to a younger audience of business owners, who were able to get into business and stay in business on more preferable terms,” Haase said.

Restaurants, among the first properties to reopen, helped lead the business resurgence and bring the city back to normalcy.

“Everybody who came back remembers where they had their first meal,” said Michael Hecht, chief executive of the economic development group Greater New Orleans, Inc. His was a hamburger and a bourbon on the rocks at La Petite Grocery, a bistro on Magazine Street.

“Restaurants have always had an important place in New Orleans, and post-Katrina, they assumed an even more prominent role,” said Hecht, a former restaurateur himself who had several dining spots in San Francisco’s Mission District, including Foreign Cinema. “And there’s a sense of ownership. People feel empowered to create a future here.”

As part of the rebuilding process, many businesses are filling their ranks with locals as well as with needy residents. Crazy Lobster eventually gained back most of its core staff from before Katrina, but it has also sought out shelters and recovery programs for troubled youth when jobs open up. Several of its employees have histories with drugs and alcohol or incarceration.

“When you see somebody and they’re good people, and they have a problem and can’t control it, we’re willing to overlook that one day when they might not make it to work because of that problem,” Tusa said. “We want to give them a chance, and we’ve seen people turn their lives around." 

Hotels, including the Sheraton and Marriott chains, have also begun to hire from these programs. “It takes a while for these organizations to be open to the idea that a lot of homeless people are very skilled people,” said Deacon DiGiovanni, executive director of Ozanam Inn in New Orleans, which provides shelter for homeless men and supports their transition into more stable lifestyle. “It helps them get back on their feet and into mainstream society.” 

DiGiovanni, a college friend of A.J. Tusa, has also sent some people from his program to work at Crazy Lobster.

Employees at the restaurant call themselves a family. “If there’s something that’s going on in my life, if I have an issue, I’m able to walk up to them or call them at any point,” Darrell Skidgell, a lead server at Crazy Lobster, said of the Tusas.

Angel Roberts, who joined the staff seven years ago at 16, is now a manager. She said the Tusas surprised her with a baby shower when she was pregnant with twins, and loaned her money when her car was about to be towed. “It was me and my pride. I wasn’t sure if I should call them,” she said. “They asked me when I was going to be able to give it back, and I said I was in school, and they said, ‘That’s fine.’”

The Tusas have opened two more restaurants in the city since Katrina: Poppy’s Time Out Sports Bar (a grandson of A.J. Tusa gave him the nickname) just a few steps away from Crazy Lobster, and the more upscale New Orleans Creole Cookery near Jackson Square.

Anna Tusa finds that the city has in many ways strengthened after the storm. “We wanted to employ residents of the city and start helping the economy here," she said.