The Rich Don't Pay Tax! …Or Do They

In 2008, the number of US citizens that formally renounced their citizenship reached a record low of just 231 (See for yourself: 2008 Q1, 2008 Q2, 2008 Q3, 2008 Q4), since the government began publishing this info, in mid 1997. But just over three and a half years later, under the Obama Administration, more US citizens – 239 – handed in their US passports and renounced their US citizenship in just the third quarter (2012 Q3), than did in all of 2008.

The reason why this is important is because the people who are leaving are the people who pay more than 70% of all US Personal Income Tax and who create the vast majority of US jobs. Poor people don’t expatriate from the USA. They can’t afford it. Almost all of those expats are likely to be at least moderately well off.

Back in 1996, a non-health-related amendment was added to the Health Insurance Portability and Accountability Act (HIPAA). This amendment created what has become widely known as the Taxpatriate Lists. That legislation requires that the names of every person who formally renounces his US citizenship, be published quarterly in the Federal Register. The overt idea was to “embarrass” prospective expats into not leaving.

It didn’t work. In fact, being on those lists has become something of a badge of honor for those expats who take the step of formally renouncing their US citizenship. They say that it shows their bravery, since they were willing to “tell the jailer where they were going, when making their escape.”

But although those lists had no effect on slowing formal expatriation, they do provide solid, factual data on expatriation that was not available to the general public, before that bill was passed. The result is that ordinary people are now able to watch formal expatriation climb and fall.

By counting the names on each quarterly Taxpatriate List, we can tell exactly how many US citizens are formally renouncing their US citizenship. Since those lists first appeared, the number of annual formal US expats had not fluctuated very widely and had remained rather low, through 2008. But all that ended in 2009, immediately after Obama took office. Expatriations jumped more than three times, in just that first year. They continued to increase in 2010 and 2011, both years breaking the previous record high and peaking at almost 8 times more expatriations in 2011 than in the year before Obama took office (2008). Moreover, the new 2011 record high number of formal expatriations was not just a record, but it was more than double the expatriation rate in any year before Obama took office.

These new third quarter official renunciation numbers show very clearly that the Obama-driven expatriation will continue to drive out many of those who pay the vast majority of US income taxes and create the vast majority of US jobs.

Some in government have taken to calling those who renounce their US citizenship for tax purposes, “Taxpatriates”. So I suppose that we should start calling those who renounce their citizenship to avoid Obama’s “Soak the Rich” campaign and demonizing of those who he believes to be TOO Successful, “Obamatriates”.

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Obama wants us to believe that if the government “Soaks the Rich”, it will help solve all of our economic woes. But the hard numbers tell a different story.

The Administration proposes punishing those who earn over $250,000 a year, with a wealth tax. So let’s use published IRS data to prove just what this does.

The annually published collections data from the IRS, does not specifically cite data relating to those who earn over $250,000 a year, so let’s look at the next break point down. In a static world, this would result in even more revenue.

The top 5% of taxpayers, according to the most recent IRS data, are those who earn more than $154,643 a year. That income group earned a combined total of $2.482490 Trillion and paid a combined total of $610.156 Billion in personal income tax.

So let’s assume that Obama wanted to tax those people at a whopping 50% tax rate. That would mean that they would end up paying $1.241245 Trillion in personal income tax (half of their income), instead of the $610.156 Billion that they currently pay. That means that the government would be getting an additional $631 Billion in revenue from that group (and that only if many from that group didn’t flee the USA).

That’s not even half of one year’s deficit under Obama.

If Obama and the Democrats were to tax that group at an phenomenal 90%, the additional revenue would just barely exceed the deficit.

And remember that we’re not talking about those who earn more than $250,000 a year, but those who earn over $154,643 a year. If you included only those earning over $250,000, then even taxing them at 90% wouldn’t cover one year’s worth of Obama’s deficit.

Then consider that all of the indicators show that our most prolific taxpayers and job-creators are fleeing the USA to more success-friendly jurisdictions. That means that there would be fewer rich people to tax and less revenue to be taken from them. As more wealthy people leave, tax revenue will go down even further.

“Soak the Rich” is NOT the answer.

Instead of “soaking the rich”, the government should be finding ways to entice more successful people from other countries to move to the USA, where the additional revenue from their US-based success would benefit all Americans.

But to the Democrats, it’s not about saving our economy. It’s about bringing it down, so they can feel more powerful, doling out favors from their ivory towers.

Follow John Gaver on Twitter: Follow @OrigIntent

The book that conclusively answers the question, "Who pays tax?"

Exposing the disastrous consequences of punishing success.

Once again, more US citizens renounced citizenship last quarter than did the whole year before Obama took office.

Taxing the Rich at 50% Would NOT Come Close to Covering Just the Deficit.