Obama policies drive 1300% increase in formal citizenship renunciations

Taxpat Chart for 2013
Hover over image to view at full size.
Renunciation History (This frame may be scrolled if it doesn’t fit your browser window.)

It’s happened again!

Just when you thought that Obama couldn’t make things any worse, the Federal Register’s Quarterly Publication of Individuals, Who Have Chosen To Expatriate  shows yet another near record quarter for formal renunciations of U.S. citizenship. Furthermore, this completes a record year for formal renunciations.

Key years for Formal Renunciations of U.S. Citizenship

    • The worst year under Bush (2005): 762
    • The best year under Obama (2009): 750
    • The last year under Bush (2008): 231
    • The first year under Obama (2009): 750
    • The worst five years under Bush (2001-05): 2959
    • The worst one year under Obama (2013): 3001
  • Total for eight years under Bush: 3939
  • Total for first five years under Obama: 8060
  • Trend projection for eight years under Obama: >27,000
    (see below)

In the last quarter of 2013, the reported* number of people who felt compelled to take the distasteful step of formally renouncing their U.S. citizenship was 632, bringing the total number of renunciations for 2013 to an incredible 3001. What make that number even more incredible is that it’s 1300% that of the record low expatriation rate that Obama inherited from George W. Bush (231 in 2008).

Of course, more important than the number of expatriations, is the income level of those who are leaving. There’s no formal data on the income levels of expats. But there is a ton of ancillary data that suggests that those who are leaving are in the upper income brackets.

But use your own common sense. Just ask yourself, “How many of those who are leaving are poor and who’s going to pay the taxes that the rich used to pay, after the rich are gone?” After all, according to officially reported IRS Collections Data, the top 10% of income earners pay more than 70% of all personal income tax collected by the IRS. The same IRS data tells us that to be in the top 10%, a taxpayer must earn at least $116,000 per year. Then consider that it would probably be somewhat difficult for most people earning less that that, to give up U.S. citizenship and all the benefits that go with it.

Do you begin to see why driving these people off spells disaster for those who remain?

Let’s look closer at this official data and where it’s headed. Then we’ll look at what it means for those who remain.

To begin with, as the chart above shows, the 2013 total is almost 400% that of the record high seen under the Bush Administration.

But worse yet, the 2013 renunciation totals are 70% worse than the previous worst year for expatriations, which incidentally, was set under Obama’s watch in 2012 and it’s almost double the worst year for expatriations before that, also set under Obama’s watch in 2010.

The quarterly publications that we’re talking about are supposed to list the names of every person who has formally renounced his or her U.S. citizenship in the previous quarter. However, the names of several very high profile (meaning very rich) expats have never appeared on those lists. These lists, by the way, have become known as the Taxpatriot Lists (or more commonly, the Taxpat Lists), suggesting that most of these people are seeking tax relief by leaving. This further suggests that most of them must be rich.

There’s a very good reason for this conclusion. You see, poor people don’t leave the USA. They can’t afford to leave all the freebies that they get here, provided to them at the expense of more productive U.S. taxpayers. In fact, poor people come wading across the Rio Grande every day, with their hands already out for free benefits, paid for by hard working U.S. citizens. Furthermore, it’s the rich who are being targeted for even more taxes than they already pay (which by the way, is double their share, based on income), to pay for all those freebies. So put those pieces of information together and what do you get?

The poor have an incentive to stay and the rich have an incentive to leave.

But the most important question is, “How much of the tax load is paid by those who are leaving?”

As we’ve concluded, it’s a pretty safe bet that the vast majority of those who are leaving are at least moderately well off. Those who earn less that $116,00 probably account for a statistically insignificant portion of the names on these lists. Consider too, that under our current system, the more wealth a person has, the bigger target he becomes for the IRS. Millionaires and billionaires like songwriter Denise Rich, rock star Tina Turner and Facebook co-founder Eduardo Saverin come to mind. Therefore, those who are expatriating are probably skewed heavily toward those with higher incomes and higher tax liabilities and therein, lies the rub.

Those who currently pay the lion’s share of the tax load are the people who are leaving. As determined above, those who earn more than $116,000 pay more than 70% of all federal income taxes collected by the IRS and that’s the income category of most of those who are leaving. So this brings up the most important question.

When the people who pay 70% of all personal income tax leave, who will pay the taxes that they used to pay?

That answer is obvious…

You.

