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I agree with the article's conclusion, but not necessarily its premise. Not sure "Hauser's Law" stands up, or is it just statistical coincidence? But yes, rais

I agree with the article's conclusion, but not necessarily its premise. Not sure "Hauser's Law" stands up, or is it just statistical coincidence? But yes, raising tax rates can certainly decrease tax yields. Take one of my closest friends. He's 28 now. He's a college dropout, and self-made millionaire as of age 24. Amazing guy. He was grossing about $800,000/year in his age 24/25/26 years. He was netting out mid/low six figures, and paying $50,000-$150,000 each year in various taxes. Working (no kidding) 80+ hour weeks. Often more. I've seen people cite the top marginal tax rate as being in the 90% range post WWII. But mobility has increased so much since then. My friend is an incredibly resourceful dude, as you can imagine. He's a good person. America wants him here, or at least should. But if the government now wanted, after writeoffs, interest deduction from taxes, etc, say... $400,000 per year from him - he'd be long gone. There's enough countries where you can get a "welcomed exceptional people" visa by putting enough money in the bank, or a resident's visa by buying a property. Dubai being one such place. So yeah, he'd be long gone if the government wanted to tax him more. Now, I can't speak to whether that's fair, or right, or if he's neglecting his patriotic duty by not being willing to stick around in the USA even if it wasn't a smart move for him financially. But it's the way it is. He grits his teeth and pays what he has to because he reckons he'll make more money here doing it that way. If that were to change, I reckon I'd be visiting him in Hong Kong, Dubai, or wherever else pretty fast. He and I both travel pretty regularly, and both of us have lived abroad some. Heck, I'd probably leave if taxes got high enough too.

nazgulnarsil 18y ago
I think this is becoming more and more true as globalization reduces the sedentary habits of business. when you're selling things over the internet, what incentive do you have to stay in a highly taxed region?
- jbjohns 18y ago
  Personally I would like to see things get to a point that people switch countries as often as they switch jobs. Anything that would force countries to compete with benefits vs. costs. Many people talk about market forces driving inefficiencies out of the market place. I don't think the Government should be so shielded from this. I would like to see the government be the best it can possibly be and no government is anywhere near that atm IMO.
  - ibsulon 18y ago
    ...and learning a new language every few years isn't an inefficiency?
    - jbjohns 18y ago
      I'm living in a country now that has four national languages. None of which are English, yet I know several people who've lived here for years and can't speak a word of any of those languages. English is international these days and will get you much much further then you might think.
      - theoneill 18y ago
        Switzerland? Or is there another?
        jbjohns 18y ago
        I live in Switzerland, yes, but I have Scottish college who worked previously in Germany and several friends from South Africa who've worked all over Europe. None of them can get much past "ja" or "nein". The thing to remember is that, outside of the U.S., most companies of any size are international. And once they're international the main language is probably going to be English because that will be the most accessible middle ground.
numair 18y ago
As an American citizen, you are taxed globally. Now, you may think that you can simply renounce your US citizenship, burn your passport and call it a day, but as of 1986 the IRS is able to come after you for taxes for up to 10 years after renunciation of citizenship. In addition, tax information is now shared with INS, so you can be barred entry from the US or end up getting carted off to somewhere you don't want to go if you don't have all of your ducks in a row. Perhaps you're thinking of starting an offshore company, and keeping your money there. Well, you've got to file a special form each year with the IRS for each entity of this sort, as they are known as "Controlled Foreign Corporations." Failure to provide the IRS with this information once again causes you to run afoul of US laws, which once again puts you at risk of punishment from the country that is globally known as "the world's policeman." You have to remember that you are a citizen of the world's smartest country. They have pretty much thought of everything.
- lionhearted 18y ago
  Ah, I expected someone to make this comment eventually. It's true that the United States' tax code is the only one in the world that sets tax on its citizens living in foreign countries, transacting business in foreign countries, with foreign citizens, foreign suppliers, doing business with no connection to the United States. Brits in particular have a good laugh at our international tax code. They simply don't believe it when I try explaining it to them. Anyway, as someone that knows quite a few expats and international businesspeople - practically speaking, it doesn't always go down like you say.
  - numair 18y ago
    There is a standard expat deduction -- I want to say it's something like $72,000 per year. If you make less than that, you don't have to pay anything. "Quite a few expats and international businesspeople" who make more money, and hide it, are constantly getting in trouble -- see, for example, the recent move with the US against UBS. It's becoming harder with every passing day to flout the rules, so it's really a lot better for people to design their lives with the rules in mind. And we're not the only country - there's always Bangladesh!
mattobrien 18y ago
Small point: Dubai is finished. It is bankrupt. It was a classic boomtown. All of the building was done on debt. Foreigners are leaving their cars at the airport, flying out, so that they do not end up in debtor's prison (yes, Dubai has debtor's prison). Not exactly friendly to entrepreneurs - take a risk, take on some debt, and land in jail. Every major country is going to have to spend to stop from falling into complete depression. Taxes will be higher everywhere. And the US will likely get through this crisis better than anywhere else. Having the reserve currency has its benefits after all. I really do not think going somewhere else to avoid higher taxes will make sense in the future.
- didroe 18y ago
  You've just got to pray that everyone keeps using Dollars to buy/sell oil and doesn't switch to the Euro.
  - mattobrien 18y ago
    The euro??? The euro has a much, much better chance of ceasing to exist than it does of replacing the dollar as the reserve currency. Countries like Spain and Italy that are near depression will have huge incentives to leave the euro so they can conduct their own monetary policy. If Eastern Europe is not bailed out before it goes bust, then more Western European banks will go bankrupt - and many countries in Europe are too small to bail out their banks. There will be immense pressure on the eurozone countries to leave the monetary union. In the land of the blind, the one-eyed man is king. The dollar does not look good, but compared to the euro or the yen, it looks great. We don't have to worry about losing reserve currency status anytime soon. We just need to figure out what to do with insolvent banks.
    - llimllib 18y ago
      I agree with you, and wanted to add this Marginal Revolution post which is tangentially related. Are the banks insolvent or illiquid? http://www.marginalrevolution.com/marginalrevolution/2009/03/john-hemptons-radical-view-of-banking.html http://www.marginalrevolution.com/marginalrevolution/2009/03...

