The report was authored by the former Chief Economist of McKinsey and Company, James Henry. Its findings advance our understanding of tax havens and demonstrate that typical estimates of wealth inequality are significantly understated.

The major finding is that offshore financial holdings now come to some $21-32 trillion, compared with the estimate in TJN's 2005 report of $9.5 trillion (this excludes non-financial wealth, such as real estate). James makes a

*very*conservative estimate of how much governments lose in taxes of $189 billion a year, based on earning just 3% on this $21 trillion, taxed at 30%. How conservative? This is actually less than the $255 billion annually estimated in the first TJN report, but that is based on earning 7.5% annually on offshore wealth. We can get an idea of how conservative this estimate of lost taxes by seeing how sensitive it is to changing the rate of return and wealth estimate used:

Rate of Return Wealth Estimate Lost Taxes

3% $21 Trillion $189 billion (Henry's actual estimate)

4% $21 Trillion $252 billion

5% $21 Trillion $315 billion

6% $21 Trillion $378 billion

3% $32 Trillion $288 billion

4% $32 Trillion $384 billion

5% $32 Trillion $480 billion

6% $32 Trillion $576 billion

Note that none of these hypothetical estimates use an earnings rate for offshore wealth as high as the original TJN report's 7.5%.

Since these assets are hidden, we of course have no way of knowing how much the money is earning. I think it is fair to say that Henry's estimate is more likely low than high.

On the inequality of financial wealth, Henry says:

By our estimates, at least a third of all private financial wealth, and nearly half of all offshore wealth, is now owned by world's richest 91,000 people - just 0.001% of the world's population. The next 51 percent of all wealth is owned by the next 8.4 million, another trivial 0.14% of the world's population.In the companion report on inequality by Nicholas Shaxson et al., the authors asked a number of well-known experts on inequality if they thought these data showed inequality has been underestimated. The answer from Thomas Piketty (of Piketty and Saez, the most widely quoted set of papers on inequality that I know of) was blunt: "Yes, definitely."

Despite Felix Salmon's characterization of the report as "long on hyperbole," I find no reason to disagree with its conclusion that tax havens are a "black hole," one which costs the middle class (through uncollected taxes on the super-rich) untold billions of dollars and increases inequality around the world.

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