| Tick -
Tick - Tick The Economy Bomb - Legislative attacks upon the wealthiest
1% of Americans could soon wreck our economy |
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| Fact: |
The top-earning
1% of US taxpayers pay one third of all federal individual income taxes
collected. |
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Fact:
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The top-earning
1% of US taxpayers earn only 17.4% of all federally taxable individual
income. |
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Fact:
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The top-earning
1% of US taxpayers pay one third more of the total individual income tax
load than they did ten years ago. |
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Fact:
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The top-earning
1% of US taxpayers are facing frivolous lawsuits in phenomenal numbers,
simply because they are wealthy. |
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Fact:
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The top-earning
1% of US taxpayers are in more danger of government seizure (forfeiture)
of their private property than ever before in our history. |
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Fact:
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The top-earning
1% of US taxpayers are Leaving the USA at the highest rate in history. |
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| The
facts above are based upon the following statistics and calculations which
are, in turn, derived from preliminary
data released by the US Internal Revenue Service and compiled by the
Tax
Foundation. |
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| The
information presented in this article may sound implausible at first, but
read on. |
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| The existing
facts, some simple calculations and conservative projections strongly support
the conclusions presented here. |
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| Examine the
numbers, follow the links and do the math for yourself. |
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| The problem
is real. |
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There were roughly
121.5 million tax returns filed in 1997.
The IRS collected
$727 billion in personal income tax in 1997
The top-earning
1% of taxpayers (1.215 million tax returns) earned 17.4% of the income.
The top-earning
1% of taxpayers (1.215 million tax returns) accounted for $242 billion
in income tax
The top-earning
1% of taxpayers (1.215 million tax returns) paid one third (33.2%) of the
$727 billion total individual income tax collected that year. Do
the math ($242 billion / $727 billion).
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The top-earning
1% of taxpayers (1.215 million tax returns) paid almost double their share
of taxes in relation to income. Do the math (33.2% if taxes / 17.4%
of income).
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The top-earning
1% of taxpayers (income over $250,736 in 1997) carry 33% more of the tax
burden than they did in 1987, when it was 24.8%. Do the math (33.2%
/ 24.8%). Indications are that the share of the tax burden that the
wealthy will have to pay will continue to rise, even with a Republican
President.
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| Recent
related legislation, aimed squarely at the top-earning 1% has made matters
even worse. This is presenting a serious problem for the wealthiest
1%. It is their legitimate and justified response to that problem that
is a ticking time bomb that presents an even more serious threat to the
remaining 99% of taxpayers. |
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| I know that
many people who look at the above statistics will immediately say, "So,
what's wrong with making the people with the most money, pay more tax?"
Many people seem to think that the wealthy have, in some way committed
some horrible sin, just by being wealthy and that, as a result, they should
be forced to pay a larger proportional share of the tax burden as penance.
Such absurd arguments are not only immaterial, but serve to show how completely
ignorant of the real problem now facing the United States, many people
are. The problem that I am talking about is a direct result of the position
in which the wealthy now find themselves. The wealthy are being systematically
backed into a corner by our government. They are paying double their share
of taxes. They are facing frivolous lawsuits by the greedy. And, their
property is being confiscated (forfeited) by the government. Everything
that they have worked so hard for, is being threatened. |
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| Should
we then be surprised if top-earning 1% of taxpayers, facing an untenable
situation, take the only legal route left open to them, even if such a
response threatens the very fabric of the US economy? I think not.
Their response is really quite simple. |
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| The wealthy
are leaving. |
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| The wealthy
are leaving the United States in record numbers. Is it any wonder
then, that according to records of citizenship and permanent residency
applications at many foreign consulates, the wealthiest Americans are leaving
the USA for more wealth friendly climates at the highest rate ever?
But, what's worse, is that this exodus is increasing at an alarming rate. |
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| One of the
most absurd statements that I have heard in response to the above facts
is, "So what? Let 'em leave." The problem is that, as
a result of one of the laws (discussed below) designed to punish
the wealthy for leaving, the wealthy are now taking ALL of their investment
capital with them, when they leave. And, therein lies the true problem.
What really surprises me is that even a few well-meaning conservatives,
who realize that the real problem is Capital Flight, have fallen into the
greed trap, right along with the liberals. In fact, the most inane
argument that I have heard on this issue has come uniformly from both ends
of the political spectrum and goes something like, "Well, we just need
to pass more laws to keep the wealthy from taking their money out of the
country." Duh?... As I will show below, it is precisely
those laws that are some of the primary reasons why Capital Flight
has become such a severe problem in the first place. |
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| So, what does all of this mean
for the other 99% of taxpayers? Why is the fact that a handful
of wealthy people are leaving and taking their money with them, such a
problem? After all, wouldn't it take a tremendous number of wealthy
people leaving to have a noticeable effect upon our economy? Until
you look at the actual numbers and do the math, it doesn't appear to be
a serious issue. So lets look at the numbers again and this time,
let's do the math. |
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| The chart
to the right shows the percentage of individual income tax revenue that
the wealthiest 1% of taxpayers were responsible for in 1997 (in blue) and
the percentage of tax revenue that the rest of us paid (in red).
