Slowing wealth flight in his first two years is another big Trump win the #FakeNews isn’t reporting.
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Slowing wealth flight in his first two years is another big Trump win the #FakeNews isn’t reporting.
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After eight years of watching our wealthiest taxpayers flee the USA in record numbers, due to Obama’s “Soak the Rich” agenda, wealth flight is definitely turning around, under President Trump.
We have delayed reporting on this turn-around in wealth flight, in order to make certain that it wasn’t just a blip in the statistics. But Trump is now entering his third year as President. That means that we have one full year of data, as well as data from the first three quarters of 2018. There can now be no doubt. President Trump has significantly slowed the flight of our wealthiest taxpayers from IRS jurisdiction.
Under Obama’s “Soak the Rich” policies, formal renunciation of citizenship by our most prolific taxpayers increased on a geometric scale. Obama inherited the lowest number of renunciations by the wealthy (231 in 2008), since that statistic has been tracked. But by the time he left office, “taxpatriation”, as it is called by many who are leaving, was headed for a projected 7,000 to 8,000, in 2017. There is no doubt that, if Hillary had been elected, she would have continued those “Soak the Rich” policies and that 7,000 to 8,000 taxpatriations in 2017 would have become reality and 2018 totals would have topped out well over 10,000. But by repealing many of Obama’s “Soak the Rich” policies, President Trump has significantly slowed formal renunciations of the wealthy.
Granted, the numbers are still alarmingly high. But that’s due in large part to Democrats and RINOs in Congress, fighting President Trump at every step. But like everything else that Trump has done, you can count on two things. First, he’s getting marvelous results. Second, the Fake News media is eerily quiet about that success.
The point is that taxpatriation numbers that were previously skyrocketing, are definitely on the way down.
The above chart is a visual representation of the official IRS numbers of wealthy taxpayers who have formally renounced their U.S. citizenship, from 1998 through 2017 and it shows not only the devastating effect that Obama’s “Soak the Rich” agenda had on wealth expatriation, but the remarkable turn-around that occurred in just the first year President Trump was in office. The turn-around is remarkable, not because it is slightly lower than the 5,409 taxpats, who left in 2016, but because it it dramatically lower than the 7,000 or more, where it was headed. In other words, he had to first, stop the ascent, which was headed for more than 7,000, before the numbers could start coming down.
But it gets even better. Although the fourth quarter numbers for 2018 have not yet been reported by the IRS, projections indicate that if the expatriation rate we saw in the first three quarters of 2018 continued during the fourth quarter, the soon-to-be-released totals will show a significant drop in “taxpatriation”, in 2018.
Those final numbers from the IRS are due in early February and we will publish those numbers as soon as they become available. But at this moment, a simple straight line projection shows that the 2018 taxpatriation total will be in the vicinity of 4,385. In the first three quarters of 2018, a total of 3,289 taxpatriots formally renounced their U.S. citizenship. Take that number and divide by three (for the three reported quarters) and then multiply the result by four (to project that average our to four quarters). You get 4,385. That’s how many taxpats there would be in 2018, if the fourth quarter numbers show that taxpatriation has averaged the same as the first three quarters.
But taxpatriation is not remaining flat. It’s dropping. However, we cannot yet use any trending models, other than a straight line projection, since the Obama trend has ended and the Trump trend does not yet have enough date to declare it fully established. So lacking any solid analysis, we cautiously expect to see even fewer wealthy taxpayers taking their wealth and tax liability to another country, in the fourth quarter report.
So why should we care?
Why should anyone care if a bunch of greedy rich families leave? After all, if you believe the Fake News media, liberals, and a handful of tax and spend RINOs (most of whom lost to Trump in the 2016 primaries), it’s the rich who are the problem. But that’s just not the case.
You see, in the last full IRS reporting year (2016), the IRS reported (link downloads IRS spreadsheet) that the top 1% of income-earners paid 37.32% of all personal income tax actually collected that year. Notice that the word “collected” is highlighted. That’s because this data is not just some bunch of numbers that have been estimated, adjusted, factored, distributed, combined, normalized, run through a random number generator, and otherwise massaged, all so they would fit the talking points of the Fake News media and tax and spend members of Congress. That 37% of taxes represents money that was actually deposited into the U.S. Treasury and that is identified as having come from the personal income tax payments of the top 1% of taxpayers.
It’s money in the bank.
