I’ve written many times about how investors, entrepreneurs, small business owners and other successful people migrate from high-tax states to low-tax states.
Well, the same thing happens internationally, as France’s greedy politicians are now learning.
It’s a lot harder for Americans to escape our tax system, though, in part because of reprehensible exit taxes that are disturbingly reminiscent of some of the awful policies of past totalitarian regimes.
But it still happens, and that’s a very damning indictment of Obamanomics and a worrying referendum on the future of the United States. Here are some blurbs from a recent Fortune article.
Americans are ditching their U.S. passports in record numbers, a sign of growing frustration with a system that taxes U.S. citizens on their global wealth whether they live in Montana or Mongolia. …on the list, published quarterly by the Internal Revenue Service, is Isabel Getty, the daughter of jet-setting socialite Pia Getty and Getty oil heir Christopher Getty. In total, more than 670 U.S. passport holders gave up their citizenship — and with it, their U.S. tax bills — in the first three months of this year. That is the most in any quarter since the I.R.S. began publishing figures in 1998. And it is nearly three-quarters of the total number for all of 2012, a year in which the wealthy songwriter-socialite Denise Rich (christened “Lady Gatsby” by Yachting magazine) and Facebook co-founder Eduardo Saverin joined more than 932 other Americans in tossing their passports. …Expatriations first picked up pace in 2010, when more than 1,530 Americans dumped their passports.
The problem is particularly serious for Americans who live and work overseas. The United States is one of the few nations (and the only developed nation) to have “worldwide” taxation, which means overseas Americans have to pay tax to the IRS as well as to the nation where they live.
And thanks to laws such as “FATCA,” that burden just became far more onerous.
While dumping citizenship may seem unpatriotic or smack of tax avoidance to some critics, tax lawyers blame the byzantine complexity of American tax regulations. The rules “are confusing, complex, and so complicated that even Americans with good intentions can easily find themselves running afoul of the law,” said Jeffrey Neiman, a former federal prosecutor who was involved in the government’s offshore banking probe and is now in private practice in Fort Lauderdale, Fla. “This very well may explain why we are seeing a record number of Americans renouncing their United States citizenship.”
No wonder more and more people are escaping Obamanomics.
The good news, by the way, is that Senator Rand Paul has introduced legislation to repeal the worst parts of FATCA.
But that’s not going to happen while Obama’s still in the White House, so let’s focus on the Americans who are “going Galt.”
I have mixed feelings about these rich people. Many of them did nothing to help the fight for liberty while they were U.S. citizens.
And notwithstanding my post about where I would go if America suffers a Greek-style fiscal collapse, I suspect I’ll stay in the United States and fight until my last breath. So I get a little bit irked that they escape and leave the rest of us to deal with the mess created by our political elite.
Nonetheless, I strongly believe that all individuals have the right to protect themselves from predatory government.
And when you add up the various forms of double taxation in the internal revenue code (particularly the death tax), it makes little sense for families with high net worth to stay in the United States when there are many jurisdictions around the world that will welcome them with open arms.
In other words, let’s not blame the victims and castigate Americans who redomicile in jurisdictions with better tax policy. Let’s fix the awful internal revenue code with a flat tax.
P.S. I’m ashamed to admit that France has a more pro-liberty policy on tax migration than the United States.
P.P.S. But that may not last too long. Other nations are looking to copy America’s disgraceful worldwide tax approach.
[…] changing one’s nationality is a two-way street. Beginning with the Obama years, there’s been a big jump in the number of Americans willing to give up U.S. […]
[…] harder to move across national borders, of course, but it happens. Record numbers of Americans have given up their passports, including some very high-profile rich […]
[…] Call me crazy, but I suspect the number of people riding in the wagon would exponentially expand while an ever-growing share people pulling the wagon would decide to “go Galt.” […]
[…] Call me crazy, but I suspect the number of people riding in the wagon would exponentially expand while an ever-growing share people pulling the wagon would decide to “go Galt.” […]
[…] United States has odious exit taxes that restrict freedom of movement. And even though record numbers of Americans already have given up their passports, it’s still a tiny share of the […]
[…] ashis proposed budget that would significantly shrink the burden of government spending, to hiswillingness to take on lower-profile but important issues such as repealing the Obama Administration’swretched FATCA […]
[…] that was just the beginning of a larger trend. The numbers began to skyrocket last year, probably in part the result of the awful FATCA […]
[…] ashis proposed budget that would significantly shrink the burden of government spending, to hiswillingness to take on lower-profile but important issues such as repealing the Obama Administration’swretched FATCA […]
[…] as his proposed budget that would significantly shrink the burden of government spending, to his willingness to take on lower-profile but important issues such as repealing the Obama Administration’s wretched FATCA […]
Linda Gottlieb and V-MAX: Thank you very much for your so kind comments. I do not deserve so much but thanks, that gives me enormous force to go on fighting for DIRECT democracy. Almost anyone that I know is scared to death about direct democracy. The political class is scared to death. And my libertarians friends usually say that democracy is the road to serfdom and socialism… Representative democracy clearly is the road to serfdom. . But not DIRECT democracy.
