Ten Benefits of Expatriation

I got this yesterday as a part of a financial newsletter to which I subscribe. Something that I think will interest quite a few of our U.S. members particularly those thinking of moving to another country to live and/or work. A lot of this would also apply to anyone living in a developed country.


Ten Benefits of Expatriation
By Casey Research Team

Everybody has their own personal reasons for expatriating, but here are some of the benefits:

1) Freedom from the global US tax net. Taxing you no matter where you breathe on this earth is wanton American exceptionalism. What other nations don't dare do to their citizens, the US government doesn't think twice about. Once you renounce, it's your choice either to live the rest of your life free of any tax net, or to pick a place you want to be year-round and opt into the tax system (assuming it's not a tax- free jurisdiction). If you do, you'll at least know you have the freedom to walk away from it by simply moving elsewhere.

Taxes in the US are already high, and rates are set to increase across the board. To gain some perspective, it's clarifying to calculate the number of months per year you work for the government. How many months did it take to pay all the federal, state, and local income taxes, capital gains taxes, FICA taxes, property taxes, and AMT - plus the raft of permitting, licensing and accounting costs you incur over the course of a year? Add corporate taxes if you're a business owner. And don't forget the new 3.8% health care surcharge tax on all investment income, including dividends. Be honest and add it all up. You'll then have a decent idea of how much it costs you in time and money to be a US citizen every year. That cost will rise dramatically going forward.

Here's the take-away: The biggest guaranteed return on your capital that you'll ever have is investing your money free of taxes. Do some long-run compounding calculations with and without taxes to see what I mean. I'll wager John Templeton did.

2) Freedom from the death tax. Its political label is the "estate tax," but the fact is the tax is based solely on your demise. I used to think the death tax only applied to gains on assets that had not been taxed already. How naïve I was! It grabs half of all your assets, regardless of the fact that you've paid taxes on them.

If you have over a few million dollars net worth, your heirs will be writing a heart-stopping check to the IRS. They also may be forced to liquidate your assets to raise cash. This has happened to countless small businesses and family farms. And if you're a young, talented entrepreneur who goes on to earn substantial wealth over the course of your life, the death tax has you in its crosshairs too.

The death tax is 45% now and is scheduled to jump to 55% in 2011. Either way, the amount is staggering. Expatriation lifts the death tax burden from your children and other heirs.

3) Freedom from the US government's War on Solvency. Washington's crazed debt addiction is uncontrollable and endemic. US politicians have strapped an inconceivably large debt burden on the backs of their subjects. It pays to spend some time on www.usdebtclock.org. The multi- trillion dollar debt avalanche roars on, headed straight towards economic hell. After "Debt Per Taxpayer" and "Liability Per Citizen," check out "US Unfunded Liabilities" to see a number that's suited to astronomical calculations - not economics.

Don't be tricked into thinking this is a partisan issue. It's sobering to review the debt records of both Democratic and Republican administrations...to behold what politicians do when given trillions of dollars of other people's money. They spend it all - and then borrow trillions more! Of course, the burden of servicing that debt is on you, not them. Their six-figure salaries are guaranteed, along with their uber-perks and fully funded pension plans.

While often described as "the richest nation in the world," the reality is that the US is the most indebted nation, by a country mile. No other government comes close to matching the debt burden that has been dumped onto every taxpayer. The US government is rampantly incurring debt in your name, and you have no way to stop it or slow it down. Standing in free speech zones with protest signs didn't work when it came to war and crony bailouts, and it won't work for the debt burden either.

The one truly meaningful act you can take as an individual is to opt out. Unload the government's debt burden off your back. Don't let yourself or your family be a casualty of the government's War on Solvency.

4) Freedom from being treated like a "toxic citizen." When traveling abroad, being a US passport holder used to be a positive thing. Now it's an albatross. The New York Times article I cited earlier explains it plainly: Americans abroad are being treated like "toxic citizens." They're cut off from banking and other business and investing opportunities solely because of their US citizenship.

