We are developing the social individualist meta-context for the future. From the very serious to the extremely frivolous... lets see what is on the mind of the Samizdata people.

Samizdata, derived from Samizdat /n. - a system of clandestine publication of banned literature in the USSR [Russ.,= self-publishing house]

Samizdata quote of the day

“President Biden’s tax plans might soon make Europe look like a capitalist heaven by comparison. He wants to raise the long-term capital-gains tax from just below 24% to above 43%. Switzerland has no such tax. In Britain, inventor of the welfare state, it is 20% and in Germany 26%. On income tax, the U.S. may soon top the scale. Mr. Biden wants a top marginal income-tax rate of just below 40%. Add state and local income taxes, like California’s 13.3% for top earners, and wealthy U.S. taxpayers could pay more than their European counterparts.”

Josef Joffe, Wall Street Journal ($)

I have been covering this news story about the tax proposals in my regular day job in the banking and wealth management/media sector. Joe Biden, who has been having such a shit-show lately over Afghanistan, is equally terrible over tax and the economy, and also a bit two-faced. This is a man who, let it not be forgotten, was a senator for Delaware for many years. Delaware is a bit like a mini-“Switzerland”, one of those states that is favoured by corporations and creators of trusts (South Dakota, New Hampshire, Nevada and Alaska are similar).

The US is going to have to familiarise itself with the “Laffer Curve” all over again.

37 comments to Samizdata quote of the day

  • A good indicator of behavioural responses to excessive taxation are movements of high wealth individuals from high taxing US states (CA, MA, NY, NJ, etc.) to those states without state income tax (like FL). For example the 2016 move of billionaire David Tepper from New Jersey to Florida (nominally “retiring”, but in reality giving himself a tax break from New Jersey state income tax).

    One Top Taxpayer Moved, and New Jersey Shuddered

    A more significant form of behavioural response to high taxation (which the high tax campaigner Richard Murphy aka “The Sage of Ely” categorically states “never happens”) is US expatriations, whereby US citizens and Green Card holders give up their citizenship and/or residency after paying significant penalties in expatriation “exit taxes” to escape the tax burdens arising from US citizenship and residence. Probably the most well known of these of recent years was Facebook co-founder Eduardo Saverin who renounced his US citizenship in 2012 and moved to Singapore.

    While not all expatriations are as well known as Mr. Saverin the number of expatriations has been rising steadily to such an extent that those wishing to expatriate are struggling to book appointments at foreign embassies to do so. Given that Sleepy Joe Biden seems to be giving Jimmy Carter a run for his money in terms of eye watering tax rates and the dead hand of the state, expect to see much more of this in the future, despite US efforts to keep a lid on the problem of expatriations.

  • Latest US expatriation numbers are distorted by COVID-19 since those wishing to renounce their US citizenship and/or Green Card must do so formally before a US official at a foreign US embassy along with details of their non-US citizenship, since the US is signatory to the 1961 Convention on the Reduction of Statelessness and cannot allow a US Citizen to become deliberately or accidentally stateless. This has been a bit tricky given the effective closure of many borders and reduced access and staff at US embassies.

    2021 2nd Quarter Published Expatriates

    There is no published data on how big the backlog of expatriations is, since only formally completed expatriations are recorded although anecdotal evidence is that there is a substantial backlog of people wishing to expatriate as soon as they are able to do so.

  • Bell Curve

    Latest US expatriation numbers are distorted by COVID-19 since those wishing to renounce their US citizenship and/or Green Card must do so formally before a US official at a foreign US embassy

    My wife was born in USA, wanted to give it up (not *just* for tax reasons, also because non-US financial institutions treated her like a leper when they discovered she had a US passport). They make it so difficult and demand ongoing returns for several years, she just said “fuck you” & cut her US passport in half and mailed it to embassy after marrying your truly & getting a new nationality. Means she can never go back but she’s ok with that.

  • Johnathan Pearce (London)

    John Galt, your comments are very astute. It continues to amaze me how some writers, who should know better, continue to attack the “Lafferite” argument that when tax rates bite hard enough, they prompt changes in behaviour, and cut, rather than raise, revenue.

    One of the more sophisticated attacks on the Laffer argument came from Tom Bergin, a Reuters journalist whom I know. He argues (in fairness, with a lot of data) that much of the Laffer argument is bunk. But he overreaches. For instance, when A. Laffer noted that U-Haul rental prices for people leaving California and going to Tennessee were higher than those moving in the opposite direction, Bergin dismissed this argument more or less, stating that there aren’t that many places in TN worth moving to anyway. Bergin also claims that for a lot of middle class professionals and business owners, marginal tax rate changes don’t greatly affect incentives. Really? So presumably, on his argument, 1970s-level taxes on capital gains and income that we had in the UK weren’t really much of a factor behind the UK’s dismal economic performance, and ditto in the US, where marginal rates were also relatively high at the time. But his point of view surely is based on ignorance of how entrepreneurs think: why would a businessman risk his wealth, work long hours and deal with the hassles of payroll and red tape only for the lion’s share of his eventual profits to be taxed away?

