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claimed this “clearly debunks the conventional Beltway rhetoric that the ‘rich’ are not paying their fair share of taxes.” Yet in 2009 the richest 1 percent owned almost half of all financial assets in the country—and the proportion was rising. This is not a story about high taxes on the wealthy but about stratospheric wealth and inequality. And the 40 percent refers only to income taxes—as exemplified by the income reporting of the four hundred richest Americans noted earlier in this chapter, rich people usually convert most of their income into capital gains, which is taxed at far lower rates than income; then there are payroll taxes and state taxes, the burden for which tends to fall on low- and middle-income people more heavily than the rich. For the four hundred richest Americans, their effective tax rate was far lower: just 17.2 percent and falling. Count offshore tax evasion by wealthy Americans, which income statistics don’t see, and the picture skews further. “A quarter century of tax cuts,” wrote the tax author David Cay Johnston, “has produced not trickle down—but Niagara up.”31

During my long interview with Mitchell in Washington, we went out to a modest eatery near the Cato offices, where we bumped into Richard Rahn, a Cato staffer and a former chairman of the Cayman Islands Monetary Authority. Rahn is a gruff, serious man who wears an eye patch, and when Mitchell introduced us with great bonhomie, Rahn scowled back at him, declined to shake hands with me, muttered something about “European Commies,” and stalked out. A year or so later I looked Rahn up, and this time he agreed to talk. This time he was more personable: After first hawking me around the Cato offices as a crazy European curiosity, he then handed me a little maroon passport-sized booklet containing the text of the U.S. Declaration of Independence and the U.S. Constitution. “It looks like an EU passport, doesn’t it?” he rasped, twinkle-eyed. “One, of course, is an instrument of oppression. The other is a document of freedom.”

“I have ancestors who fought in the American Revolution,” he said, sitting me down in his own rather Spartan office. “Genetically I don’t like foreign governments.” After making me buy Mitchell’s book for $20 (I already had a copy but didn’t want to spoil Rahn’s mood), we began to talk.

Rahn is not a shill for wealthy interests but someone responding, at least in part, to deep personal conviction. “You people upset me . . . I often wonder if you people are evil, or just ignorant,” he declared. “Tax oppression is causing misery around the world.” He said this was well established in the literature and cited some recent Bulgarian studies to back his case. “When international bureaucrats want to attack places for not imposing bad taxes,” he continued, “well, I think that fits into my definition of evil.” He described a “conspiracy of the international bureaucratic class” to raise taxes: not so much an organized plot but a constant effort to raise revenues to feed the bureaucrats’ own well-being and privileges.

Perhaps there is a little truth in this. But his next point is worth tackling, for it is a foundation for the intellectual edifice of offshore.

“Capital is the seed corn of economic growth. Without capital, there is no growth. It is suicidal to tax your own seed corn.” Along with this argument comes the tax havens’ Exhibit A in their own defense: that they help smooth and promote international flows of capital, channeling it efficiently to capital-hungry developing countries, where it can grow productively and benefit everyone.

Rahn’s seed corn contention contains a kernel of truth: Capital certainly can and does promote investment and economic growth. Helping it flow efficiently, at first glance, seems like a good idea. But here is where the arguments fall apart.

First, financial capital isn’t the only kind of capital. Social capital—an educated and experienced workforce, a trustworthy business climate, and so on—matters more. Having seed corn is just one factor in achieving a good harvest, along with rain, good