Being an American citizen is an honor in many ways, but it is a huge millstone around the neck for highly successful investors and entrepreneurs because of an oppressive and complex tax system. This is particularly true for those based in and/or competing in global markets. Indeed, because the tax system (and regulatory system) is so onerous and because it is expected to get far worse in the future, a growing number of Americans are actually giving up citizenship and “voting with their feet.” The politicians view these people as “tax traitors” and are trying to erect higher barriers to hinder economic migration, particularly in the form of confiscatory “exit taxes” that are disturbingly reminiscent of the totalitarian practices of some of the world’s most unsavory regimes. The Wall Street Journal recently reported on this issue:
The number of American citizens and green-card holders severing their ties with the U.S. soared in the latter part of 2009, amid looming U.S. tax increases and a more aggressive posture by the Internal Revenue Service toward Americans living overseas. According to public records, just over 500 people world-wide renounced U.S. citizenship or permanent residency in the fourth quarter of 2009, the most recent period for which data are available. That is more people than have cut ties with the U.S. during all of 2007, and more than double the total expatriations in 2008. An Ohio-born entrepreneur, now based in Switzerland, told Dow Jones he is considering turning in his U.S. passport. Mounting U.S. tax and reporting requirements are making potential business partners hesitate to do business with him, he said. “I still do dearly love the U.S., and renouncing my citizenship is not something I take lightly. But more and more it is seeming like being part of a dysfunctional family,” said the businessman, who asked that his name not be used for fear of retribution. “The tax itself is only a small part of the issue,” the Swiss-based entrepreneur said. “It’s the overall regulatory environment.” …”Fifteen or 20 years ago there was a big rush to make sure your kids became U.S. citizens, for access to U.S. schools for example,” said Timothy Burns, a tax lawyer at Withers law firm in Hong Kong. “Now we’re seeing just the opposite.” Last month, the Treasury Department announced more rigorous requirements for Americans living abroad to report information on foreign bank accounts. The reporting requirement has been in place for years, but only in the most recent couple of years has the IRS gotten tough about enforcing penalties. …Others are giving up their U.S. nationality to avoid tax increases in the U.S., as the government struggles under huge budget deficits. The top marginal tax rate is set to rise to 39.6% from 35% at the end of this year. A proposal to tax fund manager pay at ordinary income rates, instead of the 15% capital gains rate, is gaining currency in Congress. “Everybody sees the tax rates are going up. At a certain point, it gets beyond people’s pain threshold,” said Anthony Tong, a tax partner at accounting firm PricewaterhouseCoopers in Hong Kong. Unlike most jurisdictions, the U.S. taxes the income of citizens and green-card holders no matter where in the world it is earned.
[…] But 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. citizenship. […]
[…] I wrote with surprise several years ago about the number of people who were giving up American citizenship to escape America’s onerous tax system. […]
[…] while there was an increase in the number of Americans going Galt after Obama took office, the recent increase seems to be the result of the FATCA […]
[…] No wonder more and more people are escaping Obamanomics. […]
[…] in about a dozen nations who have felt compelled to exercise one of these options, sometimes known as “going Galt.” Usually they choose the latter, which generally requires them to first move all their assets out of […]
[…] 1. France, like almost every other civilized nation, does not have worldwide taxation. So when French citizens move to Switzerland, Hong Kong, or the United States, they pay tax to those nations. But they’re no longer subject to French taxes on this foreign-source income. Sadly, that is not true for overseas Americans, who are subject to tax in the nations where they live AND the IRS. Their only choice, if they want to escape this punitive and unfair form of double taxation, is to give up U.S. citizenship. […]
[…] 1. France, like almost every other civilized nation, does not have worldwide taxation. So when French citizens move to Switzerland, Hong Kong, or the United States, they pay tax to those nations. But they’re no longer subject to French taxes on this foreign-source income. Sadly, that is not true for overseas Americans, who are subject to tax in the nations where they live AND the IRS. Their only choice, if they want to escape this punitive and unfair form of double taxation, is to give up U.S. citizenship. […]
[…] It is very sad that America’s tax system is so onerous that some rich people feel they have no choice but to give up U.S. citizenship in order to protect their family finances. […]
[…] It is very sad that America’s tax system is so onerous that some rich people feel they have no choice but to give up U.S. citizenship in order to protect their family finances. […]
[…] It is very sad that America’s tax system is so onerous that some rich people feel they have no choice but to give up U.S. citizenship in order to protect their family finances. […]
[…] It is very sad that America’s tax system is so onerous that some rich people feel they have no choice but to give up U.S. citizenship in order to protect their family finances. […]
[…] It is very sad that America’s tax system is so onerous that some rich people feel they have no choice but to give up U.S. citizenship in order to protect their family finances. […]
[…] There’s no anti-Semitic motive for the tax. Instead, politicians have imposed exit taxes because some Americans decided to emigrate to jurisdictions with better tax law. And rather than interpret this as a sign that the tax code was too onerous and should be replaced with something like a flat tax, they decided to enact a law to ransack people as they crossed the border. […]
[…] you can only get rid of the IRS by giving up American citizenship. But even that’s difficult. Politicians have adopted reprehensible anti-expatriation laws […]
[…] majority of Americans are very fortunate that they don’t have any personal interactions with the IRS’s onerous international tax rules. But that doesn’t mean they shouldn’t care. The tax treatment of cross-border economic activity […]
[…] of Americans are very fortunate that they don’t have any personal interactions with the IRS’s onerous international tax rules. But that doesn’t mean they shouldn’t care. The tax treatment of cross-border economic […]
[…] who want to move, by contrast, are unable to escape the punitive internal revenue code. Indeed, the United States is one of the few nations in the world to have exit taxes, an odious approach generally associated with loathsome regimes such as the Soviet Union and Nazi […]
[…] who want to move, by contrast, are unable to escape the punitive internal revenue code. Indeed, the United States is one of the few nations in the world to have exit taxes, an odious approach generally associated with loathsome regimes such as the Soviet Union and Nazi […]
Pappas,
Indeed, here is one John Galt on his way to Taggartdom. Shifting a once great company into businesses that would simply not exist without rent seeking and mandated taxpayer support.
http://seekingalpha.com/article/117386-applied-materials-mike-splinter-talks-solar-with-obama
You mean John Galt?
I think Ayn Rand got it wrong. The world is not divided into people genetically programmed to be John Galts and Hank Reardens. The issue is whether the public wants competent people to use their brains being John Galts, or Jim Taggarts.
I am seeing a lot of John Galt to Jim Taggart conversions lately. It is a sign of the vicious cycle: The more the prevailing public attitude prosecutes success, the more John Galts convert to Jim Taggarts. This, in turn, leads to more people hating the rich Taggarts and indiscriminately take “revenge” against all success at the ballot box (the tax code cannot differentiate between the Steve Jobs and the Bernie Madoffs). The vicious cycle ends with…. well… Greece.
When faced with jerks that work for the Gov, and jerks that are in Congress is it any wonder that some people get feed up and say that are outa here for good?