Want to torque off Republicans? Criticize the lax trust laws they’ve passed to make South Dakota a haven for wealthy tax dodgers. Rep. Susan Wismer (D-1/Britton) spoke up in House Judiciary Thursday about the 94 trusts holding $234 billion in secret cookie jars in our state:
She said trusts and video lottery are comparable, except trusts provide better-paying jobs. South Dakota has become a haven for “fiefdoms from generation to generation,” according to Wismer.
“It’s really nothing to be proud of,” she told other committee members and a room with many financial professionals.
“It’s the way South Dakota has struggled to find alternative sources of revenue that, really, in the long run are not good for democracy as a whole,” she said [Bob Mercer, “Wismer Rips Trusts, and Lust Blasts Her,” Rapid City Journal, updated 2018.01.18].
Rep. David Lust (R-34/Rapid City), who has helped rig our trust laws in favor of rich cash-stashers, took umbrage:
Video lottery is gambling, while trusts employed hundreds of people in positions higher than those commonly available to many working people, according to Lust, R-Rapid City.
“They’re intellectual-property jobs,” he said.
Lust said it was “incredibly naïve” that anyone could “think for an instant” the trusts wouldn’t be off-shore somewhere if they weren’t in South Dakota.
He described Wismer’s remarks as “a screed.”
“It’s just a jaded and biased opinion [Mercer, 2018.01.18].
Hmm… if the Sturgis Rally didn’t have prostitutes, all those biker-tourists would go elsewhere to buy sex. And top-tier hookers who come up with creative activities for their clients are doing intellectual-property jobs. So why do we keep hearing the “jaded and biased opinion” that prostitution is bad for South Dakota?
The Wismer/Lust exchange came in a hearing on House Bill 1072, the latest impenetrable revision of our trust laws written by trust lawyers for their own benefit. HB 1072 sailed through the House yesterday with minimal resistance.
South Dakota trusts and their clients pay no taxes on the assets under management. Trusts do pay fees—up to $30,000 a year—and bank tax on any income they make—at least $500 for new trusts, at least $25,000 after four years. In 2015, when South Dakota trusts held $175 billion, those fees and taxes added $1.1 million to South Dakota’s coffers.
$1.1 million out of $175 billion is 0.00063%. If you got that rate on your property tax on your $200,000 home, you’d pay $1.26.
Conversely, if trusts paid 0.1% property tax on the $234 billion in assets they hold (and that’s still far lower than the tax I’m paying on my house), they’d contribute $234 million toward the state that makes their intellectual property jobs and their clients’ assured and easy intergenerational wealth possible.
For perspective, the Governor’s proposed budget for the Board of Regents is $209 million. The proposed budget for corrections, the courts, the Legislature, the constitutional state offices, and other state government combined is $236 million.
But it’s just a jaded and biased opinion to suggest that South Dakota tax the property of individuals who enjoy the legal protections and services of our great state.
So where are these 500 jobs in South Dakota housed? Surely there must be quite a large building to house these intellectual folks that guard the piggy banks from solicitors. Where is this place located? “Ninety-four private trusts made their home in the state as of Dec. 31 with $234 billion in assets and more than 500 people employed.” From the article.
The jobs mentioned are probably in the form of accountants, attorneys, trust officers, trust officer staff, and all the other bodies needed to support such a huge industry.
Personally, a state income tax makes more sense than arbitrarily picking assets held in trusts as a new category of property to tax. Trusts are a popular estate planning tool for lots of people, not just anonymous, wealthy non-south dakotans. There are tens of thousands of people who live and work in south dakota who use trusts to map out their estate rather than relying on a Will and having their estate go through court when they die. A fair state income tax would help pull some revenue off the huge trusts without unfairly subjecting “average” people who use trusts to a tax that seems like it would be implemented as a penalty for people who had the audacity to legally protect their assets by using trusts.
Wait a minute, I thought we had an federal estate tax problem in this state…..(?) That’s what Rep. Noem has always told us and Senator Thune from time to time too. What gives here?…… ;-)
Money laundering , political corruption , wage stagnation,jobs for the financial elite, lack of democracy all admirable things to fight for……
jerry, a previous post identified a sx falls address that house a few or several of these new ‘ma and pa” small businesses.
ryan, most of those folks do their business in established trusts located in the Caymans, BVI, Bahamas ect.
