| Tick -
Tick - Tick The Economy Bomb ~ Page Two Legislative attacks upon the wealthiest
1% of Americans could soon wreck our economy |
| THE
WEALTHY ARE LEAVING |
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| So,
now that we have established that wealthy Americans are being forced to
leave the United States in alarming numbers, let's delve a little deeper
into the problem. In 1996 two laws that show just how desperate the
Federal Government has become were passed by Congress and signed into law
by President Clinton. Rather than creating economic incentives for
wealthy Americans to stay in the United States, they attempted to punish
those who would leave. Any first year political science major can
tell you that historically, disincentives almost never work. These
two totalitarian pieces of legislation were the Health Insurance Portability
& Accountability Act of 1996 (26
USC 877(a)(1)) and Immigration and Nationality Act of 1996 ((INA)
sec. 212(A)(10) and 8
USC 1182(a)(10)(E)). |
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| I will just
touch on the Immigration and Nationality Act first, since its only purpose
was to discourage wealthy Americans from leaving and it's only effect was
to scare more wealthy Americans into leaving. |
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| The
Immigration and Nationality Act of 1996 included a provision that would
permanently bar wealthy American expatriates from ever returning to the
United States for any reason, if the government "has reason
believe" that one of the reasons that the expatriate renounced his
US citizenship was to avoid US taxes. There can be only one reason
for such a law. The feds are seriously afraid of the consequences
that the continued increase in capital flight will bring and they erroneously
believed that those wealthy who were considering leaving would ever
want to come back to a country that treated them like second class citizens.
As I am writing this paragraph, I just returned from a tax haven country,
where I talked with several American expats (the popular term for expatriates).
I was not surprised to find that among the reasons high on the list of
recent expats, for leaving the USA was the Immigration and Nationality
Act of 1996. |
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| The Health
Insurance Portability & Accountability Act of 1996 has much more ominous
Overtones. To begin with, the United States government, through this
act, has the audacity to claim the right to tax expatriates for 10 years
after they renounce their US citizenship, if the government "has reason
to believe" that one of the reasons that the expatriate renounced his
US citizenship was to avoid US taxes. United States has long shared with
Libya the infamous distinction of being one of only two countries in the
world that claims the right to tax the income of its citizens regardless
of where in the world that income is earned. |
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| But,
even Libya is not so tyrannical as to claim the right to tax ex-citizens
for ten years after they renounce their citizenship. But then, Libya is
not faced with capital flight on a massive scale either. But, the real
problem is not the abhorrent nature of this law. It is the effect of it. |
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| When word
of the Health Insurance Portability & Accountability Act of 1996 reached
the wealthy, they saw this law for what it was - not just another brick
in the economic Berlin Wall that our government has been erecting to keep
wealthy Americans from leaving with their wealth intact, but in fact, a
large section of that wall. Many wealthy Americans who had been hesitant
to leave saw this provision in the law as the last straw and began making
preparations to leave. The government's claim to the right to tax
ex-citizens for 10 years gave them no pause at all. After all, they
had a solution. |
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| For many
years, when wealthy Americans chose expatriation, they most often left
as much of their wealth as practical in some sort of tax sheltered investments
in the United States, so capital flight did not represent as serious a
threat as it does today. The wealthy would leave, but at least a
portion of their investment capital stayed here. And that portion,
though somewhat sheltered, still generated a significant amount of taxes
and funded many US jobs. But since 1996, wealthy Americans who have
chosen to leave, have had no choice but to take ALL of their wealth with
them when they leave or risk it being confiscated by the IRS. |
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| Let me
emphasize that word. ALL! |
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| Expatriates
can no longer afford to leave ANYTHING behind. They sell ALL of their
real estate, stocks, bonds,... EVERYTHING! Over a period of time,
they move ALL of their wealth into offshore investments. Then, when
they leave, there is NOTHING left for the IRS to confiscate. The
government, of course, pouts and claims that these expatriates are being
very un-American, just because they had the audacity to protect what was
rightfully theirs from IRS confiscation. |
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| The government
fails to realize or at least refuses to accept that it was their own attempts
to grab more power, that made it impossible for these wealthy Americans
to leave any money in the United States. So, instead of preventing
wealthy Americans from leaving, they not only encouraged them to leave
at an even higher rate, but they forced them to take ALL of their wealth
with them when they leave. And, there is the root of the real problem. |
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| When the
wealthy take ALL of their money out of the United States, it has many undesirable
effects. The most obvious, as pointed out above, is the loss
of tax dollars. But, there is are far more serious consequences that
lay beneath the surface. Most of the wealth that we are talking about
is what we refer to as investment income. Regardless of whether that
money is in a passbook savings account, an IRA, mutual funds or stocks
and bonds, it is almost certainly money that is funding business somewhere
in the United States. That money effectively represents JOBS in the
United States. When that investment capital moves offshore, several
things happen. Most notably, JOBS that the capital funds move offshore. |
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| Some of that
investment capital will be replaced, it might be argued. |
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| In fact, SOME,
not ALL of it, will be replaced. But, the source of that new capital
that creates yet another problem. |
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| When US
based capital is not available, businesses look offshore for investment
capital. Since US expatriates can no longer safely invest in
US businesses, foreigners move in to fill the gap, temporarily. As
more and more wealthy Americans are forced to flee the United States, Americans
will find that they are increasingly the labor force for wealthy foreigners
who, by the way, generally pay tax only on what they earn in the US.
