Years ago, it was virtually unheard-of for someone to give up his/her U.S. citizenship.
Then, one by one, a handful of famous cases surfaced… like Sir John Templeton, who renounced his U.S. citizenship in 1964 and moved to the Bahamas.
At the time, Templeton was able to save $100 million that he would have otherwise had to pay in taxes to the U.S. government.
But for anyone who views Templeton poorly for his lack of patriotism, it’s important to note that the man was one of the greatest philanthropists in history. And rather than finance more bombs, guns, and military folly at the height of the Vietnam War, he chose to channel his wealth into improving the lives of millions of people around the globe.
There have been dozens of other notable cases, both before and since… from the writer Henry James (who renounced in 1915 to protest America’s refusal to join Great War) to Tina Turner.
Not to mention thousands of people that no one has ever heard of.
In the first quarter of 2013, 679 individuals renounced their U.S. citizenship. This was 47.6% more than during the first quarter of 2012… certainly a significant growth rate. And it’s almost as many as renounced for the entire year in 2009.
For certain people, the stranglehold of the U.S. tax system is simply too much to bear. After all, the United States is almost alone in the world in terms of countries that tax nonresident citizens on their worldwide income.
In other words, if you’re a U.S. citizen, yet never set foot on U.S. soil, you’re subject to paying a huge portion of your earnings to Uncle Sam forever.
For some people, this becomes a major breaking point. They weigh their obligations to their families against the morality of financing a corrupt, dysfunctional government… and the decision to renounce becomes clear.
In 2008, the United States government passed a rule governing the procedure of renunciations. They deemed that a “covered expatriate,” i.e., a person of some wealth, would have to pay an exit tax before renouncing on the mark-to-market gains across his/her entire estate.
This exit tax is basically the same thing as an estate tax… or death tax. So to the U.S. government, renouncing citizenship is a bit like dying. It’s a bit strange.
“Covered expatriates” are individuals whose annual income tax liability (i.e., what you owe the IRS) exceeds $155,000 on average over the preceding five years and/or someone whose net worth exceeds $2 million.
Despite these existing rules, however, some U.S. senators are now working to reintroduce legislation that would bar covered expatriates from entering the United States. And it would retroactively apply to covered expatriates who renounced 10 years ago (when the term “covered expatriate” didn’t even exist.
This may end up being problematic for some people who have renounced over the last 10 years. But more importantly, consider what it says about the Land of the Free.
Most U.S. citizens are born on U.S. soil or to U.S. parents completely by accident. And what the government is telling us is that our accident of birth obliges us to lifelong service to the state, even though we never signed up for any of it.
If they say we must pay, we must pay. If they reinstitute a draft and say we must go die, we must go die. If they say they need to steal our Social Security, seize our IRAs, or inflate our currency away, then we must yield.
And if at any point, we stand up and say, “Wait a sec. I never signed up for any of this. You can have your citizenship back,” then they bar us for life as a penalty.
This all seems rather curious for a nation that was founded by foreigner settlers in search of a better life.
Yet we must either gleefully accept being born into state slavery… or they’ll treat us as if we are dead. It’s hardly seems an appropriate way for an enlightened civilization to treat people.
Simon BlackOriginal article posted on Laissez Faire Today
Yawning at the IRS’ quarterly expatriation figures
Simon Black is an international investor, entrepreneur, permanent traveler, and free man.
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