Dear Mr. Kokai: I just finished reading your article “Tax debates often ignore facts, negative consequences” and thought I would write to add another fact that is being swept under the rug in the wave of populist progressive rhetoric. Namely that prudent Wealthy Americans are getting themselves the insurance policy of being able to ‘Vote with their Feet’ in the event of the Democrats sweeping the field in November. Let me take a few minutes to explain.
The architects of the Warren/Sanders Wealth Tax, Gabriel Zucman and Emmanuel Saez to make the patently false assertion that the US is not subject to tax competition with other countries for its wealthy taxpayers. In a recent Washington Post OpEd, they said the following:
“The situation in the United States is different. You can’t shirk your tax responsibilities by moving, because U.S. citizens are responsible to the Internal Revenue Service no matter where they live. The only way to escape the IRS is to renounce citizenship, an extreme move that in both Warren’s and Sanders’s plans would trigger a large exit tax of 40 percent on net worth.”
As someone who assisted my first wealthy American client to permanently legally leave the US tax system by renunciation in 1990 and who has helped hundreds of others do the same over the past three decades, I can safely state that Mr. Zucman and Mr. Saez’s statement is ridiculous. This ‘extreme’ move has been taken by thousands of wealthy Americans annually for years. In fact the reason the numbers are not even higher is that the system to get an interview to renounce US citizenship is tremendously backlogged! In fact you are welcome to read my comments in a recent NYT piece “When U.S. Citizenship Starts Looking Like a Bad Deal”
Ever since the Democratic POTUS candidates have changed their ’Tax the Rich’ rhetoric from “Getting money to spend on good things” to “Taking money from bad people”, my phone has been ringing off the hook with Wealthy Americans who read a blog I wrote earlier this year entitled, “Now is the time for America’s top 1% to start preparing their Back-Up Plans?”. I followed this up with “Back Up Plans for High Net Worth Americans? Anyone who feels certain about the US political and tax future is just fooling themselves”.
Wealthy Americans are looking at equipping themselves with a BackUp Plan which will give them the option to ‘Vote with their Feet’ should the increasingly likely outcome of a Democratic political grand slam take place in November 2020. If this occurs, those people with a BackUp Plan can decide to trigger their departure, long before something like Senator Warren and Sander’s proposed 40% exit tax could become law.
In a democracy American voters are free to elect politicians who propose policies such as a Wealth Tax or taxing capital gains at ordinary tax rates. Likewise, wealthy Americans have the freedom to sever their future tax obligation to the US. The US public should know before casting their votes that the undisputable consequence of a departure by even a relatively tiny number of Wealthy Americans is that the US Treasury will not only not have a tax windfall but will end up with significantly less tax revenue . It should also be pointed out that this impact will be even more significant to the US then the departure of wealthy French and other Europeans to their countries. This is a result of the reality that since the US does not have a VAT source of tax revenue, it relies to a greater extent on personal tax revenue.
While this false assertion is everywhere, the accurate reality and its important (and entirely predictable) consequence is not getting much attention in the media. …