We're not the Soviet Union, that's why. A society should offer a good enough deal to all of its members, even the rich ones, that they do not want to leave. If it cannot do that, it should let them pursue happiness somewhere else.
If someone wants to renounce their citizenship for any reason, good riddance to them and don't let the doorknob hit them in the ass on the way out. You don't have a right to their property to fund your government, a right of which they are "depriving" you by leaving. Taxes are the bill one pays for membership in the society. If one declines membership, one doesn't owe the taxes. The princes of Saudi Arabia are very rich, and much of their money was earned selling products to Americans. Do they owe us taxes too?
That kind of punitive taxation is, like the draft, an attempt to compel a civic emotion which cannot be manufactured by any external power. Like the draft, it increases quantity at incalculable cost to quality. The American idea is that you are not an American because you were born here; you're an American because you want to be. If people do not want to be Americans, then we are better off without them.
Well said.
Well said, but...
You don't have a right to their property to fund your government
You apparently have a right to 47% of it when they die and pass it to their kids.
Taxes are the bill one pays for membership in the society. If one declines membership, one doesn't owe the taxes.
Except that we have an immigration problem where membership is only nominally required in order to exercise its benefits. Those of us members who are actually paying the club dues aren't too happy about that.
That kind of punitive taxation is, like the draft, an attempt to compel a civic emotion which cannot be manufactured by any external power.
I'm not sure about this. I think taxation and drafts are a means of acquiring resources that people won't give up freely. It's made politically possible by appealing to civic emotion, but that's not the purpose.
Well said but...
If there were no income tax but rather consumption tax then...
TakeFlight - what "club" and what kind of membership are you talking about? It sounds spooky at first sound.
Take Flight raises an interesting point- death is also a form of citizenship loss (and not a renunciation to be "punished"), and yet we tax that. Megan, are you opposed to estate taxes?
The problem you're missing is the distinction between how rich people accumulate assets and how middle class people do. Middle class people do it by saving portions of their income, which is already taxed; and by watching their homes grow in value, which are taxed both annually and at sale.
The rich usually get rich by accumulating untaxed assets. Bill Gates has around $20-30 billion in Microsoft stock on which he's never paid a dime in taxes. Under your plan if he flew away to Bermuda he'd never have to.
When you add free trade to that, as well as the right of companies to relocate their headquarters to a post office box in the Bahamas, and you have a surefire way of allowing people to get rich off the American market without ever any paying any taxes to sustain it.
(I'm sure you think those last two are swell ideas, too).
I have no objection to the rich retaining their loot should they decide to leave. But they damn well pay their better bills on the way out: if someone skips out on three months rent, moving to another locale does not absolve them of this debt.
If there were no income tax but rather consumption tax then...
The question is one of whether individuals should pay taxes on what they buy, or on how much wealth they manage to extract from the economy. The moral and economic arguments all favor the latter approach.
TakeFlight - what "club" and what kind of membership are you talking about? It sounds spooky at first sound.
No, it's spooky that you do understand what he means.
Hugo,
what "club" and what kind of membership are you talking about? It sounds spooky at first sound.
Spooky? How so?
If my friends & I walk into a gym somewhere and just start using their equipment without paying, wouldn't the gym's actual members have a right to be upset? Especially if now the machines are less available when they come to work out so they have to keep buying more and more and raising dues to pay for it? Would they agree that I have a "right" to use the equipment just because I was in the building already? Would those standing in line to become members continue to follow the rules if the management granted us full membership ahead of them? Would anyone then say that the actual membership had any real value?
In my analogy, the "club" = USA and "membership" = citizenship.
My main point is that citizenship is overrated, because here in the USA we don't require citizenship in order to consume our benefits.
Maybe we should.
No, it's spooky that you do understand what he means.
And I, of course, meant "don't"
Megan, are you opposed to estate taxes?
I won't presume to answer for Megan, but I think I remember her writing that inheritances should be taxed like any other income, to the recipient. That's my position, for what it's worth (albeit I think there should be a fairly large exemption -- say, $10,000,000, to account for the fact that the person receiving an inheritance is being compensated for a loss).
I am not sure I understand the tone of the posts or the comments - yes, there are people who move abroad for tax purposes, but the real issue with the expatriate tax are people who are working in a low-tax country where the salaries are not adjusted to the higher U.S. tax rates for which people are liable.