Typical currency controls don't permit you to take money out of a country. The US doesn't have that (yet). Instead, and this is quite clever, the government enacts laws and regulations that function as indirect currency controls. There are so many Patriot Act and other costly impositions forced on foreign banks that handle US customers that they're simply refusing to put up with the harassment. Here's the upshot: Your money isn't fenced in; it's fenced out.

If you seek firsthand evidence, visit a major banking center outside the US and try to open a bank account. Odds are you'll be turned away when the bank finds out you're a US citizen. Reports abound of US citizens' long-held accounts at foreign banks being summarily terminated. The US government has made its subjects, along with their money, persona non grata.

I've read that some foreign banks are now setting up, in essence, holding pens designed to handle US citizens who want to bank offshore. But, really, what's the point? You're burdened with having to file extra IRS paperwork, along with FBAR forms to the Treasury Department. And even if you don't file all the extra papers (not a smart move), new laws force foreign banks who accept US customers to report on you anyway. They are pressured to sign "information reporting agreements" to have US citizens as customers. Google "FATCA" and "qualified intermediary agreements" if you want details.

Now for the most extreme instance of liability. Being a US passport holder can mean life or death in the context of a terrorist attack. The US government's never-ending War on Terror makes the world more dangerous for Americans. After so many years of bombing and military occupation in the Middle East, how can the hundreds of thousands of civilians who've been maimed and killed by the US government NOT be the source of enduring resentment and blowback? Needless to say, the US passport is on the short list of ones you least want to have if somebody sticks a gun in your face and says, "Passport." Unfortunately, this has happened on more than one occasion, and it would be unreasonable to assume it won't happen in the future.

5) Freedom from the paperwork prison. Millions of Americans are plagued every year by days, sometimes weeks, of preparing tax documents and paying thousands of dollars to accountants to decipher the IRS tax code. There are, literally, hundreds of different IRS forms. The tornado of rules and regulations in the tax code fills roughly 70,000 pages. And then you have to save boxes and boxes of papers for years in fear of someday being audited and not being able to produce the demanded documents. If you're unfamiliar with audits, here's how they work: You're guilty of whatever the IRS claims, unless you prove yourself innocent. If that sounds preposterous, I encourage you to ask a tax lawyer. "Innocent until proven guilty" does not apply. Freedom from spending days of tedium on mind-numbing paperwork and thousands on accounting fees has been an absolute joy.

6) Freedom to invest without tax distortions that encourage capital misallocation. The US tax system encourages misallocation of your investment capital. It obscures the act of buying and selling securities based on a rational assessment of their value. For instance, you end up not selling a security you otherwise would simply because you don't want to trigger taxes yet. Or you hold on longer than you might otherwise to get long-term capital gains treatment. Or you sell securities you normally would keep - for "tax loss harvesting."

Moreover, you're incented to give an artificial value premium to municipal bonds simply because they aren't taxed, despite their negative real return after inflation. And your assessment of real estate's value is warped too, by mortgage interest deductions and capital gains exemptions. The phrase "letting the tax tail wag the dog" encapsulates these distortions. Expatriation instantly liberates you from them.

7) Freedom from being crushed by the fiat currency landslide. If you pay attention to the world's major currencies, you'll notice they fluctuate, often dramatically, against each other. In a year's time, the price of an item can increase or decrease 20%, 30% - sometimes more - solely based on which currency you use to pay for it. The same item!

Regardless of the reason for the volatile swings in the value of currencies, there it is. Reality. So what's the risk for you? For one thing, you can have all your money in one currency, earn a positive investment return on paper (that you're taxed on), but actually lose purchasing power. Think about it this way. The US imports goods from all over the world. When the US dollar drops in value, it takes more of them to buy those goods. That makes you functionally poorer, no matter what your account statement says. It's that simple.

Every time the dollar drops, you get the short end of the stick. The value of your savings erodes. Your money is like ice cubes. The longer you wait to use them, the more they melt. According to the government's official "inflation calculator," the dollar has lost 95% of its purchasing power since 1913. See for yourself here.