    It is true that incentive effects cannot necessarily be traced as having a linear direction, but they exist, and it is astonishing that so much of the political Left seems deaf to incentives. Take incentives away, and what you have instead is coercion.

  • Paul Marks

    Leaving aside the far left “advisers” around Joseph Biden – the man himself has never been any good.

    Anyone who thinks that Joseph Biden was ever really a “moderate” has not looked at his Senate voting record – he is always been an ever bigger government man.

    Joseph Biden is a corrupt man (a criminal) – but that is NOT the reason he is a terrible President.

    Ironically it is the one SINCERE believe that Joseph Biden has (a belief he shares with Nancy Pelosi and just about every other Democrat (and the pathetic “RINO’s” just beg for mercy – which they will not get) is that an ever bigger government “helps the poor”.

    No amount of evidence or logical argument will shake them – as ever bigger government is their CORE belief, it is the only belief they really have.

    Even before he became senile, there is nothing that anyone could have said to Mr Joseph Biden (or to any of the others) that would have turned them from their road.

    And it is the road to ruination.

    Those people who are still buying Dollars and American government securities are fools.

  • Paul Marks

    J.P. John Bergin is, in a way, correct. But NOT in the way he thinks he is.

    Cutting taxes is not enough – and it certainly does not “pay for itself”. Someone like President George Walker Bush, with their tax cuts and government spending INCREASES, is useless.

    CUTTING GOVERNMENT SPENDING is vital – but many economists (going all the way to Adam Smith – at least on his bad days) think that certain forms of government spending have “economic benefits” that counter balance the costs of the taxes and money printing – and they are just WRONG.

    Places such as Florida and Tennessee (outside its insane Democrat cities) are places to move to because their GOVERNMENT SPENDING is lower. And they are less union dominated.

    Of course Mr Biden supports “The Strike Threat System” (as W.H. Hutt put it) as well – Mr Biden is wrong about everything, all of them are wrong about everything.

    Get out of the Dollar, get out of American government securities – the “flight to quality” is mistaken, because this junk is not “quality”.

  • Paul Marks

    As for very high rates of tax being self defeating.

    This was shown by the Grand Duke Leopold II of Tuscany – back (I believe) in the 1780s. He cut the tax rates and increased revenue – but increasing revenue is not the point. The point is that high tax rates distort the economy – they need to be cut, even if it does NOT mean more revenue (even if it means LESS revenue).

    That is one of the reasons that GOVERNMENT-SPENDING-MUST-BE-CUT.

    The United States needs a Warren Harding (who dramatically cut government spending as well as taxes) and it has got the opposite – it has got a Joseph Biden.

  • Stonyground

    In the past I have been called infantile and naive for suggesting that taxation is no different from theft. Helping yourself to other people’s stuff is illegal and tends to get you prosecuted and put in jail. There are good reasons for theft to be illegal, property rights are essential in order for society to function. The government is exempt from being prosecuted for stealing your cash and, as a consequence tends to steal as much as it can get away with. I don’t see why this is a surprise.

    My argument for taxation being theft follows. There are things in life that I need and that I have to pay for. Some of these things are provided by the private sector, some by the government. On the private side I can decide what I need and what I don’t need, I can decide how much I want to pay. If I agree to part with my money the vendor has a legal obligation to supply what I agreed to pay for. If they fail to do so I can either take legal action or write off the loss and never give them my business again. When it comes to the government side I have no such options, they just help themselves to my money and spend it on whatever they feel like. I want them to spend the money on defending our borders, maintaining the roads, to give just a couple of examples. That they fail to do this and instead spend my money on wind turbines and HS2 is not something that I can do anything about. So until the government restrict their spending to stuff that taxpayers actually say that they want, I stand behind my claim that taxation is theft.

  • bobby b

    “This is a man who, let it not be forgotten, was a senator for Delaware for many years. Delaware is a bit like a mini-“Switzerland”, one of those states that is favoured by corporations and creators of trusts (South Dakota, New Hampshire, Nevada and Alaska are similar).”

    Delaware has followed a rather brilliant tax strategy with regard to protecting its own taxpayers.

    1. Set up state incorporation statutes far more beneficial to businesses than most other states, encouraging business all over the country to incorporate in Delaware.

