Exit tax passes Congress

The U.S. government is about to close off the last refuge for Americans who seek to escape the clutches of the IRS.

Every year, a few hundred Americans take the fateful step of surrendering their U.S. citizenship to avoid paying U.S. taxes. Many of them already live abroad, and are subject to U.S. law which — almost alone among the world's nations — taxes the income of its citizens no matter where they live or where they earn that income.

Now, buried within a bill furnishing tax benefits for soldiers and veterans is a provision that amounts to an "exit tax." As explained by the Wall Street Journal, the law will "that will tax the assets of those who leave for good on their way out the door, as if they were selling those assets."

But wait, there's more! In what looks like a hideous application of retroactive law, ex-U.S. citizens who die and leave their assets to heirs who retain their citizenship will find those assets taxed at 45% — the gift-tax rate.

And it gets still worse. The law applies not only to U.S. citizens, but also anyone who's been a permanent resident longer than eight years. (Call this one the Foreign Investment Discouragement Clause.)

Given how this is buried in a popular bill that "supports the troops," it's sure to gain a presidential signature.

So, in effect, your only hope for preserving your wealth now is to grow it — grow it so large that you'll be OK no matter how high our confiscatory tax rates end up looking like in the years ahead. (FDR maxed it out at 94%. Who says it can't happen again?)

One possibility worth considering is something we call the "Chaffee Royalty Program." On its first go-round, it turned every $1 invested into $50 — until it was closed in 2002. Now it's open again… but be aware this offer expires at midnight EDT tonight.

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