Friday, August 09, 2013

Americans Are Ditching Citizenship in Record Numbers, Part 2

As I noted last May, the rate of wealthy Americans renouncing on their citizenship due to deepening political repression and the prospect of higher taxes, has been accelerating. Facebook co-founder Eduardo Saverin and celebrity Tina Turner embodies this hastening trend. 

Amazingly, despite the stiff or the punitive exit tax or expatriation tax, the rate exodus has nearly doubled from 670 from the first quarter to last quarter's 1,131.

Sovereign Man’s Simon Black explains:
A massive 1,131 individuals renounced their US citizenship last quarter, according to data that has yet to be officially released (though I was able to procure an advanced copy).

This is a HUGE jump.

Compared to the same quarter last year in which 188 people renounced their US citizenship, this year’s number is over SIX TIMES higher.

Not to mention, it’s 66.5% higher than last quarter’s 679 renunciations.

This brings the total number of renunciations so far this year to 1,810.

While still embryonic, it’s difficult to ignore this trend– more and more people are starting to renounce their US citizenship.

After all, the number of people who renounced citizenship this past quarter is roughly the same as the number of people who renounced for the previous four quarters COMBINED.
"Nationalism" losing its luster… Again from Mr. Black
This movement shouldn’t be that surprising for a species that began as nomadic hunter gatherers, or for a society that was founded by foreigner settlers in search of a better life.

Yet, in a rather anomalous twist, the emotional ties we have for our passports are incredibly strong.

It doesn’t matter where you’re from– the United States, Sweden, New Zealand, or Venezuela… many people all over the world are inculcated from birth with a sense that their country is ‘better’ than all the others.

We grow up with the songs, the flag waving, and the parades until the concept of motherland becomes deeply rooted in our emotional cores.

Not to mention, when so many of our friends and neighbors unquestionably fall in line, it’s a powerful social reinforcement that only strengthens the bond.
We come to view our nationalities rather ironically as a big piece of our core individuality. I am an American. I am a Canadian. I am an Austrian. Instead of– I am a human being.

It has taken decades… centuries even… to reach this point. So the fact that more and more people are making the gut-wrenching decision to ditch their US passports is truly a powerful trend.
Indeed, we are all human beings regardless of the supposed social divisions caused by race or geographic boundaries.

And if we are to talk about “race”, as I earlier pointed out, we are all “Africans” by genetic origins (mtDNA and paternal Y-chromosome). 

To quote National Geographic’s lead scientist Spencer Wells on the National Geographic-IBM’s Genographic Project
You and I, in fact everyone all over the world, we’re literally African under the skin; brothers and sisters separated by a mere two thousand generations. Old-fashioned concepts of race are not only socially divisive, but scientifically wrong.
(italics mine)

The mental concept of nationalism signifies a legacy of the tribal hunter-gatherer age. Then, the dearth of division of labor and trade made man’s survival entirely dependent on the limited scope of land which sustained them, thus, social bonds among tribes and neighbors were forged to resist against intrusions by marauders. Tribalism set stage for the 'nationalist' order.

Yet as trade or voluntary exchange or markets expanded, the importance of territorial boundaries has vastly been diminished. In essence, trade knows of no boundaries. It is the politicians who create such borders and barriers to trade.

And in the understanding of the potential loss of usufruct and privileges from wangling resources from the citizenry, the political class resists such dynamic by selling "nationalism" as a way to maintain the status quo by curbing people’s ability to freely transact with each other.

Modern day nationalism represents no more than the populist justifications that bequeaths to the political class the power to tax and the power to extend political control over their respective constituents in the name of “feel good” pseudo- social belongingness.

And why are Americans are exiting? Back to Mr. Black:
So what’s driving it? Taxes… and the search for liberty.

For many, their tax bills constitute a financial breaking point. Particularly for people who spend most of their time outside of the United States and are constantly hamstrung by worldwide taxation and information disclosures, the burden for many of them has just become too much to bear.

The US government figured this out some years ago and began charging an exit tax to certain high income / high net worth expatriates seeking to renounce.

This applies to anyone whose average US tax liability over the last five years was about $150,000 (the equivalent of roughly $500,000 in taxable income in 2012 dollars), and/or has a net worth of at least $2 million on the date of expatriation. Curiously this net worth figure does not adjust with inflation.

The ironic thing is that in the “Act of July 27, 1868″, the United States Congress declared that “the right of expatriation is a natural and inherent right of all people, indispensable to the enjoyment of the rights of life, liberty, and the pursuit of happiness.”

Yet I would expect that as the number of expatriates continue to grow, this exit tax will become more and more onerous as the government tries to trap people, and their wealth, in the country.
I would like to add that aside from taxation and political repression, financial intrusion has been compounding to the incentives of Americans to exit.

The US is the only country who taxes her citizens on a worldwide basis. This means offshore Americans are taxed twice—one in the country where they operate, and second by the US government.

Yet the US government will expand the dragnet of taxation and of the intrusion of financial privacy via the Foreign Account Tax Compliance Act (FACTA).

FACTA will force Americans to disclose to the US government all foreign held financial accounts and will force domestic banks operating under the FACTA framework to share information with the US Internal Revenue Services (IRS)

So FACTA essentially will undermine the supposed 'sovereignty' of other governments as US policies now dictate (by virtue of what seems as a foreign policy erected on the premise of 'might is right') on domestic politics.

The jurisdictions covered by FACTA has now expanded to include about 83 countries, which includes, Germany, Israel, Singapore, Malaysia, Taiwan, Thailand and the Philippines.

So far only the Swiss government appear to be resisting the US overlord's FACTA framework and where Swiss banks have reportedly been shunning accounts of American citizens.

So deepening political interventions, the prospects of bigger taxes and loss of financial privacy, as well as, economic uncertainty via monetary policies, appear to motivate wealthy Americans to opt out. 

And as the taxpayer base of the US erode, the fragile fiscal balance of the US will increasingly operate under duress from the growing mismatch between revenues and expenditures. A looming debt based welfare crisis will further this trend.

Despite heavy exit taxes, the growing 'opt out' option is increasingly a disturbing sign, not only for the US political economy which should have a leash effect on the world, but importantly for the US dollar standard.

1 comment:

theyenguy said...

One should consider expatriate internationalized living, and even becoming an international person,

Munkee writes Here ae the mny bnefits of hving a bank account in Hong Kong. Simon Black of SovereignMan writes Hong Kong is an excellent place to bank. One of the best in the world, in my opinion. Why? Because the banks are strong, stable, innovative, and well-capitalized [and account holders] are free to choose what currency to accept (and save), whether HK dollars, US dollars, Chinese Yuan, gold, or anything else.

And Darren Kaiser writes in Doug Casey’s Sovereign Man Chile to join US Waive Program. Countries listed in the Visa Waiver Program are listed below. Successfully joining the Visa Waiver Program means Chile would become a better option for Americans seeking a second passport, if they are considering renouncing their US citizenship one day. After Chile has joined the program, an American could obtain Chilean citizenship, give up their US passport, and still return to the US visa-free for up to 90 days. There are plenty of people who would like to renounce US citizenship but still would like to have the option to travel to the US occasionally, without the headache of applying for a visa. Obtaining Chilean citizenship after Chile has joined the Visa Waiver Program would allow them to do just that