The full circle represents the amount of personal income tax revenue that
must be collected to fund the government for a year. It demonstrates
that if only the top-earning 1% of taxpayers were to leave the USA permanently,
we would all be in a world of hurt. How would you like to face a
50% tax increase. That is what it would amount to. Without
that 1% of the wealthiest Americans, every remaining taxpayer would have
to pay 50% more in taxes to equal what was lost. Can you afford that?
Those who argue that Americans with the most money should be taxed at a
higher rate will find themselves being taxed at a much higher rate, instead.
If you are paying $10,000 in income tax today, then imagine paying an additional
$5000 in taxes. If you are paying $50,000, then imagine paying an
additional $25,000. If you are paying $100,000 - well if you are
paying $100,000, there is a good chance that you already have your bags
packed and your second passport, so you don't need to imagine anything. |
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| As the
most wealthy leave, the additional tax burden shifts to the next level
down, so lets think about the fact that the top-earning 5% of income earners
pay 51.9% of all taxes collected. While the wealthiest 1% are
"escaping" ("escape" is the popular term used by expatriates),
do you think that the top-earning 5% will just be sitting around waiting
for a 50% tax increase? Of course not. And, when they leave,
your tax bite will more than double! Then, of course, there is the
top earning 10%. But, I wouldn't worry about them. By that
time, the government will have either repealed all of the wealth punitive
laws and abolished the Income Tax, to encourage the wealthy to return,
which is really unlikely, or they will have done what so many other repressive
governments have done when faced with capital flight on a massive scale
- they will have closed the borders to keep the remaining wealth in the
country. But then, as shown by every case where that has happened,
ranging from Nazi Germany in the 30's to South Africa in the 70's and 80's
to to the more recent case of Malaysia, even closing the borders to capital
only increases capital flight. So, maybe you should worry about losing
the top-earning 10% after all, because if they can manage to get out with
their wealth in tact, your taxes would almost triple! Although it's
interesting to think about, for other reasons that I will explain, I seriously
doubt that it will ever get that far. The problem goes much deeper.
But, staying with just the tax issue for now, let's look at the numbers. |
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| Here is
the math for the top-earning 1%: |
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100%
- 33.2% of taxes lost = 66.8% of taxes left
33.2%
= 49.7% additional tax burden for those remaining
66.8%
Here is the math
for the top-earning 5%:
100%
- 51.9% of taxes lost = 48.1% of taxes left
51.9%
= 108% additional tax burden for those remaining
48.1%
Here is the math
for the top-earning 10%:
100%
- 63.2% of taxes lost = 36.8% of taxes left
63.2%
= 172% additional tax burden for those remaining
36.8%
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| Think about
it. If only the top-earning 1% of taxpayers leave the United
States, the remaining taxpayers will find that they will have to pay almost
50% more taxes. 1% is not that much. If you were to put 100 pennies
on a table and then take away just one, you could not tell the difference.
In fact, I will demonstrate later, just how quickly we could lose that
1%. Then, consider that if 5% of taxpayers leave the United States,
the tax burden will more than double. And yet, our government is
making it almost impossible for the wealthy to remain in the United States.
Legislative attacks upon people with any significant degree of wealth is
a ticking time bomb for our economy. |
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| The exodus
really began in 1968, shortly after the riots at the Democrat National
Convention in Chicago. This is not to say that it was a problem at
that time. Let's just say that the trickle of expatriates that
any country experiences became a noticeable flow at that time. Indications
are that the flow increased steadily until the 1980's. For a short
time during the Reagan administration, there was an attempt to roll back
some of the wealth punitive laws and tax rates that were contributing to
this exodus and indications are that it did have a small effect.
But, such is the nature of the INCOME TAX and the lust for ever more power
that elective office often infects officeholders with, that no sooner than
President Reagan left office, the attacks resumed and have been increasing
since. |
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| Evidence
from foreign consulates indicate that the number of US citizens requesting
foreign citizenship or permanent residence in foreign countries jumped
significantly in the months after the Democrats in Congress tricked George
H. Bush into a huge tax increase and the numbers have continued to rise.
Another jump occurred just after the Clinton tax increase. But, there
is now reason to believe that the wealthy are leaving the United States
in significantly larger numbers every year. Scant information from
some tax haven countries indicate that the numbers of US citizens requesting
foreign citizenship or permanent resident status is roughly doubling every
two years.* Although information of this sort is very hard to come
by, since consular offices are very hesitant to give out such information,
some have been willing to verify, not the actual numbers, but the percentages.