SD is just getting started in the WEALTH BUSINESS. I think Joop opened some republican eyes. jmo (I am curious what the real story is. Sen Rounds is sure that we ordinary SD citizens have no business knowing how much these corporate CEOs ect make. What is happening right now with DODD FRANK and the gutted banking regulations is sure to be revealing.) He wants to make more of his career, like Kristie does. the hell with ethics.
see https://harpers.org/archive/2018/01/swap-meet/ concerning the Volker Rule
“Carl Levin of Michigan and Jeff Merkley of Oregon, both of them Democrats. Levin, a veteran lawmaker, had a clear-eyed understanding of the way the banks operated….AIG, the giant insurance company that had thoughtlessly taken the other side on a huge proportion of the banks’ CDS [credit default swaps] bets, was bailed out with $185 billion of taxpayer money. By March 2009, the Treasury and the Federal Reserve had committed $12.8 trillion—almost as much as the entire US gross national product—to save the economy. Fearful of public outrage over such generosity to those who had fomented the disaster in the first place, the Fed and the banks struggled to keep the numbers a secret.
By November, 2008, just a month after being raised from the dead by the government’s largesse, the biggest derivatives dealers—including JPMorgan, Goldman Sachs, Citigroup, and Bank of America—were already investing $25 million in setting up the CDS Dealers Consortium, a lobbying group aimed at preserving their freedom to trade credit default swaps without irksome restrictions.
At the end of 2009, Goldman handed employees nearly $17 billion in pay and bonuses. In London, the traders in JPMorgan’s SCP unit generated $1 billion in revenue, thanks largely to a shrewd bet that General Motors would go bankrupt. Bankers and their representatives argued vehemently that their prop trading had absolutely nothing to do with the crash, despite the trillions in bailout money needed to keep them afloat.
…banks and similarly interested parties launched waves of lawyers and lobbyists at the agencies to ensure that rules were crafted to their liking. A painstaking academic study of the public record by Kimberly Krawiec of Duke University revealed that the agencies were subjected to almost 1,400 meetings….
the true objects of the lobbyists’ labors were often invisible to the untrained eye. An ambiguous word here, an obscure footnote there, could be worth billions down the road. “What’s interesting,” Gellasch told me, “is that the complexities were added as a result of lobbying by the firms that were going to be affected, as a way to mitigate the impacts.” Now, he said, those complexities are being viewed as regulatory millstones by those same firms, whose reactions he summarized as “Oh, my God, this is so burdensome.” SOUNDS LIKE WHAT SEN ROUNDS KEEPS SAYING
the $700 trillion derivatives market, the rule attracted intense scrutiny from interested parties, especially the International Swaps and Derivatives Association, the industry overseer that issues the standard contract for swap transactions. Searching the CFTC guideline’s 84 pages of text and 660 footnotes for crevices that could be expanded into loopholes, ISDA found just what they needed buried, whether deliberately or not, in footnote 563:
‘Requirements should not apply if a non-U.S. swap dealer or non-U.S. MSP [the counterparty, or person on the other side of the trade] relies on a written representation by a non-U.S. counterpart that its obligations under the swap are not guaranteed with recourse by a U.S. person.’
There it was, cloaked in bureaucratese. All that was required to dodge the regulation was to state that the foreign subsidiary was “not guaranteed.” Just one month after the CFTC issued its edict, ISDA quietly rewrote its boilerplate swaps contract.
In my opinion this is happening right now. Sen. Rounds is part of it. No doubt other elites in SD are too as the trust laws are massaged by our duped legislators.
And conclusion, “Senator Merkley of Oregon, when asked whether he thought the industry offensive would succeed, his reply was despondent. “I’m afraid it will,” he said.
… resurgence in credit trading by the banks indicates… that they’re already “cheating more on Volcker.” He also asked why Goldman was placing bets on the Marcellus Shale** with its own funds to begin with, given the restrictions laid down by the rule. “That’s a good question,” he said. “But you can be pretty sure that no regulator is going to ask it as long as the administration is filled with Goldman Sachs executives and Gary Cohn works at the White House.”
