It’s official! Trump cuts Obama wealth flight in half in 3 years and media is silent.It’s official! Trump cuts Obama wealth flight in half in 3 years and media is silent.
In the last three years of Obama’s bungled attempt at governing, 2,408 of our most prolific taxpayers renounced their US citizenship, thus depriving the USA of a tremendous amount of vital tax revenue. By contrast in the first three years of the Trump Administration, renunciations among this same elite group dropped by 3,338, meaning that Trump is fixing Obama’s failures 39% faster than Obama caused them!
The latest “Quarterly Publication of Individuals, Who Have Chosen To Expatriate”, along with data from earlier such lists, leaves no doubt that it was Obama’s “Soak the Rich” policies that were at the heart of the 2,342% increase in costly, but mostly unreported wealth flight that occurred during Obama’s tenure in the Oval Office. It should also be noted that those policies are almost exactly the same kind of misguided policies that AOC, “Sleepy” Joe Biden and, for that matter, all of the Democrats in Congress, want to impose on US taxpayers. This would lead to even more loss of critical tax revenue.
But look at what happened, as soon as Trump became President. He began rolling back Obama-era attacks on wealth and, as the above chart shows, we began to see an immediate slowing of renunciations among the wealthy. Just as we predicted, the slow down was somewhat tepid, at first, since those affected were unsure of how successful President Trump would be. But the slowing of renunciations among the wealthy became more marked in Trump’s second year in office, as Trump began to establish a track record. Now that Trump has been in office for more than three years and a second Trump term is a virtually certainty, the wealthy are no longer worried about losing all they have worked for, to an over-zealous government and renunciations are now dropping faster than they rose.
Certainly, some of those renunciations would have happened, anyway. After all, before Obama took office, formal renunciations among this group of our most prolific taxpayers ranged from a high of 762, to a low of just 231 – that low was in the year before Obama took office. But it is the cause of the marked increase, during the Obama era and the cause of the drop in those same numbers, since Trump has been President, that is no longer in doubt. This is now far beyond coincidence.
There are no more excuses.
Liberals initially claimed that the increase in renunciations under Obama was Bush’s fault. But when it continued at a previously unbelievable rate, they had to find another excuse. So they said the increases were the result of changes in reporting, though when questioned, they could not identify any such changes. When that excuse would no longer fly, they claimed that the rise was coincidental, being caused by non-political stimuli and that it would have happened regardless of who was in office. Moreover, since they expected a Hillary win in 2016, they told us that such increases would likely continue, till the Democrats could pass more laws to prevent the wealthy from leaving, with their wealth intact. But now, there are no more excuses.
The above numbers now prove that it was Democrat “Soak the Rich” policies that were driving this dramatic rise in renunciations of those taxpayers who pay the vast majority of taxes actually collected by the IRS. Yet, listening to the Democrat debates and listening to their congressional leaders, it’s abundantly clear that the Democrats, as a group, are still determined to “Soak the Rich” into oblivion. The only difference is in how fast each Democrat may want to achieve that goal. But the goal is, nonetheless, the same.
Fortunately, Trump’s election has proved how wrong they were. In fact, as we predicted long before Trump even secured the GOP nomination, renunciations among the wealthy dramatically turned around, as soon as Donald Trump took office. At first, the nay-sayers tried to say it was just a blip. But the blip kept going down throughout Trump’s second year in office. Even so, the Democrats kept trying to come up with excuses. But now, the final numbers for President Trump’s third year in office are in.
These numbers prove, beyond any doubt, that President Trump’s policies are working and that it was Obama’s policies that caused the rise in renunciations of the wealthy, in the first place. In fact, Trump’s policies have now reversed well over half of the wealth flight damage done to our economy by Obama’s “Soak the Rich” policies.
It’s important to note that the numbers have moved exactly as we and others predicted throughout the Obama years and now through the first three years of the Trump Administration. This is just one more reason why the Democrat “Soak the Rich” crowd has no more excuses. Both the rise and the fall in formal renunciations were accurately predicted. We only needed to see the fall reach this point, to prove beyond a doubt what we have been saying for 11 years.
It’s now clear that attempting to “Soak the Rich”, as the Democrats are promising to do, should they regain control of both lawmaking branches of government, will not only will fail to increase tax revenues, but will actually reduce tax revenues. There is no doubt that, should the Democrats regain control, the tax base would drop again, because our most prolific taxpayers would again be forced to take refuge in the form of citizenship in more wealth-friendly jurisdictions.