If you think this isn’t Obama’s fault, think again. Formal expatriations during each of Obama’s first two years in offices broke the previous year to year record increase. In 2007, under Bush, the year to year increase reached a record 1.7 times that of 2006. But it should also be noted that even after that increase, the total was still the third lowest recorded up to that time. Moreover, the next year, expatriations dropped to the record low that Obama inherited, which it should be noted, was the second record low in three years.

During Obama’s first year in office, expatriations spiked more than three-fold, coming within two percent of the previous record high. That’s more than double the worst year to year increase under Bush.

But it gets worse. Instead of dropping back down the next year, expatriations more than doubled again; this time, reaching a record high of more than double the previous worst year for expatriations (excluding the first reporting year, which actually included more than one year of data).

Only one year since Obama took office have formal renunciations of U.S. citizenship dropped. But even that year, the total number of expatriations was much higher than any year before Obama took office. Furthermore, consider the fact that this occurred in 2012, which was an election year. Now we all know what an honorable man Barack Obama is and that he wouldn’t do something as underhanded as order a delay in the posting of some of the renunciation records, to make it appear that expatriations were dropping, leading up to the election. Sure he wouldn’t. And pigs fly, too.

But let’s ignore election year politics for a moment and look at the over-all picture. More than 60% of all formal expatriations that have occurred since the government began publishing that information in late 1997 have occurred during the first five years of the Obama Administration. Worse, a polynomial trend line projection, with a 5 year spread, suggests that by the time Obama leaves office, 80% of formal expatriations that have occurred since the Taxpat Lists were created in 1997, will have occurred under his watch.

Taxpat Chart for 2013 with projection to 2016
Hover over image to view at full size in a scrollable frame.
Renunciation Projection (This frame may be scrolled.)

This is not coincidence. Look at the trend line. It was level and about to go down, when Obama took office and instead, it turned sharply upward immediately after Obama assumed office and it has continued to break records since. It’s clear that Obama’s “Soak the Rich” agenda is driving those with money to do what they would not have even thought of doing a few years earlier — seek shelter outside of the jurisdiction of the IRS, by giving up their formerly prized U.S. citizenship.

It would be easy to say, “So what? Let’em go. We don’t need’em.” But that would be a great mistake, since we desperately do need them. Remember that the top 10%, of income earners pay more than 70% of all personal income tax and most of those who are leaving fall into this income category.

But it’s actually far worse than the above chart suggests. That’s because, for every one taxpayer who formally renounces his U.S. citizenship, it’s estimated that between 100 and 1000 more U.S. citizens, depending on the politics of the statisticians to whom you listen, just acquire a foreign passport and drop out, without ever filing formal renunciation papers. It’s so common that there’s even a name for such people. They call themselves PTs, meaning Practically Transparent. But the point is that you can probably multiply the numbers on the above charts by at least 100 and probably a lot more, to get the real numbers.

If we are to reverse this flight of our most prolific taxpayers and job creators, we need serious tax reform that will eliminate the ability of any President or Congress, regardless of which party is in power (and they both do it), to punish political enemies and reward big donors, through manipulation of the tax code. Furthermore, as the above chart shows, we need this substantive tax reform now.

Adding more pages to our already convoluted tax code will only make matters worse. Flattening the income tax sounds good at first, till you consider that our current tax code started off flat. In fact, a flat income tax is only a red herring, proposed by politicians who don’t want to give up the power of an income tax. They know that as long as they keep any kind of income tax, adding tax brackets back in and favoring certain donors will be something that they can easily re-insert, in the next term.

By contrast, the FairTax (H.R. 25) will not only reverse this capital flight, but it will create tons of new jobs, as foreign businesses move their production facilities and even their home offices to the USA (roll over for more detail). It’s the only legislation that provides the tools to fix most of the non-spending-related economic problems that ails the USA and not only is it a bill in Congress, but it already has more than 70 co-sponsors in both houses. The only thing that’s keeping it from becoming law is that the leadership of both parties are doing everything they can to keep it bottled up in committee. Those entrenched politicians realize that the FairTax will take away the tremendous power that the income tax has given them in the past and they’re using every political dirty trick in the book to keep the FairTax from getting to the floor of either house.

This nation cannot endure three more years of Obama driving out the people who pay the vast majority of the taxes that support our government. If just half of that top 10% of taxpayers were to leave, the rest of us would be expected to pay more than double our current tax bill, just to stay even. The FairTax is the only thing that will reverse this exodus quickly enough to avoid economic disaster.