**Energy Transfer Partners, a Texas pipeline company, which promised there would be “no adverse effects” on the historic site, the following year, ETP razed the house to the ground, causing Goldman Sachs to lose $100 million. The doomed mansion was located close to the projected path of the Rover Pipeline, which was being built to carry natural gas from the Marcellus Shale in Ohio, Pennsylvania, and West Virginia to Canada. Once the $4 billion project was completed, Goldman traders had calculated, the price of Marcellus gas would rise…. but dismayed by toxic spills in protected wetlands and other environmental depredations… Rover was temporarily stopped in its tracks in May 2017. Instead of rising, Marcellus gas prices plummeted—and Goldman lost its bet.
As an aside, I wonder if banks are betting against or for whether Keystone XL ect will get built, given SRST’s heroic stand on the Cannonball last winter?
leslie, I am still trying to figure how in the hell 500 employees can fit into one “mom and pop” office. They must have shrunk the intellectuals to fit them in that work environment. The only way to even think that could work would be if the EB5 was involved to make it possible. Rounds and Daugaard must have corroborated with Joop to find a way to make it all small. Lust must have been the paper pusher because he is sure defending it. This is almost to the point of calling in Stormy Daniels to get these guys to talk.
Good proposal – charge a state tax of 0.1% of the assets under management. When the greedy trust cabal complain – then raise it to 0.2%.
Leslie – who are “those folks” who do their business with Cayman trusts? I’m afraid I don’t understand what you’re saying.
I think a lot of people seem to have grandiose and incorrect ideas about what trusts are and who manages them and what’s “in” them. South Dakota has unique laws that prevent creditors from reaching assets held in certain types of trusts. In most other jurisdictions, creditors have easier paths to reaching trust assets. People from all over the world create trusts to be administered in South Dakota to benefit from our protective laws. Trusts are just words on paper, they aren’t businesses and don’t need any physical space to exist. Most assets held in these trusts are just financial accounts or investment businesses. Again, just words on paper and online accounts. Our asset protection laws make us a favorable option for people who have many other decent options around the world to administer a trust. This industry employs thousands of professionals and paraprofessionals in this state and collects sales tax on all services it performs. Without our trust laws, several types of businesses would be drastically different in this state, including financial advisors, accountants, attorneys, and many more.
And again, many state residents with modest assets also use trusts here for estate planning purposes, and I don’t think charging those families fees for wanting to avoid probate court is good policy.
Citigroup and some Canadian banks are the only investors currently- I don’t think it has as much to do with protests as it does with Climate change and investing in Chinese solar. Norway sold all fossil fuel investments, and the World Bank will no longer fund any fossil fuel development anywhere starting next year.
You can track the XL funding here https://www.banktrack.org/project/keystone_xl_pipeline#popover=financiers
But it is “their” money. It is not yours. You have no right to “their” money just as they have no right to “your” money.
Seriously! it’s money that is untraceable so that they don’t have to pay taxes , it’s money a lot of times from illegal activity. You know taxes is the stuff that fixes roads, funds schools etc.
Tell a dysfunctional government that they don’t have a right to my money !
It’s in my house. It is not yours. You have no right to my house or to charge me rent on my house in the form of property taxes.
Debbie is right—OldSarg’s groanings just lead us to anarchy… or at least a misunderstanding of our civic duty.
Raise the rate to an even 10% and then block access to the accounts until paid in full. Stop bending over backwards to screw the people of the state to make billionaires happy.
While attorney Frankenstein may forgivably represent her client with zeal trying to obstruct Indian voters if I recall (no different than a defense lawyer in a gory but obvious murder case); her law partner Rep. David Lust (R-34/Rapid City) likely but unforgivably may use his elective office to fashion favorable but obscure, opaque laws for this ‘nouveau’ SD industry to feather his own nest or compete with off-shore tax havens specializing in hiding/laundering huge sums of money, using our tiny state legislature’s limited knowledge and at taxpayers’ expense. Lust “doth protest too much, methinks”. ‘Screed’ sounds misogynistic, perhaps, David? Eh?http://www.theamericanconservative.com/articles/hillarys-puppet-screed/
I’ll have to look it up, sometime worthwhile. While a bit glib, I agree ordinary people use trusts too.
$234 B is an extraordinary amount of money in a short time in SD. That might add up to one hundred fifteen B-2 stealth bombers. One per elite trust! offshore accounts are often the lynchpin in many illegal tax avoidance schemes. Owners go to great lengths to conceal the existence of these accounts from their home governments, and they are often helped by lax disclosure rules in offshore tax havens. offshore accounts are also the lynchpin in many illegal tax avoidance schemes. http://money.cnn.com/2016/04/04/news/offshore-accounts-panama-papers/index.html
os-i still wanna see trump’s tax returns. forgive me!