    2. Tax those businesses heavily in exchange for that great treatment. Tax their incorporation, tax their profits as Delaware-based earners . . .

    3. Drop tax rates for Delaware taxpayers as foreign corporations pick up the slack.

    Biden had a hand in these arrangements.

    Delaware is routinely in the bottom 3 of the 50 states in individual income tax rates. In his years as US Senator for Delaware, Biden continued doing rather good things for his own voters at the expense of the rest of the nation – for which I’m not going to fault him here. (Mother Jones has a rather good article from back in 2019 about Biden’s rise and his protection of the Delaware taxpayer here .)

    Now, as US *President, Biden has no one left to milk for the benefit of his constituency. We’re all his constituency. But he still loves spending OPM. So, here we are . . .

  • Paul Marks

    Delaware is not in the bottom 3 of the 50 States for individual income tax – several States have no State income tax at all, and other States have s lower rate of it than Delaware.

    The claim to fame of Delaware is the lack of a Sales Tax – it is one of a only a few States that do not have a Sales Tax.

    Did Mr Biden (once Senator Biden and Vice President Biden) decide Delaware tax policy? No he did not. The one thing that Mr Biden did that might be considered help to Delaware was prevent the Federal government hitting Credit Card companies (demanding that they make very clear their interest rates, demanding that they make it clear to people when they are going into debt, and-so-on) – many Credit Card companies have offices in Delaware, so Senator Biden’s actions (for which he was well paid by the Credit Card companies) could be argued to have helped Delaware. But that is about it.

    Mr Biden has always been a Big Government person. Yes he is now senile – but this is nothing to do with his senility.

    I note this ideas of “Biden the moderate” is still not dead – but it is total myth. Mr Biden has never been a moderate – any more than Nancy Pelosi has, or Teddy Kennedy was.

    The one aspect of their Church teaching that they do respect (they totally disregard all its other teachings – on abortion and so on) is the-government-must-help-the-poor via taxes, government spending and regulations. That goes back to the famous Encyclical of Pope Lex XIII in 1891 – but there have been a whole series of documents since then (and they have got worse, not better, over time) leading up to Pope Francis.

    Mr Biden does not need Marxist “advisers” (although he now has them) – as he has always believed that ever bigger government (ever more taxes, spending and regulations) helps the poor. Again he does not believe in other aspect of Catholic Church teaching – but this he does believe.

    Like Nancy Pelosi and many other important people, Joseph Biden believes that it is fine for him to do ANYTHING (anything at all – steal, lie, have people removed-from-this-Earth…..) as long as he gets the government to “help the masses”, doing that covers for everything else.

    In short it is not their corruption that is the problem – it is the one SINCERE belief that they they have.

    And it sincere – totally sincere. That is why it is so dangerous.

  • Paul Marks

    The people who actually made Delaware a relatively low tax State were the DuPont family – who used to be really important in the State.

    They once owned a vast chemical company (they created it) – and they were such things as Governor of Delaware.

    The family seems to be forgotten now – but I am older than sin (and twice as ugly) so I remember them.

    Joseph Biden is not Peter Dupont.

    Joseph Biden is, and has always been, an ever bigger government person. Yes he is now a senile puppet of far leftists who want to utterly destroy the United States (they are really bad people bobby b – they want you either enslaved or DEAD), but even before this Joseph Biden was an ever bigger government person.

    The one thing one can say that is positive (in a way) about Joseph Biden is that he did NOT believe that ever more taxes, government spending and regulations would destroy the United States (he was NOT harming the United States ON PURPOSE – which is what the terrible people who now control him ARE doing) – he followed what he had been taught since he was a young child.

    The government must help the masses – via taxes, government spending and regulations. That is the one sincere belief Joseph Biden has had in his life (which he believes covers for any sin he might comment – as long as he gets the government to “help the people” he believes he is covered for ANYTHING else he does). And that is also the one teaching of his Church that he believes in – he does not follow any of the other teachings.

    The same is true of Nancy Pelosi and many other Democrats.

  • Paul Marks

    Many “mainline” Protestants and “Reform” Jews share this position – they have dropped all the “difficult” theology stuff, their definition of religion is the government must help the masses.

    American atheism is also dominated by this doctrine (which they took from their Social Gospel Protestant ancestors – for that turned into atheism over time) – the doctrine that the government must help the masses via taxes, government spending and regulations. Free market atheists (followers of Ayn Rand and so on) are a minority – although an important minority.

    The tragedy, and it is a tragedy, is that these policies make things WORSE (not better) – worse and worse over time.

    But the doctrine is held with fanatical zeal – for example it would be totally pointless to try and explain to the rulers of Chicago that the policies they push to “help the poor” are vastly INCREASING poverty.