When a wealthy taxpayer renounces his US citizenship, he no longer owes any tax to the US government on non-US-sourced income.
However, simply slowing renunciations of our wealthiest taxpayers is only half the job. We must turn these numbers around. In other words, we need to entice some of those past expats to return.
There are several hurdles to overcome, in order to make this happen. But the most significant hurdle to overcome, if these numbers are to ever reach pre-Obama levels (231 renunciations in 2008) is the Obama-era Foreign Account Tax Compliance Act (FATCA – Title V, Subtitle A, of the HIRE Act of 2010) (FATCA). That law must be repealed. Many US citizens who renounce are already living and working abroad or maybe retired abroad. The problem with this is that FATCA has made it extremely difficult for these people to live outside the USA and remain US citizens.
That’s because, to avoid FATCA repercussions, many foreign banks simply choose not to deal with US persons or companies. You see, foreign banks, like US banks, value their reputation for privacy. But dealing with US persons means that those banks would have to violate their clients’ privacy, by reporting US client transactions to the US government, if they wanted to stay connected to the US banking system. (Please note that what FATCA requires of foreign banks would be considered un-constitutional, were the same rules applied to US banks.)
So this leaves many US citizens, who live outside the USA, without a local bank account. But without a local bank account, a person can’t pay his rent or utility bills. The result is that many US citizens, who were working at lucrative jobs in another country, married to a foreign citizen, or who had other good reason to stay abroad, took the only option left open to them. In order to not have to move back to the USA, they renounced their US citizenship, in favor of another nation’s passport. Sure, most of those people were probably not counted among the extremely wealthy. But this points to one major reason for renunciation of the wealthy, as well as those US citizens of average income.
But the problem is not related to those of average income, who renounce. It’s that the ultra-wealthy make up a disproportionately high percentage of formal renouncers. It doesn’t sound like much, but the effect is huge. The highly respected, HSBC Expat Explorer Report (see page 4), indicates that expats who earn more than $250,000 a year (a group, which makes up just 3.5% of U.S. citizens), makes up at least seven percent of renouncers or More than double their percentage of the US taxpayer population!
But the US taxpayer population makes up only half of the total US population. According to the Joint Committee on Taxation, 51% of tax units (roughly households) don’t have enough income to incur any tax liability. In other words, more than half of Americans don’t owe any US income tax or they receive back all of what they paid in tax during the year. In fact, some even get rebates for money they never paid into the tax coffers, to begin with. So this means that this top 3.5% of taxpayers actually represents the top 1.75% of all Americans.
The end result is that this very elite group of extremely prolific taxpayers are renouncing at a rate that is four-times their representation within the US population in general. They make up around 1.75% of taxpayers, but make up 7% of expats.
Eight years of Obama’s policies driving wealth out of the USA and the last three years of Trump policies decisively turning that wealth flight around has proven that Soaking the Rich is a recipe for disaster. Yet the Democrats, both in Congress and their presumptive nominee for President, are still determined to not only resume, but build on Obama’s “Soak the Rich” agenda, should they regain power.
We’ve already seen how much damage can be done in just eight years. And we’ve seen that President Trump has had great success in reversing this dangerous trend. But even if Trump gets the renunciation rate of the wealthy down to pre-Obama levels, that’s still not enough. Remember that just slowing this wealth flight down would still leave the 21,163 wealthy former U.S. taxpayers, who fled Obama’s attacks on wealth, outside of U.S. tax jurisdiction. Furthermore, those people are unlikely to return, with their thick checkbooks in tow, without some sort of additional motivation. Also consider that, although the number of formal renunciations continue to fall, there will still be those who will continue renounce, due to Obama policies that are still in place, under Trump, such as FATCA.
The point is that, to return to a pre-Obama tax base, we must either convince those wealthy renouncers to return or replace them with new equally wealthy (legal) immigrants. Otherwise, Obama wins and this part of the damage he did to our economy will be permanent. But whether it’s getting wealthy expats to return or attracting new wealthy immigrants, it’s going to require legislation that will create a motivation for such people to want to become U.S. citizens, either again or for the first time.