But, once the tax rates are forced up, by the lack of wealthy citizens
to tax, even that foreign investment capital will dry up. |
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| Add to
all of this, the appalling increase in frivolous lawsuits by the greedy
and the recent rash of government confiscations (forfeitures) and
you discover that increasingly, the wealthy are finding that their only
choice is to leave. It's like a snowball rolling down hill.
Right now, it's just a little glob of snow. But if we don't create
some major incentives to keep American capital in America, it will become
an avalanche. |
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| The problem
is very complicated and there is no single solution. But, far
and away, the most pressing problems surrounding the capital flight issue
are those caused by the Internal Revenue Service and the Income Tax. |
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| I mentioned
earlier that I have interviewed many American expats about their reasons
for leaving. The number one reason for leaving, cited by EVERY expat
that I have talked with, was the IRS. Not the Income Tax. The
IRS. When I asked them to be more specific, they cited IRS abuses,
lack of privacy in their financial dealings and, let us not forget, the
Health Insurance Portability & Accountability Act of 1996 and the Immigration
and Nationality Act of 1996. |
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| Every last
expat that I have talked with told me that the "deciding factor"
that pushed them over the edge had something to do with the "not to
be sufficiently damned IRS." That phrase in quotes, by the way,
seems to be common in the expat community. So, if we eliminate the
"deciding factor" that is causing these wealthy citizens to expatriate,
it would go a long way toward keeping any more wealthy Americans from leaving.
Every previous attempt to solve this problem has been aimed at strengthening
the power of the IRS. It should now be obvious that any proposed
solutions to this problem that leave the IRS intact should be summarily
dismissed. The single most important thing that we must do to stop
capital flight is ABOLISH THE IRS. |
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| That would
mean replacing the Income Tax with some system of taxation that does not
require such an organization looking into the personal finances of every
individual. The Flat Tax would not work, since it retains the
source of the problem, the IRS. There are, in fact, only two tax
plans that would fit this requirement - excise taxes on imports and a National
Retail Sales Tax. Since broad use of excise taxes have generally
been found to have a negative impact upon the economy, they are not a practical
solution. On the other hand, the findings of a CATO Institute Policy
Analysis on "THE ECONOMIC
IMPACT OF REPLACING FEDERAL INCOME TAXES WITH A SALES TAX" predict
that the shift in tax structures will raise the stock of US capital by
at least 29 percent and potentially by as much as 49 percent. Another
recent study found that if the United States were to implement a National
Retail Sales Tax, most of the largest foreign corporations would move factories
and offices into the USA and many would move their corporate offices here.
A National Retail Sales Tax would not only create the incentive for wealthy
Americans to keep their assets right here at home, but it would actually
have the effect of reversing capital flight and bring a lot of expatriated
capital back into the United States. |
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| But, here
is the important thing. A National Retail Sales Tax must be implemented
soon, before the expatriation snowball picks up too much speed to be stopped.
If we wait until the economy begins to react to this capital flight, it
will be too late. You saw what happened when the markets reacted
to tech stocks being overpriced. Imagine what will happen when the
markets take notice of capital flight. Once that slide begins, all
that you will be able to do is pick up the pieces. |
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| WE MUST
ACT NOW! |
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| Contact your
CongressmanTODAY
and tell him/her that you want him/her to support the Fair
Tax Act of 1999 (H.R. 2525) and the National
Retail Sales Tax Act of 1999 (H.R. 2001). Either of these bills
will go a long way toward reversing capital flight, eliminating IRS confiscations
and getting the IRS out of our personal lives. I urge you to tell
your Congressman that it is
imperative that one of these two bills MUST be passed this session. |
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It
is no longer simply a matter of equity in taxation. It has now become a
matter of the
SURVIVALOF
THE UNITED STATES OF AMERICA.
Support
the National Retail Sales Tax
(or start
packing your bags).
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| The number
of Americans leaving the USA is derived from a limited amount of information
from the US Bureau of Consular Affairs, the IRS and certain foreign consuls.
Up to now, each new piece of information has served to further strengthen
the previous data. Because of the sources of the current data and
his offshore experience, the author is thoroughly convinced of the validity
of the numbers, but it is his intention to continue gathering this data
until the numbers are totally irrefutable. If you have access to
any verifiable data of this nature or know someone who does, please email
the author at jgaver@gurusinc.com. Your contribution will be appreciated. |
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| See related
articles and supporting documents: |
|
The
Infernal Revenue
More
Attacks on the Wealthy
US
Taxpatriates List
Health
Insurance Portability & Accountability Act of 1996 (26 USC 877(a)(1))
Immigration
and Nationality Act of 1996 ((INA) sec. 212(A)(10) and 8 USC 1182(a)(10)(E))
The
Economic Impact of Replacing Federal Income Taxes with a Sales Tax (CATO)
Fair
Tax Act of 1999 (H.R. 2525)
National
Retail Sales Tax Act of 1999 (H.R. 2001)
Americans
for Fair Taxation
National
Retail Sales Tax Alliance
How
to Hide Your A$$et$ and Disappear
Escape
From America |
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| Expatriate
sites: |
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The
Sovereign Society
Escape
Artist
Expat
World
Second
Passports |
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| Contact
your Congressman here. |
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Copyright
2000 John Gaver
All rights
reserved. |
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