    Where does this all end? It ends in collapse – that is where it ends.

    One can not explain to these people that their policies are leading to disaster – so they will carry on with them, till disaster occurs.

    I repeat this is the one sincere belief that these people (including Joseph Biden) have. They have always believed this – they are not going to change.

    “Do not make war in Afghanistan – make “war” in the inner cities, “bomb” the homeless with food, shelter, health care ..”

    I heard a commentator say that only two days ago – telling that man that these are the policies that have been followed in American cities for SIXTY YEARS (and have made everything worse and worse) would just not work.

    That particular commentator was an atheist – but this is a religious faith, government help for the masses is the one thing they really believe in.

    That is why things are going to end very badly, very badly indeed.

  • bobby b

    Paul M., yes, I did misspeak. It is not specifically “state income tax” in which Delaware excels – it is the entire tax load on individuals. It wasn’t long ago that Kiplinger’s Finance Mag called Delaware the Most Tax-Friendly State and Most Tax-Friendly State for Retirees.

  • Schrodinger's Dog

    As a Brit who has lived in the US of A for over twenty-five years, I’ve long questioned those on the right who claim America is a low tax country. Yes, federal income tax rates are fairly low by international standards but, as the original post points out, state and local taxes can add substantially to that. Then you need to add on property taxes which, in some places, can make Britain’s council tax look an absolute bargain. Finally, I count what I pay in health insurance and medical bills as a tax. After all, if you’re willing to put up with the vagaries of the NHS, healthcare in the UK is paid for out of taxation.

  • Paul Marks

    bobby b

    Yes – the income tax in Delaware (for the wealthy) is 6.6% – but overall its tax burden is 18th best (lowest) in the United States.

    The last figures I have for the overall Tax Burden figures are for 2019 (Tax Foundation) I do not have any figures for 2020 (let alone 2021).

    I can not even find American manufacturing output figures for 2020 – it is as if history stopped in 2019.

    Schrodinger’s Dog – in a way the cost of health care in the United States is a tax, because the government interventions (the spending schemes and the regulations) have EXPLODED costs over the years and decades. Health care in the United States used to cost (even adjusted for inflation) a tiny fraction of what it now costs.

    Property Taxes – yes States such as New Jersey are a nightmare, much higher than here.

    I just do not know how people in States such as New Jersey and New York make ends meet – the overall burden of taxes and the cost of health care and so on is insane.

    However, health care (although fairly inexpensive) is not “free” in Britain.

    I am poor, very poor, and I do not get “free” health care. I must pay for my asthma treatment, I also have to pay for dental care (NHS dental care essentially does not exist – as a friend of my down the road found out), and when my back tore (and I could not walk) the NHS was not interested (even when I had myself taken to the NHS doctor the receptionist said that they only made appointments by telephone, and they do not answer their telephone) – but, yes, the private osteopath was not expensive.

    Medical care is a less expensive in Britain – but it is not free.

    Overall I was say that, even including the cost of healthcare, the burden is less in say Casper Wyoming than it is here – but if you are living in New York, New Jersey, California, you are in terrible trouble.

  • Sigivald

    In possibly more fairness than is due, Delaware’s Senators have absolutely no control over Delaware’s internal politics or laws or policies.

    They represent the state in the Senate, but have no governing power in the state itself.

    Joe Biden seems to have lived in Delaware since his youth, and ran for office there because he lived there, not because he chose it for its policy positions on taxation.

    He’s no hypocrite for being a Senator for a state that has tax laws he doesn’t favor as President. If he vocally defended those tax policies as Good For America (rather than Good For Delaware Compared To California), that’d be one thing, but it’s not in evidence yet.

    (There are a plethora of other things he can be dinged for, but not that.)

  • Paul Marks

    Even taking account of higher wages the cost of living (housing, medical care and so on) in California is just unacceptable – no wonder people are leaving. Ditto New York or New Jersey.

    Rich people in high tax States are hoping that the deduction of State and local taxation from taxable income (before it is subjected to Federal taxation) is restored.

    The classic tax loophole for the rich was got rid of by President Trump – it is now limited to ten thousand Dollars (not much for a Silicon Valley swine).

    These people are leftists – but they are also, often, hypocrites (they support very high taxes – as long as they, personally, can dodge them), President Trump took that loophole away from the rich leftists of New York and California – I suspect that this was one of the reasons they had (and have) such a hated for President Trump.

    Still there is also ideology – Mr Zuckerberg, alone, spent almost half a BILLION Dollars on rigging voting and the counting of votes, and then there were the rest of “The Cabal” (this term was actually used as a compliment by Time magazine – it appears to be what the ultra rich leftists who rigged the election call themselves, I suppose they thought “The League of Evil Mutants” was a bit too blatant).

