Taxed to Shrug

[Ed Hudgins]

Taxed to Shrug

by Edward Hudgins

On Tax Day 2012 we’re greeted with the news that some 1,800 Americans, a record number, last year renounced their citizenship or turned in Green Cards. The principal reason was to avoid high American taxes. Particularly onerous is the fact that the United States, unique among advanced countries, taxes its citizens on income that they earn while working overseas.

This is yet another example of Atlas shrugging, of individuals opting out of systems that penalize them for seeking their own prosperity through their own productive efforts. In recent year, for example, Norway lost its richest citizen, who decided he would rather be a citizen of Cyprus than the target of a government that saw him as a cash cow to be milked dry. (See my article “Ragnar Shrugged” May 24, 2006. )

Of course, opting out leaves the looters empty-handed. They don’t like that. This is why European Union governments, aided by the United Nations, seek to cut off all avenues of escape through “tax harmonization,” meaning agreements that all countries will tax at confiscatory levels. And this is why the United States targeted peaceful Switzerland, a country that takes banking privacy seriously and refused to enforce American tax laws on depositors that American tax collectors claimed owed American taxes.

But countries that punish producers will collapse, as Greece and many European countries are doing now, for in the end only freedom works.

[9thdoctor]

Back when I was working on my Master’s in Tax one of the cases that was fresh was that of Ted Arison, a wealthy cruise ship magnate. He renounced his US citizenship (in favor of Israel) to avoid estate tax, but died too soon for it to fully take effect. Wealthy foreigners avoid getting green cards in the first place because they make your estate subject to this potentially onerous tax. One downside is that you can only spend so many days a year on US soil. 121 was a magic number, but note that I don’t work in this area so I’d have to review the subject to fill in the details. There are always lots of devilish details, and it’s been a while for me.

OTOH, if you’re wealthy enough that this is an issue for you, you surely can afford a winter home in the Cayman’s, a penthouse co-op on the Champs-Élysées, and a bungalow in Thailand; all this in addition to that mansion in Jackson Hole, Wyoming that alas, you may only use for 4 months out of the year (by which time the daily sight of the Tetons surely has lost it's majestic quality). There was a way to become literally stateless, but there were other downsides to that, I forget the details. It’s hardly an option for we of the 99.99999%.

[caroljane]

Canada lost one of its rich citizens for much the same principles Hudgins mentions - the government did not appreciate him. and he had bigger fish to fry. He renounced his citizenship to go fishing, and has been a co-Floridan of yours, Ninth, for some six years now.

He'll be getting out of prison next month, and since he owns property here I suppose they will let him come rejoin the wife and dogs in the mortgaged mansion.

But Conrad is no Canadian and I speak for many when I say, we don't want him back.

[caroljane]

Hey Ninth! I just saw on Yahoo that a Miami accountant has become a football player and been signed by the Dolphins! Is this the plotline for the 2014 series of Dr you know Who?

[9thdoctor]

Hey Ninth! I just saw on Yahoo that a Miami accountant has become a football player and been signed by the Dolphins! Is this the plotline for the 2014 series of Dr you know Who?

http://www.thepostga...-miami-dolphins

Hmm, hadn’t heard about that. I don’t follow football. It’s not me, if that’s what you’re asking. Hope it works out for him and that his new career is:

http://www.youtube.com/watch?v=rX2RKJIkwYw

[jts]

The correct amount of taxes from the point of view of government is the amount that generates the most money for government. If the amount of taxes is too high, people produce less and at some point revenue decreases. This is the Laffer curve. For maximum revenue for government, you need the right mix of freedom and slavery, enough freedom so people produce and enough slavery to get what they produce.

The relationship between government and the rest of the people is like the relationship between a master and his slaves. The master wants his slaves to be healthy and well fed and even happy, so they are more productive for the master.

Objectivism says government is supposed to protect individual rights and nothing else. That is a pile of male bovine excrement. In the long run governments do not behave that way.