A last point: I find scary how media presents politicians as “the guy next door”… In fact they are rather normal folks… But there is an horrifying power abyss between say the US president and any regular folks. That power abyss should be abolished in my humble opinion (IMHO). The Swiss Confederacy president has so little power that he often travels in tramway and very few people knows who is the president of the Swiss Confederacy. But the US president has about 6000 people taking care of him and he travels in 2 747 Jumbo Jets so powerful he is.
Libertarians may convince a lot of people about freedom´s benefits but as long as “representatives” -and not the people- decide there will be oppressive government IMHO. Thanks again for your kindness!
Luis Di Mare…
thank you Sir… for sharing your insights and perspective… know that your efforts are appreciated…
best…
For the VERY rich- everywhere in the world is America to them. There are no laws that apply to them- they canessentially buy their way out of any altercation, any oppressive regine issue, or any attack on their person. The rest of us count on a fair set of regulations and a constitution to protect us. SO, you cannot blame them for simply seeking the lowest tax have to call their domicile.However, as it has been shown- nobody escapes the IRS. And with more money left in their pockets, they have evwen more money to buy protection in these regimes.
Luis Di Mare, Sir you are genius in m y book. Thank you for such a complete explanation. May the country heed you expertise.
Not like the brazen giant of Greek fame,
With conquering limbs astride from land to land;
Here at our sea-washed, sunset gates shall stand
A mighty woman with a torch, whose flame
Is the imprisoned lightning, and her name
Mother of Exiles. From her beacon-hand
Glows world-wide welcome; her mild eyes command
The air-bridged harbor that twin cities frame.
“Keep, ancient lands, your storied pomp!” cries she
With silent lips. “Give me your tired, your poor,
Your huddled masses yearning to breathe free,
The wretched refuse of your teeming shore.
Send these, the homeless, tempest-tost to me,
I lift my lamp beside the golden door!”
Sorry for posting such a long opinion, but this is my only comment in months. The world that is not high tax USA & WEST Europe in general is growing pretty fast. Singapore and Hong Kong, which shine for being rich countries having MODERATE taxes, grow faster than Western European tax hells and USA, in accord with Mr. Dan Mitchell papers that show that government spending slows economic growth. Already Singapore and Hong Kong, ultra poor in the 1960s, surpassed EVERY European tax hell in GDP per person in PPP dollars excepting oil super power Norway (Hong Kong is still behind Norway). The figures are here https://www.cia.gov/library/publications/the-world-factbook/rankorder/2004rank.html
In the past industrialized tax hells like the USA and West Europe could put immoral high taxes and many people never left those countries because other countries had much lower incomes. But that soon will be a thing of the past because incomes are rising so fast outside the USA and West Europe. Soon many Americans will leave for other countries that have a decent standard of living and that are not a prison in many things. The USA is a prison in many things. Here in Latin America for instance we often say hello to our female coworkers with a small kiss, even bosses often does that. In the USA you probably risk a 1.000.000 dollar lawsuit for doing such things. You go to jail for idiotic things in the USA like that guy in California that got life prison for stealing steaks and he got life because it was its third offense. And the USA has that abominable hideous institution called death penalty,
To that you add all the horrific laws that Mr. Mitchell shows in this blog and you see that the USA is anymore no paradise but a place where you land in prison for idiotic things and a place where they must see you naked in order to travel through airports.
Classical liberalism was destroyed at the federal level because classical liberals never believed in direct democracy, they do not believed in people establishing legislation through referendum. Classical liberals usually believe in an ultra small ultra powerful political class having insane immoral power and “legislating”, making the rules. That BAD system already degenerated in socialism in the USA. So much power in the hands of so very very few not only is indecent but finishes attracting narcissists, people addicted to power, sadists and less sinister people that just enjoy being center stage and handling trillions and trillions through the insane power the political class has in a representative democracy.
Freedom under representative democracy was doomed since representative democracy´s birth because it left such enormous power in the hands of very few. The predictable happened: Federal Government became an entity where the addicted to power, control, sadism or trillions can get unparalleled satisfaction for their power, sadism, control, etc vices. Those vices can be satiated in a representative democracy in an scale that cannot be dreamed outside the insane nefarious power that very few of the political classes have under representative democracies.