When you're out of the global US tax net, you can freely diversify the currencies you own to protect your purchasing power from being diluted. If you do this as a US citizen and the dollar drops, you're taxed on the paper gains from those other currencies. In other words, you're taxed for simply preserving your purchasing power. And if you choose the monetary metal, gold, as a fiat currency hedge, you're taxed even more heavily. No matter what you do to try and preserve the purchasing power of your dollars, one way or another you're slowly being bled. That ends on the day you expatriate.

8) Freedom from the accountability for how the US government spends your money. I sleep much better knowing I no longer fund the military- industrial-banking complex. Anybody can get mugged, but every US taxpayer is a constant patsy for the political establishment. The rip- offs are so unthinkably big and endemic, there's nothing an individual can do to stop them.

If you step back and take an honest look, you'll see that the unfortunate state of affairs in America has resulted from the reign of both political parties. Don't fall for the divide-and-conquer strategy that politicians use to corral people into "red" and "blue" sports teams. Donkeys and elephants are sold as team mascots pretending to be in mortal conflict. In reality both parties work together to advance their agendas in lockstep...logrolling...and when necessary, one side "takes the hit" whenever the illusion of accountability is needed. The system depends on the delusion that people can "vote the bums out."

Meanwhile, every government failure becomes the pretext for more government growth. If you don't get distracted by the spectacle, it's impossible not to notice the pattern: Every political solution to any problem involves more regulation of your life and more taking of your money.

What are the consequences of this vicious cycle of growth through failure? Most Americans are familiar with the oft-chanted phrase, "We're #1!" Humor me for a minute and try this exercise. Mentally separate yourself from the government you're paying trillions of dollars to fund. Then, consider that the US is: #1 in government debt and deficits; #1 in unfunded liabilities, most importantly Medicare and Social Security; #1 in building and maintaining the biggest WMD stockpile in the world; #1 in weapon sales to foreign governments; #1 in bombs dropped and missiles fired on other nations; #1 in causing civilian casualties and property destruction; #1 in "defense" spending; #1 in lawyers per capita, with over 1.1 million total; #1 in law suits filed; #1 in political lobbyists, special interest groups and campaign donations; #1 in taxpayer bailouts of the politically connected "too big to fail" corporations; #1 in people imprisoned - "The United States has 4% of the world's population and 25% of the world's incarcerated population," according to Wikipedia.

I've avoided citing sources for these claims (save the last one) because I'm hoping you'll be moved to verify them for yourself. The process is eye-opening. If you fall for the political fallacy that "the government is the people," you end up with the faulty conclusion that America must be overrun by war-crazed, lawsuit-happy, debt-addicted criminals. How could anybody buy this after even a moment of clear thought? There's certainly no resemblance to the American people I know. These problems stem from the military-industrial-banking complex, the dark heart of the US political machine. Why continue being the stooge that supplies the money to run it?

Looking at the world with fresh, open eyes isn't easy. One of the great benefits of liberating yourself from the grip of the US political system is that the world becomes your oyster. You're free to embrace places that welcome individuals who seek to live peaceful and prosperous lives.

9) Freedom to radically increase your charitable giving. Individual liberty sparks our charitable instincts. If you care deeply about philanthropy, expatriation frees up vastly more of your capital to give away. Also, your philanthropic impulses are no longer distorted by the IRS. You can give to any charitable cause worldwide without being penalized if it's not anointed as a tax-deductible entity.

The human impulse to help another in need is older than any government. Your judgment about how to contribute your capital to best help others will forever be superior to that of bureaucrats. Expatriation opens up new possibilities for you to reach out and help others in need.

10) Freedom from the risk of getting trapped. Politicians don't like it when the people who pay their salaries, fund their pensions, and fuel their jets close their wallets and walk away. As the number of renunciations continues to rise, it inevitably will turn into a political hot-button. The media will set the stage for politicians to denounce renunciation, paving the way to make exercising the right more difficult and costly. Wealthy people who renounce will be called greedy and unpatriotic. "Turning their backs on their fellow Americans" will be the sound bite wielded by politicians to conjure up the demand to "do something." When that happens, I expect the exit tax to become dramatically worse. Instead of taxing unrealized gains at their regular rates, it may function more like the death tax. Add up everything you own - then cough up half. Otherwise sit down and shut up.

