The 1% fleeing to tax havens with our money

The real welfare cheats

by Richard Mellor

Afscme Local 444, retired

Numerous reports have come out in the last few weeks about the massive accumulation of wealth by a small sector of the US population.  One of these characters is John Paulson. Paulson is a bit of a waster, a coupon clipper who profits from the misery of others.  He does no productive work.

He has a lot of money though.  He is famous for one of the bets he made.  “What bet was that?” the reader may ask.  “A bet on a horse, the lotto, a card game?” 

No, my friends, John Paulson is smarter than that.  He made $15 billion for his hedge fund betting that workers, people that worked hard all their lives to build this society we live in, would be bled so dry by moneylenders that they’d find it impossible to pay their mortgages and default on them.  He was right.  The subprime market fell to pieces and Johhny boy was $15 billion better off.

The subprime market was primarily poor people, senior citizens, and the disabled; people with weak credit histories which means they couldn’t pay the moneylender their blood money.  A major section of this market was African American and other people of color and poor whites. The effect on these communities was devastating.  , “…something very nasty is going down.” wrote the Financial Times’ John Gapper at the time,  explaining that,  “Some 52 percent of loans made to black people in 2005 were subprime and 80 percent of these subprime loans were exploding Arms.”  (Adjustable Rate Mortgages) (1)

Martin Eakes, a credit union CEO estimated at the time that this catastrophe, could well be “the largest loss of African-American wealth in American history.” (2) That’s if we exclude 300 years of unpaid Labor of course.

I will never forget the words of one of the coupon clippers’ victims, a woman named Gertrude Johnson still working as a health aide at the age of 89.  That in itself is pretty bad, working till you drop. Gertrude’s mortgage had ballooned to more than $3000 a month and she simply couldn’t go on. "I just wanted to be able to eat and sleep in my house and have a roof over my head…", she told the Wall Street Journal,  "Every day at midnight when I go to sleep, I think maybe when I wake in the morning they'll tell me to get out." (3)

Indeed, the collapse of subprime was very good for John Paulson.

But poor John hasn’t always had it so good, he made a few bad bets since then but he still wants to protect that $9.5 billion of his own money (more accurately, money belonging to the above Ms. Johnson and others) he’s invested in his own hedge funds.  So he’s looking to move to Puerto Rico where a new law eliminating capital gains on his $9.5 billion is on the books.  (good thing there's no poverty in Puerto Rico). This would definitely help him keep more of the money he acquired from the misfortune of those wanting a roof over their heads.  With this new law he would not have to pay local or US federal taxes on his capital gains unlike in NYC where long term capital gains are taxed at 28%.

Paulson is looking at a nice neighborhood of San Juan where an 8,379 square foot house lists for $5 million according to Bloomberg Business Week.

So Paulson and other like him will have to live in Puerto Rico 183 days of a year to take advantage of residency and I’m sure they won’t have a problem with that.  If you can invest a sum of $9.5 billion you can sure bribe officials.

There are more and more coupon clippers moving to Puerto Rico much like some of the European super rich who are fleeing higher taxes, even changing their nationality to avoid them. People like Paulson are global citizens.  Their loyalty is not to any country or similar patriotic nonsense.  Another important aspect of this is that as long as we as workers accept in our own mind that Paulson and others like him have the right to own capital, much like industrial capitalists own factories, then we cannot change things for the better.  Capital is an integral part of the process of production allowing the exchange of commodities to take place; it is the lubricant of society as many economists have explained. 

But wealth in the form of capital is put back in to production and should also be invested in social infrastructure, housing, transportation, education, health care and other crucial needs of a modern society.  Wealth is a product of Labor; there is no other source. It is the product of human Labor power in use.  In our society this wealth, this surplus value created through the Labor process, is the property of capitalists, they are the rightful owners of it in such a society, a society in which those who work get nothing and those who don’t get all.

We have to challenge this right and challenge it first in our own consciousness because we are taught from day one that Paulson and others have a right to accumulate this wealth, this product of someone else’s Labor. But it is ours. It is our collective product and therefore it has to be taken in to our collective ownership and allocated in a way that benefits society as a whole, including John Paulson. He has a right to a secure and productive future free from want of basic necessities, something his activity denies everyone else.We should not deny John Paulson a roof over his head.

There is no shortage of money in society, the US or otherwise.  Poverty, disease, famine, hunger, wars, all the attacks on social services here in the US, these are all primarily a by- product of the economic system of production that Paulson and others govern and perpetuate.

Paulson thought nothing about making $15 billion off of millions of people who were struggling to pay the moneylenders for the right to have a roof over their head.  We should not worry about taking that money back from him.  It’s ours.

(1) FT 3-19-07

(2) ibid

(3) WSJ 3-12-07