Delaware: The American Cyprus

You might think the Cypriot banking system is little more than a corporate off-shore scam. And you’d be at least partly right. But the U.S. has some pretty special state banking laws and tax schemes as well:

Hundreds of thousands of businesses are incorporated in Delaware, where corporations take advantage of the state’s forgiving tax code and disclosure laws. In fact, the number of corporations housed in Delaware exceeds its population, and has cost other states roughly $9.5 billion tax revenue over the past decade, according to a 2012 New York Times article.

The people who have sheltered their money in Delaware include disgraced lobbyist Jack Abramoff and Russian arms smuggler Viktor Bout.

Delaware is not the only state to function as a tax haven.

“Delaware is the biggest state provider of offshore corporate secrecy, but Nevada and Wyoming are the most opaque,” writes journalist Nick Shaxson in Treasure Islands, his book on shadow banking and tax havens. “They allow bearer shares, a vehicle of choice for mobsters and drug smugglers, and they are particularly lax on allowing company directors and other officers to be named, hiding the identities of the real owners.”

Wyoming in particular has become a locus for corporate secrecy. In 2011, Reuters reported that a single house in Cheyenne, Wyoming served as the registered address for more than 2,000 companies. The house is run by a company called Wyoming Corporate Services, which specializes in helping clients form miniature corporations.

I hoped all honest people out there enjoyed paying their taxes as much as I did on this Tax Day.