Moreover, it’s money that you and I don’t have to pay in taxes, to help keep this country running, because a tiny handful of, supposedly greedy, rich people (1%) already paid more than a third of all U.S. income taxes for us.
It’s precisely because those in the top 1% pay a share of the income tax load that approaches double (1.8 times) their share of the income earned, that you and I don’t have to pay nearly as much to keep this nation running. For the record, the top earning 0.1% (those earning over $2,124,117 a year) pay 1.9 times their share of the tax load, based on their share of income earned.
What this means is that for every one of these wealthy taxpayers who formally renounces his U.S. citizenship, those of us further down the income scale have to disproportionately make up that difference. So unless you like the idea of having to pay a lot more in taxes, to make up the difference for that lost tax base, it’s critically important that those wealthy taxpayers be enticed to remain here in the USA, where their taxes benefit you and me, instead of supporting some other country.
But are there enough taxpats leaving to be significant?
The answer to that question is an unqualified “Yes!”
Consider this. To be on one of the quarterly Taxpat Lists, you must be what the IRS calls a “covered expatriate” and the IRS has three very specific criteria that define that term. Those criteria are found in the instructions for Form 8854. In 2018, those criteria were as follows:
- Owed/paid an average income tax for each of the last five tax years of more than $165,000
- A net worth of more than $2,000,000 on the day of renunciation
- Failure to file Form 8854, in which you declare that you have complied with all U.S. federal tax obligations for the 5 years preceding the date of your expatriation and that you don’t fit one of the first two criteria
So let’s address each one of those criteria.
- It’s an absolute certainty that anyone who has owed/paid more than $165,000 per year in federal personal income tax, for the last five years, is very wealthy. If we work that number backwards, using the average tax rate for people in the top brackets (26.87%), we will find that a person who has had a tax liability of more than $165,000 per year, for the last five years, has probably earned well in excess of $700,000 per year. Remember that to be in the top 1%, a taxpayer only had to earn $480,804 in 2016. So a $700,000 income would put such people quite safely in the top 1% of taxpayers.
- It’s also a pretty safe bet that most people who have a net worth of more than $2,000,000 are in the top 1% of income earners. While it is possible to have a net worth of more than $2,000,000 and not be in the top 1%, it’s very unlikely. If there are any names of people on the “Taxpat Lists”, who are on the lists solely because they fit this criteria, but are not in the top 1% of income earners, they certainly make up an insignificant portion of the lists.
- As for failure to file Form 8854, I’ll just ask you a very basic question. “If you were planning to do anything for which you would be punished, if you had more money than you really do have and all you had to do, to keep from being punished, would be to file a form, what are the chances that you wouldn’t file that form?” Think about it… Well that’s the position of those who are not rich enough to fit either of the first two criteria. They have an easy out, to keep from paying the “Bush Exit Tax“. They aren’t going to make themselves responsible for paying a punitive tax that they are not otherwise responsible for paying. Count on it. Expats who aren’t wealthy will file the form.
The point of all this is that for a taxpayer to be on one of the Taxpat Lists, that taxpayer must be rich and will almost certainly be in the top 1% percent of income earners.
Now let’s take it a step further. The latest IRS data reveals that the top 1% of income earners is made up of just 1,408,888 taxpayers. So, by and large, that’s the pool from which the names on the Taxpat Lists are drawn. That same group is also the group that the IRS says paid 37.32% of all personal income tax collected in 2016.
But we’re not through yet. It gets worse.
According to a statement from the Joint Committee on Taxation, “of all tax units (roughly equivalent to households), including filers and non-filers… approximately 49% will have a positive tax liability.” So what this means is that the top 1% of taxpayers amounts to the top one-half percent of the population. So the top one-half percent of the population of the USA, is paying 37.32% of all personal income tax that is actually collected by the IRS.
Are you beginning to see a picture developing here? If you still don’t think it’s important that these top taxpayers are leaving, then just ask yourself this question.
“Who pays all that tax, after the rich leave?”
The answer to that question is simple… We do.
Those of us who remain in the USA have to make up that difference. There is no other option. Government liabilities aren’t going to suddenly be reduced by 37%, just because 1% of taxpayers renounced their citizenship. So since the government can’t afford to lower taxes by 37%, they’ll just raise taxes on those of us who remain, to keep revenue stable.
