Monday, April 19, 2010

Renouncing Obama's America: Going John Galt

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. _WallSt.Journal

As Obama moves to increase tough Internal Revenue Service enforcement of tax assessments on overseas income, more Americans and US green card holders are moving to cut their relationship with Obama's America.
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.

Perhaps the key sentence in this excerpt is the final one about the United States having a very misguided policy of what is known as “worldwide taxation.” This is the policy of taxing income earned in other nations, even though that income already is subject to all applicable taxes imposed by the governments of those other nations. This policy is a huge competitive disadvantage for American companies trying to compete in world markets (and Obama, not surprisingly, wants to make it more burdensome), but the impact on individual taxpayers is a key factor in the decision by so many U.S. taxpayers to escape the clutches of the IRS. Indeed, it may also be one of the reasons why some highly-talented foreigners – the kind of people who helped make Silicon Valley an engine of prosperity for the entire nation – no longer want American residency.

Ironically, Europe’s welfare states actually have better policy in this area. It is much easier for their residents to move to lower-tax jurisdictions without being followed by their national tax authorities or being ransacked at the border by oppressive exit taxes. Indeed, they usually don’t even need to give up their citizenship. Many French entrepreneurs and investors escape to places such as Switzerland, just as many Swedes and Germans migrate to places like Monaco.
But bad policy is like a toxic virus and it spreads from one place to another. The Financial Times recently urged that all European Union nations agree to impose American-style worldwide taxation rules on their citizens. What should happen, by contrast, is that the United States should copy Europe (in this limited example!) and shift to territorial taxation. _BigGovernment

But as tax rates under Obama - Pelosi continue to rise, more persons who have always resided in the US will begin thinking about life in Costa Rica or in a quiet Mexican enclave of expatriots.

More countries will likely begin marketing to wealthy US retirees as better places to spend their remaining years.

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