For a point-by-point comparison of the various tax reform proposals floating around, see A ‘Goals-Based’ analysis of tax reform proposals on this site. Learn why the FairTax will reverse this flight of our most prolific taxpayers and job creators and how it will positively affect many other aspects of our economy.

* The term “reported” is used near the top of this article, to indicate that the Taxpat Lists are nowhere near complete, since not all expatriations are reported in the Federal Register. There are still ways for an expat to avoid getting his or her name on the list. For example, in the third quarter of 2013, it was widely reported that Tina Turner had given up her U.S. citizenship, in favor of Swiss citizenship. But follow the link above and search the third quarter list for any variation on her name. It does not appear on the third quarter Taxpat List or any other Taxpat List. You see, the Taxpat lists only include the names of those who filed a certain type of formal renunciation. This means that the numbers on the Taxpat lists are significantly smaller than reality, to begin with, before applying a multiplier for PTs. So the actual numbers are likely to be even worse than indicated above. We just don’t have any data to indicate how much worse it may be, so it was not included.


Comments

Obama policies drive 1300% increase in formal citizenship renunciations — 6 Comments

  1. It is worth understanding that pursuant to the 1996 HIPPA Act which created the Federal Register list, that this list should only include those individuals who either renounce or relinquish US citizenship AND trigger either the average tax paid or net worth tests contained in IRS 8854 (aka “covered expatriates”). Therefore, the minimum net worth or income level of this group is known. This list does NOT include renunciations or relinquishments for those who do trigger either test or individuals who give up resident alien status.

    It is also worth understanding that a similar list published by the FBI ( for the purpose of denying firearms registration ) only includes renunciations of any net worth. It does not include relinquishments or abandoned resident alien status.

    • It’s also worth noting that David Lesperance is one of the top offshore attorneys in the world, so if he says it, it’s fact. I missed that nuance in the HIPAA legislation and was not aware that the list applied only to “covered expatriates”. I have re-read that legislation and found that, as expected, David is right. I suppose that’s why he’s an attorney and I write political essays.

      Anyway, the result is, as David points out, that the names on the Taxpat Lists are all upper-income former U.S. taxpayers.

      So what does this mean?

      Well the last time I checked, “covered expatriates” meant anyone who had earned $124,000 per year for the five years prior to their renunciation or who had a net worth of more than $2,000,000 at the time of renunciation. Furthermore, there was an annual increase built in to the $124,000, in that every year after 2004, the prior year’s income allowance would be multiplied by the percentage increase in the cost of living for that prior year. But that was a few years ago and may have been increased. I hope that David will follow up on this and let us know if the latest definition of “covered expatriate” has changed. If not, I’ll look it up when I get the time and post it here.

      Since the Taxpat Lists only apply to “covered expatriates,” it means that things are much worse than detailed in the above article. It means that we now know that every person on any of those lists are either worth more than $2,000,000 or they are high income earners. In other words, every one of them is in the top 10% of income earners. So thanks to Obama’s “Soak the Rich” agenda, we lost more than 3000 of those high income/high net worth individuals in just one year and the trend is for it to get much worse, before it gets better.

      By the way, if you’re one of those who is considering moving offshore, David Lesperance is one of the attorneys whom you might want to contact. It’s his specialty. I learned about him during my research on this subject. He knows what he’s talking about.

  2. The information provided by attorney David Lesperance means that every last one of the 3001 former U.S. taxpayers on the 2013 Taxpat Lists is either worth more than $2 million or had an income of more than $155 per year, before renouncing… or more likely, both.

    That means that almost all of them are not just in the top10% of taxpayers, but in the top 5% ($161K/year income). That top 5% amounts to just 6.75 million taxpayers, who pay 60% of all federal personal income tax. Then consider that in 2007, Zogby reported that more than 3 million Americans were relocating offshore every year and that was before Obama was elected and began his “Soak the Rich” agenda. If formal renunciations are increasing, informal expatriations are certainly increasing, too.

    It’s entirely possible that we could lose most of that top 5% of taxpayers, before Obama leaves office, if we don’t put a stop to his “Soak the Rich” agenda soon. If we lost just half of the top 5%, that would mean a 43% increase in taxes for everyone else. The FairTax is the only solution that can possibly be implemented in time to help.

  3. By the way, David Lesperance’s law firm is the creator of the “Flight of the Golden Geese” video, seen at the bottom of this page. We use it here, with permission. You really should watch it.

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