Death of capitalism and return to slavery

The brainchild of US Senators Chuck Schumer and Bob Casey announced a new law known as the Ex-PATRIOT Act, which will no doubt be the dumbest law ever created.

‘Ex-PATRIOT’ stands for “Expatriation Prevention by Abolishing Tax-Related Incentives for Offshore Tenancy”. Kudos to the senate for such a dumb acronym, and even dumber law!! The law proposes three key provisions:

1) Individuals who are deemed, in the sole discretion of the US government, to have renounced US citizenship in order to avoid US taxes, will be permanently barred from re-entering the United States.

2) Such individuals will also be required to pay a 30% capital gains tax to the United States government on ALL future investment gains derived from the US. Currently, non-citizens who do not reside in the US pay no US capital gains tax.

3) These proposals are RETROACTIVE, and, if passed, would apply to anyone who renounced his/her citizenship within the last 10-years.

First, a bit of history lesson. In 1990’s, many wealthy Americans renounced citizenship, renounced American citizenship. President Clinton was furious, and in 1996, he pushed Congress to pass a series of financial penalties for people who renounce citizenship. At the time, a ‘renunciant’ had to continue filing US tax returns for 10-years after renouncing. Effectively, though, this penalty was a tax on worldwide income, not an exit tax on assets.

Fast forward to the 2000s, the Bush regime passed a series of changes to expatriation rules, dropping the income tax filing requirements in lieu of charging a one-time exit tax on assets (why wait every year when you can kill the goose that lays the golden egg). 

In the years since the exit tax on assets was established, the number of Americans renouncing US citizenship has risen steadily and asset bubble has burst, so assets are worth much less than just a few years ago. As such, the government isn’t collecting as much revenue from the exit tax.

Fast forward once again to current decade. Americans renouncing the US citizenship continue to go up.  Eduardo Saverin is the latest example. The Facebook co-founder’s recent renunciation of US citizenship has become a rallying cry for politicians to go back in time and steal money from former citizens retroactively and establish a larger base for future tax revenues.

This is a truly despicable thing to do considering that these former citizens followed the appropriate rules at the time, paid the tax, and moved on with their lives. Now Uncle Sam wants to go back in time to unilaterally change the deal, and expect everyone to abide even though they’re not even citizens anymore. The arrogance is overwhelming.

Obviously the idea behind the law is to discourage Americans to renounce their citizenship.

It is surprising that of all countries America - a country that was once regarded as the freest, most economically enviable in the world, would treat its productive citizens with such hostility.

If America wants to keep people at home, it should try to create an environment similar to Norway and Sweden where people enjoy one of the highest standards of living and are indeed happy to shell out higher taxes for such benefits. 

Warren Buffet once said that to be born in America is nothing short of winning an ovarian lottery but looks like that winning comes with a life long obligation to finance the corrupt misdealing of the political class; and if you chose to abandon the obligation you will be barred from ever entering your homeland again.

In another continent, Europe, we see another insane work in progress. Monsier Hollande is proposing 75% tax on income exceeding 1million euros as part of his plan to fund France’s budget deficit. I guess it is inspired by the Japanese culture where salary man gives away all of his income to his spouse, who would manage the household and give a fixed amount every month back to the husband as pocket money. Naturally such policies are popular among masses but would that really help a nation to overcome its fiscal deficit problems? Would it really get the creative minds build the best companies in that country? Will it really motivate anyone to build something extraordinaire? Or may it will just force people to think ways of evading taxes.

It’s truly extraordinary that the Land of the Free has deteriorated to the point that the government must now resort to threats, coercion, and intimidation in order to keep its most productive citizens inside.

Like the producers in Ayn Rand’s novel Atlas shrugged, many productive members of the society have grown weary of being constantly bashed to pay for political handouts and unending wars of aggression.