The other timing consideration is that getting a second passport is becoming more difficult, more lengthy and more costly. You need a second passport to expatriate, and countries are increasing the number of years it takes to gain citizenship. There are only two countries left in the world that have an economic citizenship program, which is by far the fastest way to get a second passport. If these two programs are pressured to fold, escaping the US political combine will take most people five or more years, instead of less than one. You can bet on this: No matter what happens, it won't get any easier.

Whether you're planning to stay right here in the US or get out of Dodge, you might want to know about gold, the one "currency" that is accepted at more places than either Visa or the American Express card. Jeff Clark, the editor of Casey's Gold and Resource Report, has been saying it for years: Buy physical gold and silver. And if you want even greater gains, invest in solid, undervalued gold producers that can provide leverage of up to 4:1 to gold itself. Read more in our report, here.

Highly recommended.

The Casey Research Team
for The Daily Reckoning Australia

[ Last edited by  atomic3d at 19-6-2010 05:15 ]

Where are the other 5 benefits?

Today's newsletter with the other 5 hasn't come in yet, I'll put them up when it does.

I wish someone would do a write up about Canada lol

Interesting website with the US national Debt.

Nice piece of writing.  Very informative.

Doesn't sound good.  It would be interesting to have a counterpoint piece done by someone o the other side arguing why this research is misguided to see what they would say.

In yesterday’s edition of The Daily Reckoning, Casey Research shared five of the Ten benefits of expatriation. Today, we share the second five:

1) Freedom to invest without tax distortions that encourage capital misallocation. The US tax system encourages misallocation of your investment capital. It obscures the act of buying and selling securities based on a rational assessment of their value. For instance, you end up not selling a security you otherwise would simply because you don’t want to trigger taxes yet. Or you hold on longer than you might otherwise to get long-term capital gains treatment. Or you sell securities you normally would keep – for “tax loss harvesting.”

Moreover, you’re incented to give an artificial value premium to municipal bonds simply because they aren’t taxed, despite their negative real return after inflation. And your assessment of real estate’s value is warped too, by mortgage interest deductions and capital gains exemptions. The phrase “letting the tax tail wag the dog” encapsulates these distortions. Expatriation instantly liberates you from them.

2) Freedom from being crushed by the fiat currency landslide. If you pay attention to the world’s major currencies, you’ll notice they fluctuate, often dramatically, against each other. In a year’s time, the price of an item can increase or decrease 20%, 30% – sometimes more – solely based on which currency you use to pay for it. The same item!

Regardless of the reason for the volatile swings in the value of currencies, there it is. Reality. So what’s the risk for you? For one thing, you can have all your money in one currency, earn a positive investment return on paper (that you’re taxed on), but actually lose purchasing power. Think about it this way. The US imports goods from all over the world. When the US dollar drops in value, it takes more of them to buy those goods. That makes you functionally poorer, no matter what your account statement says. It’s that simple.

Every time the dollar drops, you get the short end of the stick. The value of your savings erodes. Your money is like ice cubes. The longer you wait to use them, the more they melt. According to the government’s official “inflation calculator,” the dollar has lost 95% of its purchasing power since 1913. See for yourself here.

When you’re out of the global US tax net, you can freely diversify the currencies you own to protect your purchasing power from being diluted. If you do this as a US citizen and the dollar drops, you’re taxed on the paper gains from those other currencies. In other words, you’re taxed for simply preserving your purchasing power. And if you choose the monetary metal, gold, as a fiat currency hedge, you’re taxed even more heavily. No matter what you do to try and preserve the purchasing power of your dollars, one way or another you’re slowly being bled. That ends on the day you expatriate.

3) Freedom from the accountability for how the US government spends your money. I sleep much better knowing I no longer fund the military-industrial-banking complex. Anybody can get mugged, but every US taxpayer is a constant patsy for the political establishment. The rip-offs are so unthinkably big and endemic, there’s nothing an individual can do to stop them.

