6 ms·

Let's think about secondary effects. What percent of very wealthy Americans do you think would renounce their citizenship based on this? How much less investme

Let's think about secondary effects. What percent of very wealthy Americans do you think would renounce their citizenship based on this? How much less investment capital would there be in the USA based on that? Note: Not asking for a value judgment ("good riddance if they do!" - not productive). Just your estimate as to what percent of wealthy Americans would give up their citizenship and how much less investment capital would result. It's an important detail to consider.

ww520 15y ago
The wealthy can renounce U.S. citizenship and lose the protection of U.S. system on their properties. Just don't cry when some thugs in their new home island state rob them of their wealth. The U.S. system provides the scalability for these people to make vast wealth. Shouldn't they pay it back to keep it up? The system is expensive to upkeep. There ain't no free lunch.
- econgeeker 15y ago
  You think property rights don't exist elsewhere? The only "free lunch" is the one paid for with stolen money, e.g.: taxes. The rich are leaving and renouncing. There are a lot of countries out there, and many of them provide a more hospitable climate for wealth.
rayiner 15y ago
Renounce their citizenship to go where? Europe (which is far less friendly to the rich)? Asia (what's the point of being rich if you have to live in the developing world?) Fears of wealthy people leaving are a red-herring. Plus, who says we have a shortage of investment capital in the US? There is a ton of money floating around from pension funds and 401k accounts, even leaving out the money held by the very wealthy. If you look at the economy today, it's absurd to say that lack of capital is the reason for the lack of top-line growth.
radicaldreamer 15y ago
I'm not sure a significant portion of people will renounce their citizenship over the capital gains tax rate. We didn't have a brain drain or mass emigration when the top income tax rate was 91% either. To make tax policy based on a fear of wealthy Americans deciding to stop being American seems ludicrous. Similarly, I think investment capital will remain in the US because of the opportunities this country provides for investment and enterprise. You have many countries which have much lower, or even zero capital gains taxes and only the ones with talent and the ability to produce return attract and maintain significant amounts of investment capital. The Isle of Man, Jamaica, and Mexico don't have any capital gains taxes, but are obviously not attracting the kind of capital that the US does- and for good reasons.
- gopi 15y ago
  When the top income tax was 91% (from 1951-1964), the capital gain tax was 25%. So while doctors and small businessmen pay >50% tax on earned income the uber rich paid 25%
rkalla 15y ago
Good point, but could you argue that those Americans that would renounce their citizen ship are already hiding that income in untaxable locations already? I wonder if it would be a wash, you suddenly up the tax, and everyone that was ducking anyway leaves and the rest get taxed and fill the void. All speculation of course, none of us would have numbers to know.
potatolicious 15y ago
Echoing what rayiner said - where are the rich going to go? Europe is less friendly to the rich - extremely so in the most pleasant of places. China? India? Neither are very pleasant places, and even with truckloads of cash has a hard time competing with the quality of life enjoyed in the US even under onerous taxation. I think you're not giving enough credit to the American quality of life - it's why my family immigrated here from Asia. While developing Asian countries have seem dramatic improvements in the last two decades, the QOL in most of these countries still pales in comparison. Just about anywhere someone used to the Western quality of life would want to go would have higher taxes.
- lefstathiou 15y ago
  That's not true. How about Hong Kong or Singapore where you certainly get a western style life with extra benefits: safer, cleaner, live-in maid service, better access to healthcare and a 15-20% all in tax rate. Have you been to Thailand or Indonesia? Sounds ridiculous but this is happening right now. I'm in banking and I hear my clients talk about it all the time. They're doing it as we speak (slowly migrating their business operations and key personell) The thing about entrepreneurs is that they are an irrational bunch. I could introduce you to a couple of people who would rather put all their money into a boat and sink it than pay it as additional tax. Sounds crazy but from a growing number of people's perspectives, the problem isnt excess taxation, its excess taxation coupled with gross mismanagement. Nobody likes seeing their money go to waste, especially to causes they dont agree with (ie union pensions for government employees that retire after 20 years of service).
  - jwhitlark 15y ago
    Drawbacks also... http://www.freedomhouse.org/template.cfm?page=363&year=2010&country=7915 http://www.freedomhouse.org/template.cfm?page=363&year=2...
  - rayiner 15y ago
    I was born in Thailand and go back to Bangkok regularly. Unless you want to live in isolation (maybe with your banker buddies), there is no comparison between living in the US and living in Thailand.
jwhitlark 15y ago
Renouncing your citizenship for tax reasons triggers secondary tax laws that offset any benefits. (It's been a few years since I reviewed any tax law, but I've not heard of any changes in this area.)
- cellularmitosis 15y ago
  according to Neil Strauss in "Emergency", recently changes in law require you to pay some taxes up to 10 years after renouncing citizenship.
philiphodgen 15y ago
For those of you responding skeptically to Lionhearted's question, I'm in the business of helping these people exit the United States. At any given point I have four or five of these cases going. They go everywhere. Their money goes with them.
- _delirium 15y ago
  The total number for 2009 was 743, though, which is pretty small peanuts by the scale of the U.S. economy. It's not even large as a proportion of very-rich people.
  - econgeeker 15y ago
    That's the number of people who renounced. And that number is going up dramatically, and I've heard that the published figures for renouncement are way under-reported. (as in here are lawyers who have more clients who have renounced than the government claims renounced in total.) But on both sides these are just claims. The number of people who simply moved their butts and their assets overseas is much higher. You can tell this is the case because the administration has been saber rattling for the last four years, and starting to work their way into currency controls. Did you know, in order to renounce, you have to get the permission of the government? They charge an exit tax too for your funds. This is a currency control and it is one of the things that marked the soviet union as a bad regime. If you can't move your money in and out of a country, then you're not likely to invest in that country. I'm not very rich, and I will renounce as soon as my second citizenship gets in. It will be easier for me because, not being very rich yet, I will be more likely to get permission of the government to give up my citizenship.
    - _delirium 15y ago
      Yeah, I'd support making it both easier to leave the U.S. as well as to enter it--- make both renunciation and green-card procurement easier. I think the U.S. would come out pretty well on overall balance there, because it's a fairly popular place to live, and is artificially keeping out many people who would like to live there. The evidence I can find is that the outward flow is a trickle rather than a flood (or even a modest current), though. Even if the 743 number is a 5x underestimate, that's still not much. I'm not sure it even balances the rich people flowing the other direction, e.g. the businessmen getting green cards under the ">$1m to invest" criterion (and no doubt there would be more of them if the green-card process were streamlined). I don't think the U.S. is particularly unique in making it hard to renounce citizenship, though perhaps it's for different reasons. Many countries make it very hard to renounce citizenship if they think you're doing it to get out of mandatory military service, for example. For economic reasons, many require that there no longer be any links with the country, e.g. you can't renounce German citizenship if you still own businesses or property in Germany. France seems to have an additional timing requirement, where you can only renounce French citizenship within the first year after acquiring a second citizenship, so dual nationals can't decide 10 years later to leave the country and renounce the French citizenship.
pbreit 15y ago
You could graduate it over many years and the departures would unlikely be noticeable. Investment capital levels cannot trump everything.

