Formal renunciations of U.S. citizenship during just the first three quarters of 2013 have tied the total number of formal expatriations for all of the last five years that George W. Bush was in office.
Think about what that says. Look at the chart at the top of this article (if examiner.com doesn't allow you to see a version large enough to read, then click here and the original will open in a new window). You’ll see that Obama inherited a record low number of expatriations (231) from Bush. But immediately after taking office, his policies drove expatriation to a near record high (750) in 2009. Every year since then, formal renunciations have not just been higher than any year before Obama took office, they have skyrocketed to alarming levels.
The greatest year-to-year increase, before Obama took office was 131, between 2004 and 2005. But it dropped the next year, for the first time, by 483 and remained low for the rest of the Bush Presidency. Compare that to this year, under an Obama Administration. Formal renunciations of U.S. citizenship have already increased by 1376 and we’re only three quarters into the year. Granted, that’s coming off of Obama’s second lowest year for expatriations. But keep in mind that even that low year saw in excess of 30% more renunciations of citizenship than the highest year under Bush. However, there is a likelihood that a small a portion of the increase in the first quarter of 2013 can probably be attributed to delayed processing of renunciations in the last quarter of 2012, in order to make Obama look a little less incompetent, for the election.
The point to keep in mind is that the overall trend is clearly and dramatically up, since Obama began his “Soak the Rich” campaign.
The latest version of the quarterly government report that has become known as the “Taxpatriot Lists” was released on Thursday and it isn’t pretty. These “lists” are quarterly reports that are published in the Federal Register and list the names of every person who renounced his U.S. citizenship during the previous quarter. The original idea for publishing these names was that it would become a list of shame, with Democrats and government tax lawyers taking to calling it, “name and shame.” But it didn’t work out that way, as more and more expats now look at having their name on that list rather, as a badge of honor, as if to say, “I was smart enough to get out while I still could.”
A count of the names on the Taxpatriot Lists for the first three quarters of this year show that the number of formal renunciations of U.S. citizenship from January through September of this year (2369) is almost identical to the total of all formal renunciations for the entire last five years that George W. Bush was in office (2373). But it doesn’t stop there. Due to the recent government shutdown, the list for the third quarter is likely to be incomplete. The real number may be much higher. But since we don’t know, let’s just stick with just what they’ve published.
Now I know that some people may react to this information without thinking and say something like, “So what? Let’em go! We don’t need’em!” But that would be a big mistake, because we desperately do need them.
You see, what’s most alarming about this trend is that most of those who are renouncing are the people who pay the vast majority of the taxes and who create the lion’s share all of the jobs in the United States.
Think about it. How many poor people do you really think would give up all of the freebies that they get in the United States?… Really.
Poor people don’t renounce U.S. citizenship. They just don’t. They can’t afford it. In fact, just the opposite is happening. Deadbeats come wading out of the Rio Grande River or emerge from tunnels in Arizona, with their hands already open for a hand-out.
It’s a pretty safe bet that the vast majority of the people who are leaving are those whose income is well over $100,000 per year. Many would place that number even higher. But I’m trying to be as conservative as possible, so as not to give detractors reason to say that I inflated the numbers. So, based on the latest IRS Collections Data an income level of just $100,000 would put those people in about the top 12 or 13 percent of income earners or more importantly, the group of people who pay more than 71% of all personal income tax collected in the USA.
Have I got your attention?
When the people who pay most of the taxes leave, who’s going to make up the difference in lost taxes?… The poor?
Who’s going to create new jobs when the job creators are gone?… The poor?
More than likely, many in the middle class will be reclassified as rich and their taxes will go up. Of course, they won’t be able to pay the huge tax rates that the rich used to pay. So ultimately, it will be everyone, including the poor and middle class, who will be required to make up that difference. And as for jobs, just ask yourself when was the last time you heard of someone being hired by a poor person.
Now let’s be clear. We’re not talking about tax cheats. When people renounce US citizenship that’s perfectly legal. In fact, when they renounce, they must report all of their worldwide assets and pay George W. Bush’s Exit Tax (110th Congress H.R.6081 Sec 301), which can be quite heavy. They also give up any benefits that U.S. citizenship may offer. But in return, their future U.S. income tax liability is suddenly limited to only that income derived from within the USA. For most expats, that U.S. sourced income is effectively zero. That’s because they tend to move most or all of their money offshore, with them, and invest it offshore. So for all but a few of the expats on the Taxpatriot Lists, we lose their entire tax base and most or all of the jobs that their investments create.
We’re also not talking about just billionaires, either. Sure, there are some billionaires who have renounced in recent years. SongwriterDenise Rich (ex-wife of billionaire tax evader, Marc Rich, who was pardoned by Bill Clinton) comes to mind and of course, Facebook co-founder Eduardo Saverin. We also just heard about Tina Turner's relinquishment of U.S. citizenship in October (her name should show up on the Q4 List). But for the most part, those taxpatriots aren’t spectacularly rich or even somewhat so. They’re just ordinary somewhat rich people… people who may earn from $100,000 to a few million dollars every year. Very few of them earn either less or more than that and even fewer are billionaires.