Since some people may still have trouble getting their head around what this all means for them, I would like to take a moment to visually explain it. As you look at this animated graphic, keep in mind that the top 1% of income earners paid more than 37% of all personal income tax actually collected in 2016. So let’s let this Susan B. Anthony dollar represent all of the federal personal income tax that was collected that year. Then we’ll take away 1% of taxpayers — not just any 1%, but the top earning 1%, who pay 37% of all federal personal income tax (and likely a similar amount of state taxes). Those are the taxpatriots of whom we are concerned.
When the wealthy renounce their U.S. citizenship, it means that they no longer pay U.S. income tax on non-U.S.-sourced income and due to our high tax rates, most of those who renounce move all of their investment assets offshore with them, so there is no U.S.-sourced income to be taxed at our high rates. Some even see it as more advantageous to have their investments closer to them. But for whatever reason, the result is that, when the wealthy leave, the vast majority of the taxes that they used to pay, is now paid by those of us who remain.
Although the number of taxpats is currently decreasing, it should be noted that nothing is static in government. For example, if the Democrats regain control and implement their “Soak the Rich” agenda, formal renunciations would skyrocket to record levels. So consider this. If all of the top 1% were to leave, it would mean a 60% tax increase for everyone who remains. Do the math.
100% – 37.32% = 62.68% in Remaining Tax.
37.32% / 62.68% = 59.5% Additional Tax
Sure, not all of the top 1% would leave. Some can’t afford to leave, due to the particular business they are in. But consider this. While the top 1% are leaving, do you think the top 5% are just sitting on their hands, waiting to be the next target of the tax and spend liberals? Not likely. They’re leaving too. But there is no data to track those who aren’t in the top 1%. The point is that whatever the number turns out to be, if the tax and spend crowd gets back into power, they’ll re-implement Obama’s “Soak the Rich” policies and you and I will ultimately face huge tax increases, to make up for that relative handful of wealthy people leaving.
As the chart at the top of this article shows, President Trump is reversing this disastrous trend. But it’s obvious that the wealthy, who are watching this play out, are being very cautious. While Trump is systematically dismantling Obama’s “Soak the Rich” policies, the Democrat leadership is out there pushing for higher taxes on the wealthy.
The Democrats are out there using the #FakeNews media to threaten the rich with more punitive taxes. They’re pushing for “Medicare for all”, which would of course, be paid for by the rich, just as Obamacare included additional taxes on the rich, to fund it. Even though the last few winters have totally shattered the global warming myth, the Democrats are still out there pushing for more environmental laws, to fight their fantasy of human caused global warming, which again, will be paid for by even higher taxes on the rich. There are even some Democrat members of Congress, who are talking about a 90% tax rate. If that were to become law, any wealthy taxpayers who were left would flee the USA “en masse”.
Fortunately, the Democrats don’t have the votes to override a Trump veto on any of their tax and spend agenda. But all the noise they are making is having an effect and preventing the taxpatriation rate from slowing down any faster. So, even though Trump is definitely reversing this flight of our most prolific taxpayers, the rhetoric coming from the Democrats is making it slow going.
Some of those who were considering renunciation before Trump took office have obviously taken a temporary pass on that move, as those decisions are showing up in the reduced taxpatriation rate. But with the “Soak the Rich” rhetoric coming from the Left, it’s probably a safe bet that most of them are keeping that option on the back burner, at least for now, while they wait to see what develops.
But just as obviously, many wealthy taxpayers, who had decided to renounce, before Trump became president, went ahead with those decisions. After all, even for an average person to move to another country takes months of time and planning, even when renunciation isn’t in the picture. I know this for a fact.
We lived in London for a time and I can tell you that it took months and multiple trips back to the USA, before we were fully settled in London. Furthermore, in our case, although London was our primary residence, we maintained a home and cars in the USA for the whole time. So our preparations were much simpler than those of someone who is renouncing and selling everything they have in the USA. Of course, the more wealth you have in the USA, the more planning has to go into moving offshore. People don’t just decide that they are going to renounce one day and get on a plane the next. It’s a long process.
For a wealthy person to move all of his assets offshore and comply with all the legal requirements of renunciation could easily take a year or two. That’s another reason why the numbers are dropping so slowly. Many of those people who already had their renunciation plans in the works, before Trump took office, likely just decided to follow through, rather than spend time reversing everything that they had done up to that point. After all, based upon Democrat “Soak the Rich” rhetoric, if they decided to stay, they might have go through that process all over, should the Democrats regain power.