For the people truly leaving the country, we can confiscate their property, but more forcibly, we can also refuse re-entry to someone who renounces their citizenship for tax purposes - the ultra-rich of this world, to the extent that they would want to escape our very low 15 capital gains tax and have not figured out another way around them, can be controlled in this manner, as it is rarely worthwhile to cash in some money in Bermuda if you cannot then return to your home country / fly to New York whenever you wish.
On the other hand, most ex-pats honestly working abroad face a real problem, and the two should not be confused with each other.
While I agree with the substance of this post in theory, in practice a lot of persons who renounce US citizenship do so (i) in order to live in island nations off the US coast that are under the protection of the US military and (ii) with the expectation that they will be permitted to travel conveniently to and from the US, and work and live in the US for several months a year. That is not "good riddance." That is a tax dodge.
Put simply, if you want to move to Germany or China or Rwanda, good luck to you. But if you want to live as a US citizen, you can pay US taxes.
“The rich usually get rich by accumulating untaxed assets.”
Oh, really? Funny, but all the rich people I currently know and have known (I’m an old man.) have accumulated their assets because they were successful businessmen, entrepreneurs, and professionals. The number of wealthy that have acquired their wealth like Gates are rather few and far between, I believe. There are a number of wealthy widows and widowers that have accumulated untaxed assets via the death of a spouse but these become taxable upon their death.
There are a number of wealthy widows and widowers that have accumulated untaxed assets via the death of a spouse but these become taxable upon their death.
Not if they depart these shores before their final departure. Isn't that what we've been arguing about?
So is Denmark better off without the people who are leaving Denmark to live and work elsewhere? That didn't seem to be the thrust of your prior entry. I think you let your rhetoric carry you away a bit. Whether we're better off without people who don't want to be Americans any more depends on what kind of people and why they are leaving. If they were good citizens otherwise, then if lots of them are leaving it would seem to me to be worth examining what policies are driving them away and whether those policies can be adjusted without compromising our core values.
If people do not want to be Americans, then we are better off without them.
Yes, but the question is, are we better off without their money?
The Draft
The historical draft in Anglo-America was the panic-mode reaction of the propertied elite to the failure of either (a) a not well regulated militia (slave-chasing light cavalry in the South) favored by Southern Whigs or (b) the Northern Whig attempts to emulate the long-term hire military of the British Empire (rank-inflated, non-heirs with expensive but obsolete small arms of British manufacture) and, of course, a Royal Navy.
The hypothetical draft is an in-kind sort of poll-tax, resisted by a propertied class, which is otherwise enamored of poll taxes: It reduces the comparable and stored value of the especially attractive male (or, now, female) heirs relative to other family members or, gasp, non-propertied citizens.
The quantity/quality arguments of FRIEDMAN/OI et alia (and Megan) are libertarian cant equating all wealth, whether created, preserved, inherited, stolen, or merely envied with the grace of God and hypothesizing war as the production of a service.
The logical outcomes of such speculations are mercenaries, ranging from Goths to Blackwater, but also a police-state in which the Praetorians are somehow subject to the constant surveillance and whims of tenured faculty and Life Peers on the Federal Bench.
Yes, that's a police-state, not a garrison-state. There is a difference, but neither of these forms of state is, for instance, a republican democracy.
The alternative, referred to obliquely but never actually implemented in Anglo-America, is the Roman, Swiss, and Israeli-style of universal military obligation embedded in a whole range of civil institutions, including the franchise, post-puberty education, government-licensed monopoly professions, labor-unions, and pension-funds, as well as popular rite-of-passage, sexual hygiene, and other secular-patriotic institutions.
The militia institution -- manifest today in Switzerland as the Ministry of Defence, Civil Protection, and Sport -- is is a particularly good fit with a robust republican democracy on any scale.
But, it is surely exotic in a country where a universal right of individual English long-bow or gun ownership is deemed to be necessary and sufficient to "the security of a free state" despite all evidence to the contrary but, surely, to some anal-retentive, reductive, or libertarian belief-systems.
TakeFlight
If my friends & I walk into a gym somewhere and just start using their equipment without paying, wouldn't the gym's actual members have a right to be upset?
Imagine, or better assume, there existed a gym where adults are the only ones that pay for equipment but all children are allowed to use it for free. Now imagine that immigrant adults come to the gym and started paying for using the equipment. Those new adults are either by building new equipment, repairing old equipment or paying membership fees or both. Are those new adults not at a disadvantage compared to other adults who have used the gym for free when they were young and started paying only recently? Would anyone then say that the actual membership had any real value?
