Pandora papers show South Dakota is a moral sewer and should be done away with
If Janklow abolished South Dakota’s interest rate cap, Citibank promised, Citibank would create 400 jobs in his state. In 1981, Janklow delivered. “Thanks to Janklow”, Oliver Bullough wrote in The Guardian in 2019, “South Dakota has a financial services sector and the United States has a trillion dollar credit card debt. “
Delaware and Nevada have followed South Dakota’s lead, also creating a financial services boom in those states, and making Janklow question how he could stay ahead of other regulatory fund providers. The answer was an indiscriminate approach to individual and family wealth. South Dakota already had no income tax, no capital gains tax, and no inheritance tax. Why not make the state even more welcoming to the rich by repealing what is called the “rule against perpetuities” and making family trusts immortal?
A trust is a financial arrangement, dating from medieval times, in which property is conferred for safekeeping in a third party, or trustee, on behalf of his heirs or beneficiaries. In modern times, the calamity that the trust is generally protected against is taxation. Until fairly recently, however, the length of time that this wealth could be protected was limited by mortality through the rule against perpetuities.
The rule against perpetuities, anchored in 18e English common law of the century, stated that 21 years after the death of the youngest beneficiary, a trust must be wound up and the wealth in it subject again to capital gains tax, inheritance and any other tax coming under a particular jurisdiction. States later changed this to limit the life of a trust to 90 years. The rule was aimed at controlling dynastic power and restricting the power of the dead over the living.