    In the United Kingdom private people are not allowed to control voting and the counting of votes via “charitable groups”.

    It is illegal in American States as well – and millions of postal (“main-in”) ballots without any real checks are also illegal. But American judges (State and Federal) refused to enforce Election States.

    People forget that almost half the Attorney Generals of the United States were part of a Supreme Court case which the court refused even to hear – they “lacked standing”.

    The candidate, President Trump, also “lacked standing”, and voters who brought cases from the rigged States (such as Pennsylvania) also “lacked standing”.

    People who condemn the January 6th mess forget that January 6th was AFTER the judges refused to enforce the Election Laws.

    The people were, essentially, told by the courts “your votes do not matter, a handful of elite people decide the election result – and there is no legal remedy”. Cases brought BEFORE the election were dismissed, and cases brought AFTER the election were dismissed – the Election Laws were used as toilet paper.

    That message (that they were living in a corrupt dictatorship) rather annoyed people. Although the FBI also organised the mess – via its stooges (which it has in all “anti government” groups).

    We now know that the Federal Government will not secure the border (on the contrary – Mr Biden wants as many illegals as possible, who will be given government benefits and services, and will illegally vote), and the armed forces are a “Woke” joke (hence the endless Marxist “Critical Theory” brainwashing – and the witch hunt for members of the Armed Forces who are against it) – that have been defeated by the Taliban (“we were not really defeated we decided to withdraw….”) – but then this is not what the Federal government is for.

    The Federal Government (as as former CIA Director recently boasted) is not there to defend the borders or defeat external enemies – it is there to crush “the American Taliban” – conservatives, who should be destroyed. All of them – all over the country, at least the half the population.

    The person who said all this (of course – via “Twitter”) was not some young student – he is older than I am, an ex United States Navy Admiral and CIA Director. And, of course, a media darling – on CNN all the time.

    The American establishment hate (HATE) the United States – they want traditional Americans destroyed.

    The “Deep State” security and intelligence services were set up to OPPOSE the totalitarians – but at some point, I do not know when, they went over to the ideology they were supposed to be fighting.

    It is like “Saruman” from the “Lord of the Rings”.

    Once head of the White Council entrusted with defending the liberty of the peoples of the world – but, at some point, he became a convert to the doctrines of tyranny.

    This is what has happened in the United States of America – it really is that bad.

  • Paul Marks

    Sigivald – yes Delaware became a good State (it has declined a bit in recent years) because of the Dupont family and other Republican owner-manager industrialists – and, relatively, small government politicians.

    The sort of people the international establishment wish to destroy. But they also wish to destroy all of the traditional population of the United States and other Western countries – “destroy” need not mean kill, it may “just” mean reduce to de facto serfdom – under an all powerful government and a few allied corporations controlled by “educated” (Woke) managers. No freedom being allowed.

    “You will own nothing and you will be happy” – or else you will be punished. The lives of everyone planned (controlled) from the cradle to the grave.

    Yet what is intended as perfect order is leading to chaos – see New York City and San Francisco. But it is possible that the chaos is intentional – so that people are so desperate that they hand over their liberty in return for some restoration of order.

    First create the problem, then present the “solution” – the all mighty state (the “solution” regardless of what the problem is).

    “Bottom up” (chaos on the streets), “top down” (take total control of society – with the consent of many people), then “inside out” – replace traditional society with the sort of society that the people who to Davos and other such conference venues want. Well want for “the masses” – not for themselves.

  • One of the more sophisticated attacks on the Laffer argument came from Tom Bergin, a Reuters journalist whom I know. He argues (in fairness, with a lot of data) that much of the Laffer argument is bunk. But he overreaches. For instance, when A. Laffer noted that U-Haul rental prices for people leaving California and going to Tennessee were higher than those moving in the opposite direction

    Tom Bergin’s argument sounds like a classic straw man. All things being equal you would expect the flow of movement to be from Tennessee to California, given that California has more variety and I’m certain that even in the recent past the balance of movement was in California’s favour rather than Tennessee, but that probably hasn’t been the case since the 1990’s.

    One thing that is often said is that the implications of the Laffer Curve are that “every tax cut pays for itself” or some variation thereof. I don’t believe this is true, rather I believe that there is a point on the curve where increasing the tax rate leads to an overall reduction in the amount of total tax collected AND that there is a delay in that.

    Humans do not avoid posted rates of tax (except the very organised and wealthy for whom tax and asset planning is a part of life), they avoid taxes they feel in their pocket, which is why a rate increase may initially lead to an increase in tax collected, but it eventually declines as people take behavioural and structural responses to avoid such taxation. The most common approach of which is to take yourself and/or your business to a (relatively) lower taxed jurisdiction.