In my analogy, the "club" = land surrounded by border
and
"membership" = being on that land
My point is simple. It has been laid out by most economists like Milton Freeman, Greg Mankiw, Paul Samuelson, etc. That both native and immigrant gym members benefit overall from immigrant gym members. In fact – old native gym members benefit more from new immigrant members than from old native members being asked to renew more machines or to pay more membership.
PS: the point is not that one should punish rich club members for leaving but that one should give them incentives to stay.
After all - the few rich pay for most of our tax budget. It is in the interest of the poor that a club can keep and attract the rich! Just as it would be in the interest of the poor to either establish a flat and low income tax or even better switch from income tax to value added taxation. Everybody except bureaucracy would benefit.
"So is Denmark better off without the people who are leaving Denmark to live and work elsewhere?"
If they actually renounce their Danish citizenship, probably.
There is a difference between moving abroad and renouncing citizenship. I have lived abroad, and so has my wife. Neither of us would ever renounce our citzenship.
They do? Why? Until they spend it, the wealth they have accumulated does nothing for them. In fact, if invested, it often allows other people to do things like improve capital equipment, start businesses, buy houses, etc... We should encourage rich people to accumulate money and then stick it in the bank or otherwise invest it.
Bill Gates has millions in stock. He can't do anything with it unless he sells it. If he announced that he was going to sell all of his Microsoft stock, the price would plummet and he wouldn't get all of those millions back.
EI
I am fine with that. Although people who renounce their citizenship should be denied re-entrance. Waivers could be granted under warranted circumstances.
Alas, this is simply not true. The middle class pay for most of the tax budget. Providing incentives for them to stay, then, doesn't make sense - I was with you until then.
"Take Flight raises an interesting point- death is also a form of citizenship loss (and not a renunciation to be "punished"), and yet we tax that. Megan, are you opposed to estate taxes"
We do not tax death, we tax the income of the inheritor.
Suppose I married a Spanish woman and had children with her.
Suppose I decided to retire to Spain with her and help put my children and grandchilden through school or get a start at life.
The US system says that if I take my assets (my already taxed assets!) out of the US there is an IRREBUTTABLE presumption that I am doing so to evade tax.
Does this sound like how a free democracy acts?
Bravo to MM for raising tis issue. There are so many cases and so many ways where our government runs roughshod over the rights and property of its most productive and talented citizens.
ANother suggestion Meagan, why don't you write about the comparative DISADVANTAGE of a US expatriate compared to say a Brit or a German in working abroad, say in a Hong Kong based job. Sure, not much sympathy for US professionals who make good money and leave the country to work, but we are a competitive country that ostensibly tries to create income opportunities for its citizens, right? Write about that some time MM
According to the link you provide, the three middle quintiles pay 35.2% of federal taxes, and the top quintile pays 63.5%. So the article you link in order to support your argument appears instead to contradict it.
Renee
The middle class pay for most of the tax budget. Providing incentives for them to stay, then, doesn't make sense - I was with you until then.
The Washington post article speaks of a shift towards the middle-class but Greg Mankiw has recently posted that the top 5% in the US pay 60% of the taxes.
What is true that the middle class gets most of the benefits. If we could transfer only 10% of what the middle-class gets to the truly poor we all would be much better off?
Funny, but all the rich people I currently know and have known (I’m an old man.) have accumulated their assets because they were successful businessmen, entrepreneurs, and professionals. The number of wealthy that have acquired their wealth like Gates are rather few and far between
Bill Gates isn't a successful businessman and entrepreneur?
you have a surefire way of allowing people to get rich off the American market without ever paying any taxes to sustain it. - Bill
Exactly how much of your taxes do you think goes toward "sustaining" the American market? If taxes and government services were severely slashed, do you think that commerce would grind to a halt?
If party A offers a good or service, and party B elects to purchase it, is that a fair trade? Or in addition to rendering the desired good or service, does party A also owe taxes to party B's government (i.e. tribute to special interests in party B's country) for the right to trade freely with party B?
Imagine, or better assume, there existed a gym where adults are the only ones that pay for equipment but all children are allowed to use it for free. Now imagine that immigrant adults come to the gym and started paying for using the equipment. Those new adults are either by building new equipment, repairing old equipment or paying membership fees or both - Hugo Pottisch
That's taking the analogy too far. His analogy was good, as it relates to taxes (since about half of illegal workers work off the books, they often don't pay them).
A different one:
Say you and a friend partner up to buy a home. You finance the down payment together, make years of mortgage payments, and build up a bit of equity - say $200,000. Then another friend comes along and says he'd like to go in with you. So he moves in and the three of you split the mortgage payment 3 ways. Does this make him an equal owner in the home? If it does then your $200,000 equity is now split 3 ways instead of 2, and you've just incurred a $33,000 loss. I'm guessing you're not that stupid.
