crasch (crasch) wrote,
crasch
crasch

  • Mood:

Expatriation

According to the Tax Foundation, in 1998, the combined burden of
federal, state, and local taxes claimed 39.0 percent of a median
two-income family's total income ($68,605). As a percentage of income,
taxes have more than doubled since 1955. Taxes now claim a greater
share of the median two-income family's income than
food (8.9 percent), clothing (3.9 percent), housing (15.9 percent),
and transportation (6.9 percent) - combined.

In my opinion, much of this money is badly misallocated, and is often used to restrict the freedom of U.S. citizens.

For example, Osama bin Laden, received training and funds from the CIA during Afghanistan's war with the Soviet Union. Afghanistan, which harbors bin Laden, derives much of its income from the sale of opium-derivatives--Afghanistan would not have these profits, but for the U.S.'s draconian drug policy. Other terrorist groups get the bulk of their funds the same way.

According to drugwarfacts.org, at the end of 1999, more than 2 million prisoners were incarcerated in the U.S., making ours the world's largest prison system. Roughly 1 out of 143 U.S. citizens are incarcerated. Each of these prisoners costs over $71,000 per year in corrections, judicial, legal, and police costs. Prisoners arrested for drug offenses constitute 61% of the Federal prison population, and 21% of the state prison population.

Worse, federal forfeitures totaled approximately $730 million in 1994. Yet 80% of the people who had property forfeited were never charged with a crime.

I would strongly prefer that my money were not used to enforce such poor laws. Therefore, I've given a fair bit of thought to expatriating (well before the recent attack). Here's some of my preliminary thoughts on the matter.



Unfortunately, the U.S. claims the right to tax the income of American citizens, no matter where they live in the world (although you can make up to $70 K/year without paying taxes, if you're domiciled in another nation). The only other countries that do this are Libya and the Philippines.

Even if you give up your citizenship, you may be required to pay taxes for ten years after you renounce, unless the IRS decides that tax avoidance was not one of the "principal purposes" of your departure. If your income tax bill is over $100 K or your net worth is over $500 K, they automatically assume your motives are tax-related.

Of course, if you never plan to come back to the U.S., this may not be a problem. However, you will probably want to be able to visit friends and relatives, take advantage of U.S. medical care, and visit U.S. conferences (such as The Objectivist Center, Foresight, etc.). Therefore you probably want to avoid getting on the IRS's list of people to detain, especially given the increased border monitoring that will happen in the wake of the WTC/Pentagon attack..

I would not rely upon privacy laws in tax havens. The island "tax havens" such as Antigua, Anguilla, Bermuda, and so forth, have already come under increasing pressure from OECD countries for unfair tax competition. Although the Bush administration, thankfully, did not pursue the issue as vigorously as the Clinton administration, I can see the U.S. demanding that these nations allow the U.S. to scan their books to prevent money laundering by "terrorists" and drug lords, as well as tax evasion.

Despite these drawbacks, I think the advantages still outweigh the disadvantages, as long as you have money. If you specialize in an intellectual field, such as computer programming, investing, accounting, law, you can offer services that would allow you to earn a great deal of money.

This is what Sir John Templeton did -- he renounced his citizenship in the late 1962, and moved to The Bahamas. For the next 30 years he ran the fund from the Island of Nassau and in 1992 when he sold his $25 billion corporation to Franklin Resources, he had saved close to one hundred million dollars in capital gains taxes alone.

Vince Cate also appears to be doing modestly well, living as an expatriate in Anguilla. Cate renounced his citizenship in order to be able to legally work on strong encryption products.

My current plan? Earn the CFA (Chartered Financial Analyst) certification, and build up a small nest egg (just under the $500,000 limit). Then I plan to move offshore, and set up a hedge fund that specializes in small cap foreign stocks.

Some useful references:



Subscribe
  • Post a new comment

    Error

    Anonymous comments are disabled in this journal

    default userpic

    Your reply will be screened

  • 4 comments