There are only 2 true direct democracies: Liechtenstein and the Swiss Confederacy. In both countries both tax and spending can be voted in referendum but rules change from one canton to other. Both are famous for being tax havens. Liechtenstein has one of the lowest tax burdens in the whole of Western Europe, only 2 ultra small west European tax havens have a smaller tax burden. Liechtenstein is number 2 in the world in per capita GDP only behind oil superpower QATAR which used its oil income to establish a tax haven. The Swiss Confederacy is now just behind Norway in GDP per capita. The Swiss Confederacy is too the richest country in financial wealth per adult (probably Liechtenstein is richer but probably statistics does not include Liechtenstein)
The USA can be easily transformed in a DIRECT DEMOCRACY. Just allow people to decide/repeal in referendum ANY federal law. Just allow every constitutional amendment to be decided in referendum. Just make it mandatory that every constitutional amendment should be approved by the people in referendum. With those simple rules that already exist both in Liechtenstein and the Swiss Confederacy, the USA becomes a DIRECT DEMOCRACY. The power of the political class is utterly reduced with these simple “direct democracy” rules.
Just imagine how many federal legislations would be repealed if the people could, as in Switzerland and Liechtenstein, repeal laws in referendum. It is of particular importance to have MANDATORY referendum for constitutional amendments: The federal constitution in Switzerland contains the high level rules that the rest of the legal system must obey. It is of EXTREME importance that those higher level rules may not be modified by the political class WITHOUT the consent of the people in referendum.
For example article 5a of the Swiss Constitution is simply amazing: It says the the “subsidiarity” principle rules the tasks that the Swiss cantons and the Swiss federal government do. That means that the Swiss Federal Government should NOT do what the cantons can actually do.
It is not surprising that the US federal government gives itself more and more power and it becomes every day more oppressive. The US Constitution never allowed the American people to repeal federal laws in referendum. It was predictable that a federal government would become what has already become: and ever more oppressive and powerful entity that does more damage as the power of the federal political class increases.
Representative democracy -the system that exists in MOST of the world- is a system that is perfect for small minority groups to take advantage of the majority: Suppose a congress has 100 “representatives”. Then 51 “representatives” could propose each one a legislation that is a “looting bill” that loots the majority in benefice of a very small minority. Those 51 “looting bills” could be put together in a monstrous bill and that bill may become law because those 51 “representatives” would vote for the monstrous bill. In a DIRECT democracy it is much more difficult to approve such nefarious bills. But in representative democracy you expect such accords to be a normal legislative process.
It is not surprising that the US federal tax code is the infamous nightmare that Mr. Mitchell has described here. That is what one expects from a representative democracy where a very small number of “representatives” -and not the people in referendum- make the laws.
I do not know well the Swiss Federal Income tax, but I bet that it is not the horrible nightmare that the US tax code is. By constitutional rule in Switzerland the MAXIMUM FEDERAL personal income tax is 11.5% and the MAXIMUM corporate tax is 8.5% (article 128 of Swiss Federal Constitution). Compare that to the US nightmare federal income tax. In the USA people cannot repeal federal laws in referendum, in the USA people must suffer at a federal level whatever the political class cooks.
Since in Switzerland the people can repeal the laws that the political class establishes then there is no prison for tax evasion in Switzerland (there may be prison for tax offenses where someone STEALS tax money. I may be wrong here, I have not checked myself but the Swiss Penal code does not include tax evasion as an offense).In Switzerland the people may repeal the punishments that the political class establishes. In the USA you cannot do that. In the USA the people have a very very small power at the federal level: They cannot decide issues, they just elect a bunch of people to decide for them. Why the people can often decide at state level but cannot decide at the federal level?
Representative democracy incentives the apparition of very small groups that try to control politics for the benefice of those very small groups through exploiting majorities. Representative democracy incentives the apparition of a media and academia that is perpetually throwing huge propaganda promoting the insane power of the political class. Through that power a a very very few get insane power and trillions through that unfair system called “representative democracy”. “Representative” it is, but in big part the actual “representation” happening is those small groups that control politics representing themselves.
Of course politicians are forced to do some good things in order to be elected. But it is clear that Representative democracy is a system where the sadist, the addicted to power, the addicted to control and the addicted to handling trillions and trillions can get unparalleled pleasure. And the greater the power the greater the pleasure, and it is obvious that at the federal level politicians generally have been increasing the power of the political class. Many sex addicts dream about some kind of ´super brothel´. Well, the nefarious power that representative democracy gives to a very few is like a ´ super brothel´ for those who have their lives governed by the overpowering need to satisfy a vice for power, for sadism, for trillions, for control.