Now imagine, instead that said new roommate isn't a friend but the wife of your co-owner, who insists that his wife is now an equal owner in the home with the 2 of you. This is not a loss, but theft. By making his wife an equal owner he's actually fattened their shared wallet.
That's the better analogy re:immigration. As I've said elsewhere, the various governments of the US hold enormous amounts of property in trust for the citizens of this country. $30 trillion wouldn't be an unreasonable estimate - and that's just the value of the assets, not the income annually produced. And it doesn't, of course, come close to including the value of the personal, physical sacrifices made to secure this nation for its people - which includes over one million dead soldiers, who I'm guessing weren't dying for your free market utopia, but for their home for their families and for their culture and traditions.
That is why immigration has to benefit all, or nearly all, Americans and not just "the economy" or other random individuals or special interests. If it doesn't benefit all of us, then it's theft.
Some of you obsess about estate - er, excuse me, "death" taxes. It's theft!, outrage!, robbery! that the government would take 50% of someone's estate after their death. Well, their American citizenship is the most valuable thing the people of this country have, or ever will have. If current trends continue - high immigration combined with higher birthrates of immigrants - by 2100 AD over half of this country's population will be descended from people who came here after 2000 AD.
Will the people living then feel better off because of the higher population? Experience says no.
After all - the few rich pay for most of our tax budget
Ahh, but that's the old dogma: the rich pay all the bills and the poor and middle class are all leeches.
You obviously haven't received the new, revised edition from the Wall Street Journal, where-in-which you will learn that the government is supported by the rich and by the most ignorant, least educated, least skilled, most fecund people in the country - illegal immigrants.
See it's the rich and the illegals who pay the bills here, not us middle class bloodsuckers.
To be honest, this news has been deeply disappointing to me. To think that it's the illiterate burger-flippers who underwrite everything this great nation does. Because, you see, I had that job way back in high school. I naively thought that by getting my bachelors and masters in engineering that somehow would benefit not only me, obviously, but my country as well.
So of course now here I stand at a fork in the road: do I keep my job which has greatly benefitted my family, or do I return to the old burger flipping joint and rescue the nation from oblivion?
If taxes and government services were severely slashed, do you think that commerce would grind to a halt?
Not at all. But if public education ceased I can assure you that the value of that commerce would fall immensely. Criminal justice, defense, education, transportation and a whole mess of other programs I can't even list all benefit commerce. They make up a pretty big portion of the budget. Medicare and social security are actually supported by taxes that, above $90,000, are regressive (and for years the surplus there has been spent on those other things).
The US system says that if I take my assets (my already taxed assets!) out of the US there is an IRREBUTTABLE presumption that I am doing so to evade tax. Does this sound like how a free democracy acts?
They do? Why? Until they spend it, the wealth they have accumulated does nothing for them. In fact, if invested, it often allows other people to do things like improve capital equipment, start businesses, buy houses, etc... We should encourage rich people to accumulate money and then stick it in the bank or otherwise invest it.
In fact this bespeaks ignorance of the tax system. We don't tax Bill Gates until he sells his stock. Huge amounts of profits earned by businesses are exempt from taxation each year because we actually encourage things like capital investment and R&D.
To allow people in this country to run up huge fortunes paying minimal taxes and then allow them to leave without ever paying taxes on their accumulated assets is a good recipe for the swift exit of capital from a nation.
There is a reason that the only places which have enacted such tax policies are tiny little places, often protectorates, with no substantial infrastructure requirements of their own.
Germany, Britain, the US, even China - they've never adopted these policies for a reason, and a reason that has nothing to do with taxpayer theft or a desire to oppress the rich.
If people do not want to be Americans, then we are better off without them.
Is Europe, likewise, better off without those Europeans who've decided, in part because of high taxes, that they'd rather be Americans?
Sure, there are some expats we're better off without. But high taxes are a legitimate grievance, and a blanket condemnation of everyone who finds the US government's value proposition lacking is unwarranted. Do you honestly think that all tax refugees were liabilities to our country?
Bill - re: "Bill Gates has around $20-30 billion in Microsoft stock on which he's never paid a dime in taxes. Under your plan if he flew away to Bermuda he'd never have to."
His Microsoft stock is his partial ownership of Microsoft which did pay a lot of taxes over the years when Bill's MS holdings reached their current value.