Estimates, derived from known numbers place the number of wealthy Americans
leaving the United States last year at almost 100,000. |
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| So again,
let's do the math. Approximately 100,000 wealthy Americans chose
expatriation last year. If the number of wealthy Americans that are
leaving is doubling every two years, the number leaving in one year is
the number that left the previous year, times the square root of 2 (1.414214).
Multiply it out and you will find that if that rate continues for six years,
the number of wealthy Americans that will have left the United States in
that time (including 1999) will be over 2.4 million. (See table.) |
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|
Year
|
1999
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2000
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2001
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2002
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2003
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2004
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2005
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Annual
Expatriation
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100,000
|
141,421
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200,000
|
282,843
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400,000
|
565,686
|
800,000
|
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Total
Since 1999
|
100,000
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241,421
|
441,421
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724,264
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1,124,264
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1,689,950
|
2,489,950
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| That leaves
plenty of room for many of those people to be in another income group and
still include all of the top-earning 1% (1.2 million). What this
means, is that if this rate of expatriation continues for only six years,
what appears to be a minor problem today, could turn out to be a catastrophe
for the US economy tomorrow. Now, I'll admit that these numbers are based
upon sparse information. But other ancillary evidence supports the numbers.
For example, it used to be very difficult to find the single small bar
in most foreign countries where American expats would gather. Today, they
more common than car dealerships. There are quite a few in every small
country. But, consider this. Even if the expatriation rate is increasing
only half as fast as these numbers suggest, we still have a serious problem.
Then consider that those numbers might be off in the other direction.
It might be worse... |
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| Officials
of the Internal Revenue and other federal agencies deny this, of course.
But I ask you, if the government's claims are true, why did Congress suddenly
find it necessary to add an amendment to the Health Insurance Portability
& Accountability Act of 1996 (26
USC 877(a)(1)), that claims the right to tax expatriate Americans for
10 years after they renounce their US citizenship if the government claims
that they "have reason to believe" that the expatriate renounced
for tax purposes? Why then, did they follow-up that abominable law
with the Immigration and Nationality Act of 1996 ((INA)
sec. 212(A)(10) and 8
USC 1182(a)(10)(E)) which permanently denies expatriates entry into
the United States if the government claims that they "have reason to believe"
that the expatriate renounced for tax purposes? If hundreds of thousands
of the wealthiest Americans are not now structuring their holdings in preparations
for leaving the USA, why is the Senate even considering a bill like the
Civil Asset Forfeiture Reform Act of 1999 (S.
1701) that demands that not only foreign nationals, but US citizens
alike, disclose any and all financial information about foreign holdings
that the government seeks or lose ALL FUTURE LEGAL RIGHT
to challenge
ANY property forfeiture in ANY US court?
All of these laws are clearly aimed at discouraging wealthy Americans from
moving their wealth out of the jurisdiction of the IRS and then moving
offshore themselves. The words of the federal agencies on this issue
are belied by their actions. |
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| If capital
flight were not such a serious problem, there would be no need for such
draconian laws. |
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| In fact,
evidence compiled by the US
Bureau of Consular Affairs contradict the claims of the IRS and others
who insist that expatriation is not a problem.
It shows that an enormous number of American citizens already reside offshore.
The following numbers represent only US citizens who have NOT renounced
their citizenship and that the Bureau knows about. As you read these numbers
keep in mind that there is very good reason to believe that less than one
expat in 10 ever renounces or notifies US authorities of his whereabouts
after leaving. |
|
| • San Jose,
Costa Rica |
19,800 |
| • Vienna,
Austria |
14,000 |
| • Bridgetown,
Barbados |
12,000 |
| • Rio de Janeiro,
Brazil |
14,460 |
| • Sao Palo,
Brazil |
16,480 |
| • Santo Domingo,
Dominican Republic |
82,000 |
| • Guadalajara,
Mexico |
111,100 |
| • Mexico City,
Mexico |
441,680 |
| • Bern, Switzerland |
12,113 |
| • Edinburgh,
Scotland |
20,000 |
| • Jerusalem,
Israel |
76,195 |
| • Madrid,
Spain |
75,596 |
| • Tokyo, Japan |
45,000 |
| • Panama City,
Panama |
19,700 |
| • Dublin,
Ireland |
46,984 |
| • Brussels,
Belgium |
35,328 |
| • Buenos Aires,
Argentina |
27,600 |
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| That list
alone numbers over ONE MILLION American expats and only the ones
who have notified US authorities of their whereabouts, at that. Then
consider that we have not even begun to touch the hundreds of small island
nations favored by expats, like Caymans, Bermuda, Grenada and Trinidad
and Tobago, that have several thousand each. How many more expats
are out there who have just dropped off of the government's radar?
It can't be denied. |
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| Page Two:
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