The Oscar Mayer heir who gave away his fortune to fight inequality explains why South Dakota became America's secret $360 billion tax haven, and how it exposes the US as the world's 'weak link'

• A trove of nearly 12 million financial documents revealed how some of the world's wealthiest hide money offshore.
• The Pandora Papers, uncovered by ICIJ, shows trusts around the world - including South Dakota.
• One of them is onshore, inside the USA: South Dakota is where the powerful are storing billions in assets.

A bombshell report from the International Consortium of Investigative Journalists found that some of the world's wealthiest and most powerful people are socking away billions in offshore accounts - including the onshore, continental state of South Dakota.

Chuck Collins has known that it's a problem for years. Once an heir to the Oscar Mayer wiener fortune, he learned firsthand how the wealthy hold on to their fortunes and gave his own away. Today, he's the director of the Program on Inequality and the Common Good at the Institute for Policy Studies, where he delves deep into how the ultrawealthy dodge taxes in America.

In March, he told Insider that Americans largely don't understand that "we are now the tax haven." The US is the No. 2 destination for "global kleptocratic capital," he said, much of which ends up in places like Delaware and Wyoming - and South Dakota.

The ICIJ confirmed Collins' research, finding that over the past decade, the amount of customer assets in South Dakota has "more than quadrupled" to $360 billion. The ICIJ looked at nearly 12 million financial records that detail over 29,000 offshore accounts, with hundreds of journalists around the world poring over them, in partnership with outlets including the Washington Post and the Guardian The leak is called the Pandora Papers, following similar leaks called the Panama Papers and Paradise Papers.

All told, 17 US states are in the top 20 jurisdictions that "have the most liberal trust laws" worldwide, according to a paper by Hebrew University law professor Adam Hofri-Winogradow, which was cited by the ICIJ. The ICIJ found 81 trusts in South Dakota alone.

The great plains state changed its laws in the 1980s to become more favorable to these kinds of trusts, according to Collins, who recently authored "The Wealth Hoarders," a deep dive into the growth of what he calls the "wealth defense industry." That's the growing system of lawyers, family offices, and more who help wealthy clients wiggle out of taxes and hold onto wealth - and it has ballooned in the past decades.

In 1983, South Dakota got rid of its rule against perpetuities - what Collins calls an "arcane legal thing" that effectively means when you place money in a trust, it has to be dissolved at some point.

"At that point, there's often a taxable moment," Collins said. That could be something like the estate tax or gift tax, but "South Dakota said that 'We're going to attract trusts by eliminating that law, making them anonymous, making it possible that you can open up a trust and not actually have to live in the state.'"

That means if you put money in a trust in South Dakota, "you're essentially sequestering money beyond the reach of tax authorities in perpetuity," according to Collins. Perpetuity is another word for forever.

If you live in South Dakota, you might be wondering where all of that money is hiding. Collins said it's probably not physically in the state. Instead, it may be parked in luxury real estate or art around the world. Only the trust itself has to be legally filed in South Dakota.

"We are emerging from a pandemic where essentially the wealthiest people on the planet have figured out how to sequester their wealth and avoid taxes," Collins said.

Collins has multiple suggestions for reform, including federal legislation that can override states when they toss rules against perpetuities, as South Dakota did; requiring trusts to be registered and disclosing their owners; a 1% wealth tax on assets' interest. President Joe Biden has backed a key senator's tax proposal about the wealthiest's assets, but in other respects, Democrats so far are leaving many tax loopholes untouched.

One thing is overwhelmingly clear to Collins, and it should scare every American. "The world is going to be looking at us differently after the Pandora Papers. They're going to see that the United States is the weak link now in the system of global financial transparency."