So why are these ordinary rich people so important? Well consider this. Many of them are small business owners. So why should that make a difference? Well according to the Small Business Administration, 64% of net new private sector jobs are created by small businesses – not mega-corporations. We’re talking about “new” jobs - jobs that didn’t even have a name or description before a small business created it. Without them, the creation of new jobs would drop dramatically.
Is a picture beginning to develop here?
Since the day Obama took office, he has overseen a steadily increasing exodus of that group of people who pay almost all of the taxes and create the lion’s share of the jobs in the United States. Zogby International reports that more than 3 million Americans relocate offshore every year. But worse yet, as this recent data shows, more and more of those expats are now choosing to formally renounce their citizenship. This means that they will no longer pay U.S. taxes on income earned outside the USA. But worse yet, after renouncing (or perhaps just before) most of the new jobs that they create will be created in their new country of domicile – not in the USA.
That’s why losing these people is so catastrophic. In fact, it’s a lot worse than just an “Oops!” If just half of the top 10% of income earners were to leave (distributed proportionately across the top 10%), it would mean that we would lose more than 35% of our personal income tax base and probably half of all new job creation would go with them. No nation could recover from such a disaster, especially one that is already $17 trillion in debt.
Obama’s futile attempts to punish success shows that he doesn’t understand two of the most basic principles of dealing with successful people – principles that any leader needs to understand thoroughly, if he is to successfully deal with the economy.
The first principle is that successful people are like a handful of sand. The tighter you squeeze, the more will slip through your fingers. They are the people who have the wherewithal to leave and as a result of Obama’s “Soak the Rich” agenda, that’s exactly what they’re doing. In fact, the Foreign Account Tax Compliance Act of 2009 (FATCA – finally inserted into the HIRE Act), signed into law by Obama in 2010, is one of the driving factors, as we’ll address later.
The second principle is that we need those successful people, because they are the people who pay the vast majority of the tax load and provide the majority of all new jobs.
Obama’s failure to grasp these simple truths and deal appropriately with them clearly demonstrates his economic incompetence.
Based on the renunciation rate for the first nine months of this year, the total number of formal renunciations for the year 2013 will likely be in the neighborhood of 3159 expats or more than 14 times the level that Obama inherited. But that’s based on a stable renunciation rate, which is likely to produce too low a number. A “stable rate” assumption ignores the fact that renunciations have been growing at an “exponential rate,” since Obama took office. Of course it also doesn’t include the effects of the new FATCA regulations that take effect next year.
A polynomial trend line, with a 5 year spread (for 5 years of Obama Administration), based on past annual renunciation totals and extended to 2016, indicates that at the current rate, by the time Obama leaves office, the renunciation rate will be well over 7,000 per year. Worse yet, this doesn’t include the dire effects of FATCA.
You see, FATCA imposes harsh compliance requirements on foreign banks that hold accounts of U.S. citizens. So as predicted by economists, before it was even voted on in Congress, many foreign banks are telling foreign domiciled U.S. citizens to come in and close their accounts. It seems that it’s cheaper for the banks to close a few U.S. accounts than to deal with FATCA compliance. The result is that many U.S. citizens, who have lived overseas for years or even decades and yet, have been diligently paying U.S. income tax, are finding their U.S. citizenship to be a huge detriment to their continued life offshore, instead of the benefit that it used to carry. The only option that FATCA leaves for these people is renunciation of U.S. citizenship or moving back to the USA. Now consider that most estimates and surveys put the number of U.S. expats living offshore at well over 6 million and some studies suggest that it could easily be more than 12 million.
Then consider that, the various estimates of those who just establish foreign citizenship, identify themselves to the banks as citizens of some other country and simply cease paying US taxes, range from hundreds to thousands of silent expats, for every formal renunciation. This nation cannot possibly afford to lose that many of it’s top taxpayers and job creators.
So how do we stop this disastrous trend?
It’s going to be difficult, since it’s a safe bet that Obama isn’t going to suddenly figure out that it’s his own policies that are driving out our most prolific job creators and taxpayers. But there is one thing that would stop this devastating trend cold. It’s a bill that is due to be voted on soon, in the Ways and Means Committee. It’s called the FairTax (HR-25). It would replace all federal income taxes with a single-rate national retail sales tax that includes provisions to un-tax poverty. By eliminating the income tax and IRS – abuses of which are the primary driving factors in this rush to what has become knows “taxpatriation” – there would be far less motivation for successful investors and job-creators to leave.
But if Obama doesn’t soon have an epiphany or the FairTax isn’t passed into law, then this taxpatriation will continue at far higher rates and it will not be the rich who will feel the pressure. They’ll be gone. All that will be left will be the poor and the middle class, who have neither the money to pay excessive taxes nor the wherewithal to leave.
If you aren't ready to start packing, to join those taxpats, then call your congressman and senators now and tell them to pass the FairTax, unmodified, today… while it can still pull us back from the precipice.