nazgulnarsil 18y ago

I think this is becoming more and more true as globalization reduces the sedentary habits of business. when you're selling things over the internet, what incentive do you have to stay in a highly taxed region?

jbjohns 18y ago
Personally I would like to see things get to a point that people switch countries as often as they switch jobs. Anything that would force countries to compete with benefits vs. costs. Many people talk about market forces driving inefficiencies out of the market place. I don't think the Government should be so shielded from this. I would like to see the government be the best it can possibly be and no government is anywhere near that atm IMO.
- ibsulon 18y ago
  ...and learning a new language every few years isn't an inefficiency?
  - jbjohns 18y ago
    I'm living in a country now that has four national languages. None of which are English, yet I know several people who've lived here for years and can't speak a word of any of those languages. English is international these days and will get you much much further then you might think.
    - theoneill 18y ago
      Switzerland? Or is there another?
      - jbjohns 18y ago
        I live in Switzerland, yes, but I have Scottish college who worked previously in Germany and several friends from South Africa who've worked all over Europe. None of them can get much past "ja" or "nein". The thing to remember is that, outside of the U.S., most companies of any size are international. And once they're international the main language is probably going to be English because that will be the most accessible middle ground.

numair 18y ago

As an American citizen, you are taxed globally. Now, you may think that you can simply renounce your US citizenship, burn your passport and call it a day, but as of 1986 the IRS is able to come after you for taxes for up to 10 years after renunciation of citizenship. In addition, tax information is now shared with INS, so you can be barred entry from the US or end up getting carted off to somewhere you don't want to go if you don't have all of your ducks in a row. Perhaps you're thinking of starting an offshore company, and keeping your money there. Well, you've got to file a special form each year with the IRS for each entity of this sort, as they are known as "Controlled Foreign Corporations." Failure to provide the IRS with this information once again causes you to run afoul of US laws, which once again puts you at risk of punishment from the country that is globally known as "the world's policeman." You have to remember that you are a citizen of the world's smartest country. They have pretty much thought of everything.

lionhearted 18y ago
Ah, I expected someone to make this comment eventually. It's true that the United States' tax code is the only one in the world that sets tax on its citizens living in foreign countries, transacting business in foreign countries, with foreign citizens, foreign suppliers, doing business with no connection to the United States. Brits in particular have a good laugh at our international tax code. They simply don't believe it when I try explaining it to them. Anyway, as someone that knows quite a few expats and international businesspeople - practically speaking, it doesn't always go down like you say.
- numair 18y ago
  There is a standard expat deduction -- I want to say it's something like $72,000 per year. If you make less than that, you don't have to pay anything. "Quite a few expats and international businesspeople" who make more money, and hide it, are constantly getting in trouble -- see, for example, the recent move with the US against UBS. It's becoming harder with every passing day to flout the rules, so it's really a lot better for people to design their lives with the rules in mind. And we're not the only country - there's always Bangladesh!

mattobrien 18y ago

Small point: Dubai is finished. It is bankrupt. It was a classic boomtown. All of the building was done on debt. Foreigners are leaving their cars at the airport, flying out, so that they do not end up in debtor's prison (yes, Dubai has debtor's prison). Not exactly friendly to entrepreneurs - take a risk, take on some debt, and land in jail. Every major country is going to have to spend to stop from falling into complete depression. Taxes will be higher everywhere. And the US will likely get through this crisis better than anywhere else. Having the reserve currency has its benefits after all. I really do not think going somewhere else to avoid higher taxes will make sense in the future.

didroe 18y ago
You've just got to pray that everyone keeps using Dollars to buy/sell oil and doesn't switch to the Euro.
- mattobrien 18y ago
  The euro??? The euro has a much, much better chance of ceasing to exist than it does of replacing the dollar as the reserve currency. Countries like Spain and Italy that are near depression will have huge incentives to leave the euro so they can conduct their own monetary policy. If Eastern Europe is not bailed out before it goes bust, then more Western European banks will go bankrupt - and many countries in Europe are too small to bail out their banks. There will be immense pressure on the eurozone countries to leave the monetary union. In the land of the blind, the one-eyed man is king. The dollar does not look good, but compared to the euro or the yen, it looks great. We don't have to worry about losing reserve currency status anytime soon. We just need to figure out what to do with insolvent banks.
  - llimllib 18y ago
    I agree with you, and wanted to add this Marginal Revolution post which is tangentially related. Are the banks insolvent or illiquid? http://www.marginalrevolution.com/marginalrevolution/2009/03/john-hemptons-radical-view-of-banking.html http://www.marginalrevolution.com/marginalrevolution/2009/03...