ww520 15y ago

The wealthy can renounce U.S. citizenship and lose the protection of U.S. system on their properties. Just don't cry when some thugs in their new home island state rob them of their wealth. The U.S. system provides the scalability for these people to make vast wealth. Shouldn't they pay it back to keep it up? The system is expensive to upkeep. There ain't no free lunch.

econgeeker 15y ago
You think property rights don't exist elsewhere? The only "free lunch" is the one paid for with stolen money, e.g.: taxes. The rich are leaving and renouncing. There are a lot of countries out there, and many of them provide a more hospitable climate for wealth.

rayiner 15y ago

Renounce their citizenship to go where? Europe (which is far less friendly to the rich)? Asia (what's the point of being rich if you have to live in the developing world?) Fears of wealthy people leaving are a red-herring. Plus, who says we have a shortage of investment capital in the US? There is a ton of money floating around from pension funds and 401k accounts, even leaving out the money held by the very wealthy. If you look at the economy today, it's absurd to say that lack of capital is the reason for the lack of top-line growth.

radicaldreamer 15y ago

I'm not sure a significant portion of people will renounce their citizenship over the capital gains tax rate. We didn't have a brain drain or mass emigration when the top income tax rate was 91% either. To make tax policy based on a fear of wealthy Americans deciding to stop being American seems ludicrous. Similarly, I think investment capital will remain in the US because of the opportunities this country provides for investment and enterprise. You have many countries which have much lower, or even zero capital gains taxes and only the ones with talent and the ability to produce return attract and maintain significant amounts of investment capital. The Isle of Man, Jamaica, and Mexico don't have any capital gains taxes, but are obviously not attracting the kind of capital that the US does- and for good reasons.

gopi 15y ago
When the top income tax was 91% (from 1951-1964), the capital gain tax was 25%. So while doctors and small businessmen pay >50% tax on earned income the uber rich paid 25%

rkalla 15y ago

Good point, but could you argue that those Americans that would renounce their citizen ship are already hiding that income in untaxable locations already? I wonder if it would be a wash, you suddenly up the tax, and everyone that was ducking anyway leaves and the rest get taxed and fill the void. All speculation of course, none of us would have numbers to know.