    I did exactly this when I was working as a European consultant for an American company. They didn’t care where in Europe I actually lived (since their head office was in the US) and despite our European office being based in London, we had very few customers there (it was mostly a US prestige thing, the CEO wanted the European office to be London), so when I joined them I simply moved myself, lock-stock-and-barrel to the Isle of Man and paid the much lower rates of tax there rather than UK rate which was more than double and cut my income tax and national insurance payments from £36,000 a year to £9,000.

    I had to give it up after a few years because living out of a suitcase is a pain in the ass, but even though my evidence is personal and anecdotal it does demonstrate that people DO move when taxes are too high, because I did exactly that.

  • staghounds

    L didn’t move to my wife’s house when we married. There’s an income tax there. That’s why.

  • Fraser Orr

    One point that needs to be clarified on expatriation is why it is necessary. If you are, for example, Richard Branson or that guy who runs Easy Jet, you don’t have to worry about it. You are a British citizen but you just move (to the BVI, or Monaco respectively) and you no longer have to pay British taxes, just local taxes, which, conveniently are zero. Americans are literally slaves to the American tax system. If I moved to Monaco I’d still have to pay American taxes (with a deduction for local taxes.) That is the reason expatriation is necessary. Americans are taxed because they are Americans, not because they live in a country. The only other country in the world where that is true is Eritrea. (Which, I suspect is appropriate, because American is fast heading toward being like Eritrea.)

    FWIW, anyone looking to do tax planning… there is only one place American citizens are not subject to the tyranny of the IRS and that is …. Puerto Rico. If you live there for more than six months a year you are not subject to US federal taxes, just local PR taxes, which are about 4% on income. I hear it is quite lovely there, and there is a growing ex-pat community…. I wonder why? And where the heck did I put my Spanish Duo Lingo app?

    (FWIW, I’m not a tax consultant, so don’t take my advice…. 😀)

  • Fraser Orr

    @bobby b.

    FWIW, I have incorporated in NV, WY and IL at various times. Each has different pros and cons, Delaware has got a bit to big for its boots, and I think it is mainly used by really large corps to deal with the high costs and bureacracy. And I think it is the business friendly courts that are the main appeal, and I am a bit to little to worry about that. NV I incorporated in because I was threatened in a lawsuit against an IL corp I owned to pierce the corporate veil (basically meaning strip the limited liability), something that happens a lot in IL, but has apparently happened once in 25 years in NV. It is kind of expensive though to maintain a business in NV. WY seems to be the burgeoning place to incorporate. It is cheap, non burdensome, has no taxes, and has a very friendly business climate. FWIW, I have never actually been to Wyoming.

  • Surprise, surprise (probably not though), but the Sage of Ely is a big fan of taxation by citizenship rather than residence, probably because it turns citizens into tax slaves in exactly the way you describe Fraser.

    As to why the US taxes people this way, it goes back to the US Civil War and the feeling that US Citizens living abroad were not contributing to the war effort so where explicitly taxes because of that. Certainly taxation by citizenship is one of those things that makes the US exceptional (baring the Eritrea’s “diaspora tax”), but I’m not sure that it is exceptional in the way most Americans would like.

    In 1995, the U.S. Congress took (yet another) look at the situation and found that only 3 countries in the world taxed based on citizenship rather than residency: Phillipines, Eritrea, and the United States. A year later, the Phillipines ended its citizenship-based tax regime. As for Eritrea, it imposes a special 2% tax on all Eritreans abroad – dual-nationals included – in order to fund the dictatorial one-party government which has ruled since independence in 1993. This is a special tax on citizens abroad, as opposed to the U.S., which imposes the same tax regime on citizens regardless of where they reside.

    Eritrea does not allow renunciation of citizenship, so anyone who ever was a citizen carries this tax burden his whole life. The enforcement mechanism for the citizenship-abroad tax is simple: if you are an Eritrean citizen abroad and don’t pay the special tax, then your relatives in Eritrea will be severely harassed, beaten and imprisoned. Additionally, the Eritreans abroad who don’t pay the special tax are not allowed to cross the Eritrean border or are arrested when they attempt to leave Eritrea.

    Interestingly, a Canadian court in Toronto ruled in 2007 that the imposition of the 2% tax on its citizens abroad was illegal and that a dual Canadian-Eritrean citizen should be paid back the money he had given. Which leaves the United States as the only country in the world which applies the same tax regime to all its citizens, regardless of where they live.