The trusts could buy themselves a cheaper air force of helicopters. Russian attack helicopters are $12 million—the trusts could buy a fleet of helicopters and some spare ammo for 0.5% of their assets under management. helicopters would be much more flexible for operations in Sioux Falls and on the golf course.
Leslie, I’m with you on this. I thought Rep. Lust’s remarks were misogynistic. It sounded eerily similar to “…nevertheless she persisted.”
What about her comments indicated “a jaded and biased opinion”? Defending the idea of $234B of managed assets in our state being untaxed while most (80%) of South Dakota families pay an average of 8% of there income in state taxes seems a lot more “jaded and biased” to me. #sdtrusttax
82% of the wealth generated last year went to the top 1% globally.
Just saying. They really can afford to spend a few bucks for fees in South Dakota.
I still don’t see what all the fuss is about. Leslie’s comments don’t seem at all related to the conversation. It seems like people are latching on to the idea that a lot of money held in trust is “administered” in South Dakota, so that means we should have some claim to that money. That’s silly. If you want to take a cut of the income these trusts earn, then pass a state income tax. If you want to take a cut of the net worth of these trusts when the wealth is transferred, then pass a state estate tax or inheritance tax. Those are fair taxes and should apply to each person or trust equally.
If, however, you just want to say, “You have more money than me, so you have to give me some of it!” you should at least admit that you want something for nothing. I don’t think most of us would want to pay an “asset fee” to the state of South Dakota, calculated based solely on the fact that you own cash, personal property, or other assets. And I still don’t see how our trust laws being beneficial for asset protection creates any kind of haven for “tax cheats.” That’s just a silly and incorrect cause and effect argument. If some other jurisdiction has a problem collecting taxes it imposes, whose fault is that? That’s like blaming South Dakota for a wanted criminal crossing from Iowa into South Dakota by way of our unguarded borders, the blame is simply not there.
SD used to have an “asset tax.” It was technically labeled a “personal property tax” that eventually became known as the “liar’s tax.” It worked somewhat like our current use tax. Folks were required to fill out a form listing all of their personal property and give the value of the property. It was amazing how few possessions the folks in SD reported, somewhat like the failure of South Dakotans to report on line purchases for the use tax calculation. Anyway, this “liar’s tax” was ultimately repealed back in the 1970’s (if I recall correctly).
BCB, correct! We wouldn’t want to go back to the liar’s tax, but we have pretty good records of the trust assets under management, held by lots of trustworthy Sioux Falls and Rapid City lawyers whom we also trust to write our laws. I’m sure a trust tax would fairly capture a reasonable chunk of wealth that those wealth holders would hardly notice.
Ryan, I don’t seek something for nothing (though if someone offers me a way to violate the conservation of matter, energy, and revenue, I’ll give it a try!). The trusts get a safe place to keep their money, protected by South Dakota law. They pay a minuscule fee to maintain the civic institutions and infrastructure that make the maintenance and growth of their wealth possible.
bcb- in case you hadn’t heard or even cared, Tom Petty died of overdose of different opioids including Fentanyl.(like Prince)
Sorry about the OT as per usual.
What about South Dakota residents who have trusts? Would they pay this minuscule fee, too? Or do they receive some arbitrary waiver despite having a safe place to keep their money, protected by South Dakota law? What about people who create trusts to be administered in South Dakota, but who are not residents, and who use individual trustees (regular people) rather than corporate trustees (banks and trust companies)? Where is the line drawn for who pays the fee and who doesn’t?
I ask for the sake of showing that this is a question without a rational answer, in response to an emotionally-driven money grab. If this industry costs the civic institution something, slap on some related surcharges based on a calculation of the cost. Just saying “we can take some arbitrary amount because they won’t miss it” makes the money grab only more obvious in its lack of actual reasoning.
No distinction on residency, just as our state income tax on banks makes no distinction on the residency of the account holders. If your assets enjoy the protection of South Dakota trust law and courts, you contribute some tiny portion of those trust assets toward the upkeep of our state institutions.
mfi, I did read about Petty’s passing. What a shame.