potatolicious 15y ago

Echoing what rayiner said - where are the rich going to go? Europe is less friendly to the rich - extremely so in the most pleasant of places. China? India? Neither are very pleasant places, and even with truckloads of cash has a hard time competing with the quality of life enjoyed in the US even under onerous taxation. I think you're not giving enough credit to the American quality of life - it's why my family immigrated here from Asia. While developing Asian countries have seem dramatic improvements in the last two decades, the QOL in most of these countries still pales in comparison. Just about anywhere someone used to the Western quality of life would want to go would have higher taxes.

lefstathiou 15y ago
That's not true. How about Hong Kong or Singapore where you certainly get a western style life with extra benefits: safer, cleaner, live-in maid service, better access to healthcare and a 15-20% all in tax rate. Have you been to Thailand or Indonesia? Sounds ridiculous but this is happening right now. I'm in banking and I hear my clients talk about it all the time. They're doing it as we speak (slowly migrating their business operations and key personell) The thing about entrepreneurs is that they are an irrational bunch. I could introduce you to a couple of people who would rather put all their money into a boat and sink it than pay it as additional tax. Sounds crazy but from a growing number of people's perspectives, the problem isnt excess taxation, its excess taxation coupled with gross mismanagement. Nobody likes seeing their money go to waste, especially to causes they dont agree with (ie union pensions for government employees that retire after 20 years of service).
- jwhitlark 15y ago
  Drawbacks also... http://www.freedomhouse.org/template.cfm?page=363&year=2010&country=7915 http://www.freedomhouse.org/template.cfm?page=363&year=2...
- rayiner 15y ago
  I was born in Thailand and go back to Bangkok regularly. Unless you want to live in isolation (maybe with your banker buddies), there is no comparison between living in the US and living in Thailand.

jwhitlark 15y ago

Renouncing your citizenship for tax reasons triggers secondary tax laws that offset any benefits. (It's been a few years since I reviewed any tax law, but I've not heard of any changes in this area.)

cellularmitosis 15y ago
according to Neil Strauss in "Emergency", recently changes in law require you to pay some taxes up to 10 years after renouncing citizenship.

philiphodgen 15y ago

For those of you responding skeptically to Lionhearted's question, I'm in the business of helping these people exit the United States. At any given point I have four or five of these cases going. They go everywhere. Their money goes with them.

_delirium 15y ago
The total number for 2009 was 743, though, which is pretty small peanuts by the scale of the U.S. economy. It's not even large as a proportion of very-rich people.
- econgeeker 15y ago
  That's the number of people who renounced. And that number is going up dramatically, and I've heard that the published figures for renouncement are way under-reported. (as in here are lawyers who have more clients who have renounced than the government claims renounced in total.) But on both sides these are just claims. The number of people who simply moved their butts and their assets overseas is much higher. You can tell this is the case because the administration has been saber rattling for the last four years, and starting to work their way into currency controls. Did you know, in order to renounce, you have to get the permission of the government? They charge an exit tax too for your funds. This is a currency control and it is one of the things that marked the soviet union as a bad regime. If you can't move your money in and out of a country, then you're not likely to invest in that country. I'm not very rich, and I will renounce as soon as my second citizenship gets in. It will be easier for me because, not being very rich yet, I will be more likely to get permission of the government to give up my citizenship.
  - _delirium 15y ago
    Yeah, I'd support making it both easier to leave the U.S. as well as to enter it--- make both renunciation and green-card procurement easier. I think the U.S. would come out pretty well on overall balance there, because it's a fairly popular place to live, and is artificially keeping out many people who would like to live there. The evidence I can find is that the outward flow is a trickle rather than a flood (or even a modest current), though. Even if the 743 number is a 5x underestimate, that's still not much. I'm not sure it even balances the rich people flowing the other direction, e.g. the businessmen getting green cards under the ">$1m to invest" criterion (and no doubt there would be more of them if the green-card process were streamlined). I don't think the U.S. is particularly unique in making it hard to renounce citizenship, though perhaps it's for different reasons. Many countries make it very hard to renounce citizenship if they think you're doing it to get out of mandatory military service, for example. For economic reasons, many require that there no longer be any links with the country, e.g. you can't renounce German citizenship if you still own businesses or property in Germany. France seems to have an additional timing requirement, where you can only renounce French citizenship within the first year after acquiring a second citizenship, so dual nationals can't decide 10 years later to leave the country and renounce the French citizenship.

pbreit 15y ago

You could graduate it over many years and the departures would unlikely be noticeable. Investment capital levels cannot trump everything.