Goal: Repatriate Lost Wealth
Millionaires and billionaires are fleeing the USA at the highest rate in history, due to a very progressive income tax that punishes success. Worse yet, when they leave, they take their investment dollars and tax revenue with them to their new home. But studies have repeatedly shown that the vast majority of those expats never wanted to leave the USA, but in fact, felt like they were given no other choice. An abusive tax code that punishes success and an even more abusive IRS are two of the most significant factors driving wealth expatriation. Give them a good reason to return and most of them would jump at the opportunity. But just tweaking the current tax code isn’t going to be enough.
Past efforts at reducing the progressiveness of our current income tax has only slowed down that exodus; not reversed it. Likewise, increasing progressiveness has always increased that exodus. The difference is really insignificant.
Flattening the tax level of the income tax, especially if there is no corporate or payroll tax component, will certainly inspire the return of some of those wealthy expats, with their investment capital in tow, though likely not much, since the IRS will remain a threat. Also, those who have left know that a flat income tax will not stay flat for long. Therefore, we can expect that any return of wealth motivated by flattening the income tax will be very limited.
While the sales tax portion of 9-9-9 and its reduced income tax level will help create motivation for the return of wealthy expats, 9-9-9 retains the IRS and even adds a slight level of complexity to the tax code. The result will be only a modest level of wealth repatriation.
But the FairTax, by eliminating the IRS and all tax on income, will create an extremely favorable tax and investment environment that will in turn, become a huge wealth magnet for all those expatriated dollars and the expats who hold them.
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