    Citizenship based Taxation

    😉

    Attempts to patch the US system to prevent the worst excesses against US expats (such as the Foreign Earned Income Exclusion) have just made a complex system more complicated and the costs of preparation and filing for non-resident US citizens isn’t cheap (several thousand dollars a year being typical) even when there are no taxes due. The introduction of FATCA which triggered the effective expulsion of many Americans from non-US domestic banking regimes has exacerbated the problem in recent years. Put simply, dealing with Americans was becoming more hassle than most banks were prepared to deal with.

    Sure, HMRC can be a pain in the ass to deal with, but the IRS are just carpet baggers enabled by Congress.

  • Nicholas (Unlicensed Joker) Gray

    At least America isn’t doing what China does- base claims of sovereignty on genes! They are even trying to control Australians who have Chinese ancestors! And even though the regime claims that atheism is the official belief, they still act as though they believed that karma is real and is genetic- hence the regular bouts of Japan-bashing, even though the modern Japanese are not militaristic.

  • JohnK

    Fraser:

    It does seem to me that residents of Costa Rica have a sweet deal. They are US citizens, but are not subject to the swamp of DC and its taxes. Yet they keep on voting for US statehood. What good do they think that will bring them?

  • Paul Marks

    JohnK.

    Did my mean Puerto Rico? Costa Rica is an independent country.

    And people in Puerto Rico do not have a good deal – as the government there copies the worse features of United States Federal Government – and has some nasty twists of its own.

    For example, when the media endless repeated that no help had been sent to Puerto Rico in response to natural disasters, President Trump pointed out that many billions of Dollars of help had been sent – but that various officials and politicians in Puerto Rico had stolen the money.

    The media responded by chanting “racist”. They just did not care that all this money had been stolen – indeed it was “racist” to even mention it.

    The “mainstream” media is obsessed with Frankfurt School of Marxism concerns (such as “racism”) – it is pointless to try and talk to them about financial matters, or anything else.

    Donald John Trump went to Business School back in the 1960s (when Wharton was a conservative place) – he did not really grasp just how Marxist (Frankfurt School Marxist) the modern establishment elite are.

    Even at Business School today “Social Responsibility” “Social Justice” (i.e. Collectivist Totalitarianism) dominate.

    As for the rest of the education system – “1+1=2 is White Supremacy!” would be funny, if these lunatics did not actually mean it (they do mean it – they are that insane). Remember the LA Times recently denounced Larry Elder as a White Supremist – have a look at Larry Elder (clue – he is BLACK).

    The “mainstream media” and the government and corporate bureaucracy in general, are in the hands of lunatics (like that demented Admiral and ex CIA Director – who engages in endless genocidal ravings on Twitter and CNN) – and they are like that because the EDUCATION SYSTEM is in the hands of lunatics.

    “How can a society like this survive?” – the answer is very simple, it can NOT survive.

  • Paul Marks

    John Galt – to keep down taxes, you must keep down GOVERNMENT SPENDING.

    Yes – you know that, but some people do not. For example, the ex Governor of Kansas thought he could radically reduce taxation without radically reducing government spending – that did not work out well.

    This idea “taxes bad – but government spending good” is wrong. Taxes must be cut – but to that government spending must also be cut.

    The Governor of South Dakota managed that even during the late 1930s – yes the Great Depression, and in the teeth of the ideological assumptions of the time (the New Deal).

    If someone says “I want lower taxes” the first question to ask is “what is your plan to reduce government spending?” – if the reply is some mumbling about “cutting waste” or “making things more efficient” – not good.

    Frasor Orr.

    I happen to know someone who lives in Wyoming – and one thing to remember is that everything is trying to kill you.

    This includes the weather – incredible winds, sudden snow storms in the middle of summer (and then burning heat – if the cold does not kill, let us try heat), hail stones as big as your fist. The wildlife is also trying to kill you.

    However, he is a rather tough person – so all this does not bother him.

    What does bother him are the TEACHERS – with their hate filled yard signs (you can guess what they say) and their endless brainwashing of little children (white men, like your fathers, are evil…. Collectivism is the solution to everything).

    The weather and the wild animals are dangerous – but the teachers are far more dangerous.

    This is older than Marxist influence in the United States – after all Woodrow Wilson taught that the purpose of education was to make sons “as unlike their fathers as possible” (he had nothing against white people as such – indeed he hated black people, but he hated “reactionary” fathers regardless of skin tone), and he taught that Collectivism was the solution to all problems.

    The idea that bigger and more interventionist government might make things WORSE never crossed his mind.

    Indeed such a concept would go against the most basic belief of people such as Woodrow Wilson – or Joseph Biden.

  • JohnK

    Paul:

    Yes, Puerto Rico, as you say.

    Maybe you are right, the local politicians are so venal that the poor people there think they would be better off as a state of the USA. However, that would surely mean that the same local corrupt politicians would simply go to Washington and steal even more. No solution at all.