But as Trump continues to disassemble the Deep State and make the USA a better place to do business, we can certainly expect to see fewer cases of taxpatriation. Although this is a very good thing, just slowing taxpatriation is not enough. There are still thousands of wealthy taxpats, who were chased out of the USA by Obama’s “Soak the Rich” agenda, who never wanted to leave, but are hesitant to return. It is those people, who are Obama’s enduring legacy… at least as long as they remain offshore. The problem is that most of them are naturally going to be very cautious about ever returning.
They were some of the most prolific taxpayers in the USA, not to mention that this group tends to encompass the largest donors to charitable causes. But in return, they were punished with even higher taxes and reviled in the #FakeNews media. The thousands of wealthy taxpayers who we lost during the Obama years are those who created hundreds of thousands or even millions of jobs in the USA. But as thanks for creating these jobs and for the hugely disproportionate taxes they paid, they were demonized and targeted by the Obama Administration. Convincing them to return, now that they have settled into their new lives abroad, will be a monumental undertaking.
These are the people we need most.
While it’s a huge win that President Trump has reversed the Obama taxpatriation trend, we still need to find a way to entice the thousands of Obama taxpats to return. We need their jobs. We need their tax revenue. But enticing them to return, after they way they have been treated, is the problem.
However, there is something that Trump can do, to not only dramatically lower the number of taxpats, but to actually get some of those who have already left, to return. That’s a total overhaul of the tax system, that would draw all kinds of wealth back into the USA. That overhaul has a name. It’s called the FairTax and it’s a bill that is currently languishing in the Ways and Means Committee, because those in the Leadership of both parties know that to implement the FairTax would seriously reduce their political power. They know that to end the income tax would mean that 50% of all lobbying activity would go away, as would 50% of PAC monies.
Just the thought of a tax plan that would take away half of their PAC dollars has the Leadership of both parties trembling in fear. They might actually have to start doing the unthinkable… listen to their constituents, instead of lobbyists. The members of the Leadership of both parties are afraid to let the FairTax reach the floor, for a vote. But Trump could use his “bully pulpit” to push the FairTax out onto the floor of the House and then on to the Senate. Even if it didn’t pass on the first vote, it would show taxpayers of both parties, which of their elected servants are really serving them and which are in the pockets of the DC Establishment and that’s what the Leadership of both parties really fear.
The FairTax (H.R.25 – FairTax Act of 2019) would eliminate the income tax, abolish the IRS, and implement a proportional national retail sales tax. There would be no more IRS… for anyone – rich or poor – to fear. There would be no more forms to fill out every year, no audits to fear.
U.S. products would suddenly become way more competitive, both overseas and domestically. Companies would rush to build their products here, where they would have a 23% tax advantage over companies manufacturing similar products in any other country. Businesses would make more profits in the USA, while more jobs, with better pay would be created here. Better yet, when billionaires buy a new yacht or plane, they would be much more likely to buy a U.S.-manufactured product, than to buy a more expensive foreign product. The only people who would pay more tax than they do today, would be illegal aliens, who would be the only group that would pay the full 23% FairTax rate, since that group would not receive the family consumption allowance that un-taxes cost-of-living spending. That means that poor working citizens would have a roughly 23% tax advantage over the illegal aliens, with whom they compete for the same jobs. The FairTax could even cause many illegal aliens to self-deport, because they could no longer afford to live here.
The benefits of the FairTax to all U.S. citizens are numerous. However, since it would represent a serious reduction in PAC money to members of Congress, getting it to a vote is going to require some extra effort.
The Trump reduction in taxpatriation has begun. Now it’s time to contact the White House and your members of Congress, and tell them to bring the FairTax to a floor vote in both houses of Congress. With a combination of President Trump’s leadership and the FairTax replacing the income tax, we could not only reduce taxpatriation, but turn it into tax repatriation. After all, the more wealthy taxpayers we have, the less everyone else has to pay in taxes.
I urge everyone to learn about the FairTax and to then embark on a mission to convince those who represent you in Washington, to pass the FairTax.
Learn more about how the FairTax can help you. Read, “The Rich Don’t Pay Tax! …Or Do They?” Also visit, bigsolution.org and do your research. You’ll soon understand why there is a large and growing FairTax movement across the nation.
There’s just one more thing. Watch for the final 2018 report on taxpatriation to be released here, in the next few days. We’re just waiting on the IRS to release the 2018 Q4 numbers. Follow us on social media