If you step back and take an honest look, you’ll see that the unfortunate state of affairs in America has resulted from the reign of both political parties. Don’t fall for the divide-and-conquer strategy that politicians use to corral people into “red” and “blue” sports teams. Donkeys and elephants are sold as team mascots pretending to be in mortal conflict. In reality both parties work together to advance their agendas in lockstep…logrolling…and when necessary, one side “takes the hit” whenever the illusion of accountability is needed. The system depends on the delusion that people can “vote the bums out.”

Meanwhile, every government failure becomes the pretext for more government growth. If you don’t get distracted by the spectacle, it’s impossible not to notice the pattern: Every political solution to any problem involves more regulation of your life and more taking of your money.

What are the consequences of this vicious cycle of growth through failure? Most Americans are familiar with the oft-chanted phrase, “We’re #1!” Humor me for a minute and try this exercise. Mentally separate yourself from the government you’re paying trillions of dollars to fund. Then, consider that the US is: #1 in government debt and deficits; #1 in unfunded liabilities, most importantly Medicare and Social Security; #1 in building and maintaining the biggest WMD stockpile in the world; #1 in weapon sales to foreign governments; #1 in bombs dropped and missiles fired on other nations; #1 in causing civilian casualties and property destruction; #1 in “defense” spending; #1 in lawyers per capita, with over 1.1 million total; #1 in law suits filed; #1 in political lobbyists, special interest groups and campaign donations; #1 in taxpayer bailouts of the politically connected “too big to fail” corporations; #1 in people imprisoned – “The United States has 4% of the world’s population and 25% of the world’s incarcerated population,” according to Wikipedia.

I’ve avoided citing sources for these claims (save the last one) because I’m hoping you’ll be moved to verify them for yourself. The process is eye-opening. If you fall for the political fallacy that “the government is the people,” you end up with the faulty conclusion that America must be overrun by war-crazed, lawsuit-happy, debt-addicted criminals. How could anybody buy this after even a moment of clear thought? There’s certainly no resemblance to the American people I know. These problems stem from the military-industrial-banking complex, the dark heart of the US political machine. Why continue being the stooge that supplies the money to run it?

Looking at the world with fresh, open eyes isn’t easy. One of the great benefits of liberating yourself from the grip of the US political system is that the world becomes your oyster. You’re free to embrace places that welcome individuals who seek to live peaceful and prosperous lives.

4) Freedom to radically increase your charitable giving. Individual liberty sparks our charitable instincts. If you care deeply about philanthropy, expatriation frees up vastly more of your capital to give away. Also, your philanthropic impulses are no longer distorted by the IRS. You can give to any charitable cause worldwide without being penalized if it’s not anointed as a tax-deductible entity.

The human impulse to help another in need is older than any government. Your judgment about how to contribute your capital to best help others will forever be superior to that of bureaucrats. Expatriation opens up new possibilities for you to reach out and help others in need.

5) Freedom from the risk of getting trapped. Politicians don’t like it when the people who pay their salaries, fund their pensions, and fuel their jets close their wallets and walk away. As the number of renunciations continues to rise, it inevitably will turn into a political hot-button. The media will set the stage for politicians to denounce renunciation, paving the way to make exercising the right more difficult and costly. Wealthy people who renounce will be called greedy and unpatriotic. “Turning their backs on their fellow Americans” will be the sound bite wielded by politicians to conjure up the demand to “do something.” When that happens, I expect the exit tax to become dramatically worse. Instead of taxing unrealized gains at their regular rates, it may function more like the death tax. Add up everything you own – then cough up half. Otherwise sit down and shut up.

The other timing consideration is that getting a second passport is becoming more difficult, more lengthy and more costly. You need a second passport to expatriate, and countries are increasing the number of years it takes to gain citizenship. There are only two countries left in the world that have an economic citizenship program, which is by far the fastest way to get a second passport. If these two programs are pressured to fold, escaping the US political combine will take most people five or more years, instead of less than one. You can bet on this: No matter what happens, it won’t get any easier.

The Casey Research Team,
for The Daily Reckoning

If the USA was not in a war now, it would be in a lot better position financially.  There would be a smaller budget deficit. The war is not going to end anytime soon...