The problem with getting wealthy foreigners, be they US expats or foreign-born immigrants, to move to or back to the USA, is that our tax system is so easy to change that they can’t depend on the law remaining stable, after Trump leaves office. In fact, our current income tax code, being based on income, is fertile ground for special interest manipulation. President Trump has successfully fought off the special interests, who have long influenced members of Congress, both Democrat and Republican. But, if we’re to have any chance at enticing wealthy US expats to return or attract new foreign wealth, we have to begin by changing our method of taxation to one that does not involve taxing income.
Fortunately, such a plan already exists as a bill in Congress. H.R.25, The FairTax Act of 2019, is currently sitting in the Ways and Means Committee. It would replace the income tax with a progressive national retail sales tax and abolish the IRS. Since the FairTax is a sales tax, it would be impossible for the special interests to use it to play favorites.
The FairTax is built on the fact that, Only People Pay Tax.
Every other form of taxation allows the government to hide taxes from less attentive taxpayers. For example, many people who rent their residence think that they don’t pay property tax. But they do. It’s just embedded in the cost of their rent. Similarly, many people who do not earn enough to owe any federal personal income tax mistakenly think that they don’t pay any income tax. But they do. It’s embedded in every purchase they make. A loaf of bread, a gallon of gasoline, a shirt, and even a kilowatt of electricity all have embedded income tax.
In fact, no business pays any form of tax! NONE!
Every business that wants to make a profit simply passes along to their customers, every penny that they pay in every kind of tax. So when you buy a head of lettuce, you are paying the lettuce farmer’s income tax, the income tax of the trucker who took the lettuce to the packager, the packager’s income tax, the income tax of the trucker who took the lettuce to the grocery store, and of course, the grocery store’s income tax.
But it’s actually worse than that. You’re paying the taxes of the oil company, whose fuel ran the trucks that took the lettuce to market, the taxes of the electric company, whose electricity kept the lights on and equipment running at the packaging plant. To a lesser degree, you’re also paying the taxes of the company that built the drilling equipment used by the oil company and the taxes of the company that made the coper wire that delivered the electricity to the packaging plant. It goes on and on.
Not a single company in the supply chain pays a penny of tax. Every last one just passes that cost along to the next customer in the supply chain. In the end, it’s the consumer who pays 100% of all taxes.
But the problem with that scenario is that it obscures from all but the most diligent of economists, just how much tax we are all actually paying.
A retail sales tax, by comparison, is totally transparent. Under a sales tax, the total amount of tax collected remains essentially the same. But the difference is that the consumer sees every penny of tax that he is paying on each and every receipt or invoice. With an income tax, it’s easy for the Tax and Spend crowd to raise taxes, because most people only see the small portion of tax that they pay and never stop to think that raising taxes on “the other guy” is actually raising their own taxes. But with a sales tax, there is no way to even pretend to tax someone else.
But before someone tries to argue that a sales tax is regressive, let me point out that the army of economists who created the FairTax already thought of that. Through the use of a rebate system (called a “prebate” because it is paid before money is spent and the tax is collected), the FairTax achieves true progressiveness. The true effective tax rate for the desperately poor will be very close to zero, while the tax rate for the very rich will approach 23%. That’s more progressive than the income tax, since even the desperately poor have a 7.65% payroll tax taken from their pay checks.
But the real draw of the FairTax, as far as U.S. expats is concerned, is that they will see the FairTax as a huge benefit for companies operating in the USA and that the FairTax, being collected only at the point of final retail sale of new products and services, cannot be used to punish the rich or, for that matter, to punish any political enemies, regardless of political leanings.
Under the FairTax, the USA would become a huge jobs magnet.
Wealthy former U.S. citizens, along with foreign-born investors will flock to the USA, to invest and build in the USA, where there would be no corporate income tax and no way for Congress to play favorites.
The FairTax would be a WIN-WIN-WIN situation. It would be a win for the poor, who would for the first time since 1916, pay little or no federal tax, while at the same time creating more jobs. It would be a win for the rich, who would be able to build products in the USA that could be sold for less than their foreign counterparts. And it would be a win for the middle class, because there would be fewer people out of work, to have to be supported by their tax dollars, meaning that those dollars could be invested in their future.
Just slowing down the damage caused by Obama is not enough. It must be reversed. The FairTax is the key to making that happen.
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Trump cuts Obama wealth flight in half in less than 3 years.