Take a look at government spending data in the IMF April 2013 World Economic Outlook Database: Among the Western European countries Direct Democracy Switzerland has the lowest government spending: 32.8% of GDP average government spending in 2010-2012 (post crisis period). The second country in low government spending is tax haven Malta with 42.4% of GDP and then third is tax haven Luxembourg with 42.7% of GDP. And then. Surprise! Number 4 in low government spending is Norway with 44.0% of GDP average government spending in 2010-2012! Norway has enormously reduced government spending and is DIRT rich in oil: QATAR, world number one in GDP per capita produces only 95% more tonnes of oil per person than Norway (gapminder .org data)
So it seems clear that it is the politicians that want tax hells, not people. I know that in the USA you actually had classical liberalism: With probably less than 10% of GDP government spending the USA became at lightning speed the world superpower in the 1800s. But those classical liberals will never come back to power because not only the political class have made the people artificially dependent on government handouts but because the system attracts so much power addicts. The only solution to stop the decadence of the USA is direct democracy. Soon the USA will never be anymore the world superpower and soon more east Asian lower tax countries will surpass the USA: Already SAMSUNG beat Apple by a big margin.
In the USA in the 1800s you had a system of freedom and “common law” -and you became at lightning speed the world superpower. “Common law” means the law is custom and not the imposition of a political class. In Latin America we never had such wonders. Here the laws were very often just the imposition of the political class. So many laws were never obeyed. Informality is enormous in Latin America -and in most of the so called ´Third World´ because tens millions cannot respect all regulations and taxes without starving to death. But in the USA you had in the past REAL LAW -common law- So almost every law is still enforced in the USA. That makes the USA today more a nightmare place, because horrendous legislations like getting life prison for robbing steaks are actually enforced.
In the USA you are under a degenerative process where the political class still has a lot power and can still approve horrendous laws and enforce them. Here in Latin America the political class just cannot enforce a lot of laws, the power of politicians is less because the laws where always much more oppressive than in the USA and people never respected many laws. The USA is just going the slow transformation of government into tyranny that Jefferson predicted. The only way to stop it is by establishing direct democracy I think. Even the US confederacy may fall apart, there are already polls that show a majority of Americans saying that having a country is such a big hassle. Already there are people that want some states to leave the American Confederacy. When being part of the American Federation gave more good than bad to a state it was worth it. But as the federal government becomes more and more oppressive and intrusive more will want to leave the Confederacy. I hope they can change the US Constitution to allow the withdrawal without a war. All this just my humble opinion and thanks for allowing me to do such a long post.
When a taxing entity becomes unreasonably confiscatory, tax avoidance is a civil right. Tax evasion is civil disobedience.
Decline is bad enough. But when you also plug the safety valves you more or less hold on to a distortion that builds to an even more turbulent end.
This is still a minor issue, but expect it to become a bigger and bigger issue as time goes by. As. Tge descent into welfare state continues, expect the issue to cross a tipping point and become a major issue. Descent into welfare state coupled with unique in the world exit taxes, global taxation and irreversible exile as the only option is a distortion that increases the chances of an implosive decline in the end.
Fortifying a submarine that has lost power with crush bars only guarantees that crush will be at a depth you cannot swim up to the surface from.
The fact that a majority of Americans apparently support these policies is an indication of eventual extreme pitchfork intentions. I cannot think of something more against the funding principles of America than emigration taxes. Pay to be released from your obligation to support the pitchforks. Exceptional people take notice. Start building your wealth outside the US, before you hit the exit tax threshold.
So as more of the tony crowd leave the United States, Obama’s revenue from taxing the rich will shrink … thus leaving the hoi polloi as the only other source of tax revenue … nice
…. dumping citizenship may seem unpatriotic or smack of tax avoidance ….
If one has ceased to be an American, one’s patriotism is owed elsewhere, surely? And surely tax avoidance – as very different from criminal evasion – as practiced by Timothy Geitner, say – is a simple responsibility?
For some very interesting research into that list of renunciants and an argument for why that list undercounts the number of renunciations/relinquishments of American citizenship (FBI says 850 compared to the IRS’ 680 and many names are missing) see this excellent post:
Apparently neither State nor the IRS can count.
Reblogged this on U.S. Constitutional Free Press.
Reblogged this on Public Secrets and commented:
Taxes here are getting so bad, Americans are abandoning their passports.
Reblogged this on This Got My Attention and commented:
Voting with your feet!