To date, $1.05 trillion dollars have been allocated to the wars in Iraq and Afghanistan.

[ Last edited by  Weelock at 19-6-2010 03:04 ]

wow afghanistan has really racketed up under Obama. what are the stats on the number of people who have expatriated.  isnt there a tax now to do so on the value or gain on your assets

So I guess the next question would be:

Where are the popular spots for US Expats to settle?  I have met some in the Philippines, a couple here in HK, and a few in the Dominican Republic.

Any other "hotspots" that are friendly to US Expats?

I read somewhere that Panama is encouraging U.S. citizens to retire there, by offering attractive tax concessions and passports.

Yeah, I think the USA is a sinking ship best to get out now while you still can. Also one point is wrong, it is possilble to give up US citizenship without having a second passport just much harder to do so.

In the us the reasons states are reluctant to increase taxes is thatvpeople can moveto other states and so a tax increase reduces the tax base.  Moving fro state to state is a hassle but it can be done if where you work can be accomodated fro a new state location.  Moving out of US seems to be a bitore difficult depending upon a persons lifestyle

Americans still have to pay Uncle Sam their taxes. I know several Americans who live in HK who have to pay US taxes.

The only way out of this is to do an Allan Zeman and renounce your US/Canadian citizenship.

How about Singapore?

Weather and climate is nice and less air pollution as Hong Kong.

The death tax and the worldwide global net tax is the most ridiculous thing. I wonder how a country keeps their foreign residents when they impose such things.

The US is also moving toward US corporations being taxed on a more globL net basis under some recent proposls. Claims about hurting competitveness on US corporatons is fLlomg pm deaf ears because there are examples especially in pharmacuetical business of shell companies moving profits around and no US tax being paid.  In times when US needs money these tax proposals get steam behind them

This is a letter lifted from a newsletter I receive, part of the "Getting out of Dodge" series, which which discusses ways of gaining an EU passport.

My wife and I recently expatriated. We are fortunate that although we were both born in the USA, due to accidents of birth, we hold passports of EU countries allowing us to live and work in the EU freely. Getting a foreign citizenship (and passport) is essential prior to expatriation; this is totally legal in the USA and you do not have to forfeit your US citizenship as a consequence. However, very few will be able to get a foreign passport so easily. The hard way is to live in a new host country for a long period of time and apply for citizenship. Some countries are rumored to sell passports, but this smacks of fraud and I'd be very suspicious of the utility of such a passport if push came to shove.

A better way is if your parents or grandparents were foreign born, to check out whether this could entitle you to a grant of citizenship. Germany for one, grants automatic citizenship to children of German nationals born abroad (until recently this only applied to German fathers, not mothers); this is the best way possible since your foreign citizenship is not something you have to apply for - you already have it and perhaps are just not aware of it. Ireland grants citizenship to grandchildren of Irish nationals regardless of where born, but genealogical proof is required. Expect these rights and programs to become more limited or even to vanish over the coming years, so your readers should investigate the opportunities as soon as possible and avail themselves quickly; there is no downside to having a foreign passport 'at the ready', and it makes international travel much easier even if you do not expatriate.

We thought long and hard about giving up our citizenships, but in the end we could fathom no logical reason for hanging on, other than blind inertia. As your article points out, the US government has made it very difficult on expatriates in many ways and it's hard to justify blind loyalty when your own country treats you like a criminal.

The act of expatriation is disarmingly simple and quick, but best handled by an attorney in a foreign country who specialized in this. You have to be living overseas to do this, and you have to have a foreign passport otherwise you would become stateless, and as a result the embassy people won't let you renounce your US citizenship.

[ Last edited by  atomic3d at 23-6-2010 12:09 ]

I had no idea that the US tax system was such a rape train... I wonder how you'd go about getting a foreign passport if you only have a US one and still wish to expatriate.

No easy way to answer this. Depends very much on your individual circumstance.

I now notice your based in Melbourne. So you are a U.S. citizen living/working in Melbourne? Have you enquired about Australian citizenship? We do allow dual citizenship here.

[ Last edited by  atomic3d at 23-6-2010 14:05 ]