I’ve commented before about entrepreneurs, investors, and small business owners migrating from high tax states such as California to low-tax states such as Texas and nobody gets upset.
Indeed, I just appeared on Fox Business Network to talk about a new study showing an exodus from Maryland following the imposition of some class warfare tax hikes (which simply confirms earlier analysis showing the same trend), and at no point was there any discussion about whether the state’s taxpayers had some sort of moral obligation to stay put and get fleeced by Obama-style tax policy.
But when a successful taxpayer decides to move from the United States to Singapore, there’s a different reaction. All of a sudden, that person becomes selfish, greedy, and unpatriotic.
Even though I’ve defended the right of people to protect themselves from greedy governments by moving across national borders, I can sort of understand why people tend to react in a negative fashion.
Simply stated, we self-identify as Americans (if we have any patriotism) and don’t have instinctive loyalty to individual states. So we don’t think there’s anything wrong when an American flees from New Jersey to Florida. But it rubs us the wrong way when American citizens renounce their citizenship. Even when we rationally understand that they are making the best possible choice for their families.
This issue has become hot again now that another big name has decided to escape the IRS, and I discuss the issue on Fox News. In my first soundbite, I warn that expatriation is driven by a combination of punitive tax policy and a growing perception that America will suffer a Greek-style fiscal crisis thanks to poorly designed entitlement programs.
At this point, I can’t resist a detour. Shepard Smith goofed big time when he remarked that taxpayers would “lose” because of Denise Rich’s expatriation. Nonsense. If my neighbor puts locks on his doors and bars on his windows and no longer is being robbed, that doesn’t impose any cost on me. Indeed, I’m probably helped because thieves may get discouraged and decide to live honestly instead. And even if thieves now target me because my neighbor’s house is less vulnerable, that’s not the fault of my neighbor. We should always remember that the blame should fall on the thieves. Or, in this case, the politicians. As if there’s a difference.
Now, back to the main topic, Fox did the same report at a different point in the day, but they used a different soundbite. In my second appearance (only an excerpt, not the entire segment), I explain that it doesn’t make sense to drive the geese with the golden eggs out of the country.
Interestingly (or perhaps I should say disturbingly), even France has a better approach to tax expatriation than the U.S. government. That tells us something about how American policy has veered in the wrong direction.
The big picture, as I’ve noted before, is that we want people to have the freedom to cross borders as a means of disciplining politicians who will over-tax and over-spend if they think taxpayers have no choice but to meekly submit.
Which is why all of us should be very happy that tax havens exist. Imagine how high taxes would be if politicians didn’t have to worry that people had escape options.
[…] of innovators, entrepreneurs, and inventors, it’s bad news for the United States when they move to low-tax nations such as […]
[…] Simply stated, politicians will be less likely to impose punitive tax policies if the geese with the golden eggs can fly away. That’s why I cheer when taxpayers escape high-tax jurisdictions, whether we’re looking at New Jersey and California, or France and the United States. […]
[…] P.S. Remember the Facebook billionaire who moved to Singapore to escape being an American taxpayer? Many of us – including me – instinctively find this unsettling. But if we believe that folks should have the freedom to move from California to Texas to benefit from better tax policy, shouldn’t they also have the freedom to move to another nation? […]
Liberals always try to avoid the consequences of their own actions.
[…] Maryland to Texas, but Not Okay to Move from the United States to Singapore? […]
I think it is rather patriotic to move to jurisdictions that are adopting traditional American freedoms (individual freedom taking precedence over collective desire to enslave the individual to communal causes) while America is abandoning same freedoms, becoming more like the rest of the world and – inevitably – having American prosperity converge to the worldwide average.
The future belongs to international citizens, economic mercenaries who will move wherever they can keep the fruits of their labor. Americans can follow Europeans in their efforts to sandbag these fundamental and unstoppable realities. Down that path lies the irreversible Argentinization of America. Umberknownst to naive Americans, HopNChange has been successfully sold to many one peoples, leading to their demise. This process of decline is still evolving in Europe. Alas, seems like German wallets will keep the dream alive ( the dream they someone smarter, someone more competent, or someone simply harder working will leave his family every morning to prop up my basic necessities of healthcare, education, retirement and housing to the western prosperity levels I’ve been accustomed to by capitalism) just long enough for Americans to cement their way to decline by some further flattening of the effort-reward curves.
Procastrinate on an exit strategy at your own peril.
So by your own logic, if you want to shrink the size of government you should encourage them to RAISE taxes. Because you said that lower taxes (ie Reaganomics) INCREASES revenue. So if they lower taxes, it would increase their “allowance” and the Pavlovian response would be to increase the size of government.
Something doesn’t add up here…
“Which is why all of us should be very happy that tax havens exist. Imagine how high taxes would be if politicians didn’t have to worry that people had escape options.”
Have you not heard of FATCA? Beginning 2013, tax havens will for the most part cease to exist, as that is when FATCA takes effect. FATCA, which was slipped into the HIRe Act of 2008 requires all foreign financial institutions in the world to report on the financial holdings of American citizens or green card holders to the IRS. If a foreign financial institution decides not to comply, than the IRS will withhold 30% of any US payments made to that institution.
FATCA was designed to destroy the tax havens of the rich, but is instead punishing expats, dual citizens and ‘accidental citizens’ across the world. Banks in Asia and Europe are beginning to dump US clients in order to get around the extremely costly and burdensome reporting requirements of FATCA. Expats who have been living overseas for many years are finding they can’t get a bank account, a retirement fund, a mortgage, etc. Many of these people are now renouncing their citizenship in order to be able to lead normal lives.
As part of FATCA, the IRS is making ‘reciprocal’ agreements with various countries, promising to report on the financial holdings of non-residents with US bank accounts. This means your local US bank will now be turning over information about it’s clients to the IRS to report back to foreign countries. I’m sure no mistakes will be made in this information sharing process. I totally trust the banking establishment and the IRS to carry out a 100% accurate information exchange with several foreign countries across the world. (sarcasm)
Anyway, thank you Mr. Mitchell for writing up a more accurate report on the situation. But I did want to point out that tax havens as they have existed in the past will soon cease to exists at all.
Elizabeth Warren, is that you?
America provided these people with an education. A safe first world country to grow up in. Police and courts to protect their property rights so they could get rich. And the demographic manpower to staff their businesses so they could grow. Their wealth is as much a function of their environment as themselves, and that environment is the result of investments made by America. Now that they have benefited from those investments they don’t want to pay them back.
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The first among all human rights: the right to vote with your feet.