Joel Bowman

Against a backdrop of heated immigration disputes along its border states, America this week learned that a small but growing number of her citizens are choosing to renounce their citizenship in order to pursue a freer life abroad. This should come as no surprise, not even to those who have forgotten why their ancestors set sail for the “Land of the Free” in the first place.

According to the Federal Register, the government institution charged with keeping tabs on such activity, 502 expatriates gave up their US citizenship or permanent residency status in the last quarter of 2009. That figure, though still relatively small when compared with the 5.2 million Americans estimated to be living abroad, is more than twice the total for all of 2008. Nevertheless, the increase – from a rate of 235 per year to over 2,000 per year – is enough to raise a nationalistic eyebrow or two.

For some, the decision of their fellow countrymen and women to surrender their American passport – and, after an enormous initial penalty, future tax obligations – is tantamount to desertion…treason, even. Of course, that all depends on what we assume a freedom-loving person chooses to swear their allegiance to in the first place: the concept of freedom itself…or a nation professing to uphold and honor it.

“Let’s be clear about something,” opined Lew Rockwell, founder of the Mises Institute and editor of LewRockwell.com, earlier this week, “A person who decides to give up his US citizenship is not guilty of disloyalty to America; quite the opposite. He could very well be more loyal to American principles than the regime is willing to tolerate.”

Indeed. It is helpful here to inquire as to what, precisely, this band of wayfaring renegades is voting (with their feet) against.

“American expats have long complained that the United States is the only industrialized country to tax citizens on income earned abroad,” elaborated an editorial in The Washington Post during the week, “even when they are taxed in their country of residence, though they are allowed to exclude their first $91,400 in foreign-earned income.”

In addition to onerous taxes (which some expats have taken to calling “taxation without representation”), it would be difficult to argue that the growth of the State – and its myriad associated expenses, debts and deficits – had nothing to do with this still nascent trend. It is surely no coincidence that this uptick in “deserters” comes as the Feds demand and occupy an increasingly larger share of the country’s economic landscape.

In fact, not since a brief spike circa WWII has government expenditure gobbled up a larger percentage of the nation’s GDP pie. Where as government expenses began the 20th century at a relatively modest 7% of the nation’s entire economic activity, they today account for almost 45% of the whole. Until as recently as 1950, total government expenses – including pensions, health care, education, national defense, welfare and all other spending – were still in the vicinity of $70 billion, or roughly 25% of the nation’s GDP. Just two decades later, that number had more than tripled (in nominal terms) to $322 billion, or around one third of the nation’s GDP. We doubt if the number ‘trillion’ had ever even been uttered in the halls of Congress at that time, but by 1990 the government’s expense figure had reached just over $2 trillion, edging its way toward 35% of GDP. Today, it weighs in at over $6.5 trillion and is projected to top $8.6 trillion by 2015.

Because politicians don’t typically spend other peoples’ money as prudently as they might have spent their own, state-funded activity generally leads to a mountain of waste and, eventually, an even bigger mountain of debt. According to figures compiled by the Peterson Foundation, the government’s debt was over $180,000 per person in 2008. Since then, it has grown at more than $4.2 billion dollars per day. This includes expenses like servicing the interest payments on the national debt, maintaining armed forces in hundreds of permanent bases around the world, funding various and multiplying welfare programs and paying the swelling public workforce more than the private market would ever tolerate for the sub-standard services they tend to provide.

Why is this important? Because an increase in the size and cost of maintaining a welfare state is directly proportional to a decrease in economic freedoms for those who are forced (through taxation and other coercive measures) to sponsor it. Ergo, greater state presence in an economy equals more confiscation of private individuals’ property and, ultimately, an unsupportable number of people living at the expense of the dwindling, productive few.

One only need consider the ever-tightening noose of capital controls. Our vigilant friends over at The 5-Minute Forecast noticed recently a “provision slipped unceremoniously into the Hiring Incentives to Restore Employment Act, AKA ‘the jobs bill,’ which passed into law on March 18, 2010.

“The provision,” The 5 continued, “outlines new rules on ‘Foreign Account Tax Compliance.’ The gist is this: Send more than over $50,000 to a foreign bank not on good terms with the US and the IRS will withhold 30% of it for possible tax claw back – and a boatload of your private account information.”

What’s more, with trillion dollar annual deficits as far as the eye can see, there is little chance that the political pressure to “eat the rich” will ease up anytime soon. Is it any wonder then that a fast-growing number of people are already trying to get out before the hammer really slams down? And, more germane to this discussion, are these people to be considered “unpatriotic” for surrendering a passport – of any color and origin – in favor of liberty?

Perhaps it is useful here to consider freedom as a concept, not an institution or a political or geographical location. Certainly one cannot point to freedom on a map, nor is it defined – regardless of laws attempting to render it otherwise – by the color of one’s passport or skin. It resides neither in the wooden speeches of politicians nor in the empty promises of their sophistry, where it is prone to being debased, corrupted and molested. Instead, it lives and thrives in the impenetrable safekeeping of those who seek to achieve it. As such, it is only natural that the torchbearers of mankind’s greatest attribute should seek a home in which they can live their lives unencumbered by the coercion of others.

Joel Bowman
for The Daily Reckoning

Joel Bowman

Joel Bowman is a contributor to The Daily Reckoning. After completing his degree in media communications and journalism in his home country of Australia, Joel moved to Baltimore to join the Agora Financial team. His keen interest in travel and macroeconomics first took him to New York where he regularly reported from Wall Street, and he now writes from and lives all over the world.

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