  • Tim

    “US is signatory to the 1961 Convention on the Reduction of Statelessness and cannot allow a US Citizen to become deliberately or accidentally stateless. This has been a bit tricky given the effective closure of many borders and reduced access and staff at US embassies.”

    On an unrelated subject, suppose Elon Musk in the near future gets his private colony on Mars. What if the people who emigrate to Mars renounce their citizenships of whatever country they currently reside in before leaving Earth. Would they would then be considered “Stateless” by the provisions of the treaty and therefore be forbiden to do said renouncement? They of course could claim that their new “state” was the “martian free-colonies” or some such phraseology; don’t know if that would fly legally…

  • I imagine that the Mars colony would simply declare itself an independent sovereign nation at some point. If a tiny spec of dirt in the Pacific like Tuvalu can be an independent nation then I don’t see why a reasonably sized Martian colony can’t do the same.

    Maybe, instead of being a democracy the Mars colony will declare itself a monarchy or even an empire in its own right?

    All Hail Elon, first of his name, Emperor of Mars!

  • bobby b

    “I imagine that the Mars colony would simply declare itself an independent sovereign nation at some point.”

    And the IRS will continue to send them nasty certified letters and attempt to dun their Earth bank accounts forever.

  • Tim

    And the IRS will continue to send them nasty certified letters and attempt to dun their Earth bank accounts forever.

    Think we are on the same page…I am thinking that after they (the colonist) renounce their citizenship they will announce their sovereign nation independent of Earth. Setup the “Bank of Mars” and accept donations (deposits) from people on Earth. It (the Mars colonies) would be like the Cayman Islands on Earth the ultimate tax shelter.

  • Tim

    Maybe, instead of being a democracy the Mars colony will declare itself a monarchy or even an empire in its own right?

    All Hail Elon, first of his name, Emperor of Mars!

    Assuming Elon Musk is really serious about wanting to “die on Mars”; but even if he went there would very quickly be more than one colony. Mars is after all a big place; the other colonies would no doubt have their own ideas about who the “boss” should be.

  • And the IRS will continue to send them nasty certified letters and attempt to dun their Earth bank accounts forever.

    Sure, but in practice there are a lot of non-resident US Citizens who have simply cut-up or returned their US passports, do not intend to return to the US for any reason and simply ignore the IRS imposts. When you make dealing with your bureaucracy ridiculously expensive and expatriation a bureaucratic nightmare then a lot of moderate income people are just going to say “Phuq you then”.

    Think we are on the same page…I am thinking that after they (the colonist) renounce their citizenship they will announce their sovereign nation independent of Earth. Setup the “Bank of Mars” and accept donations (deposits) from people on Earth. It (the Mars colonies) would be like the Cayman Islands on Earth the ultimate tax shelter.

    Sure, there would be outrage from the Congress critters (since any move would undermine their power and control) and there would probably be attempts at disrupting life on the colony, so I would imagine that they’d only declare independence when they have separate connections from other parts of the world, probably multiple national outposts and the ability to survive on their own without supplies from Earth for an extended period, but the distance and bureaucratic imposts alone will eventually make it inevitable.

    Assuming Elon Musk is really serious about wanting to “die on Mars”; but even if he went there would very quickly be more than one colony. Mars is after all a big place; the other colonies would no doubt have their own ideas about who the “boss” should be.

    I think both logistics (such as mining polar ice) and the inherent safety of having multiple outposts would mean it is sensible to split the colony into multiple outposts as soon as it is practical. Just because you’ve got multiple outposts doesn’t mean that Mars would be more than one colony. It would be more about financing, logistics and the desire of the colonists.

    Baring evidence of living Martians, Mars seems to be a clear cut case of Terra nullius.

  • Tim

    “I think both logistics (such as mining polar ice) and the inherent safety of having multiple outposts would mean it is sensible to split the colony into multiple outposts as soon as it is practical. Just because you’ve got multiple outposts doesn’t mean that Mars would be more than one colony. It would be more about financing, logistics and the desire of the colonists.”

    Mars would be a deadly frontier where the life expectancy would likely lag Earth’s (at least in the developed world) for some time. There would have to be a plus that outweighs the minus; the only one that stands out is sovereign national independence (freedom). Having left Earth to escape governmental control can’t see said colonists being very tolerant for very long of a big Boss (Musk or anyone else) lording it over them. There would both be splinter colonies of the original one and new one’s setup independently from new emigrants. No reason why there would only be one “Bank of Mars” there would quickly arise competitors; different colony groups offering the same tax-shelter advantages. So, unless one group managed to monopolize the communications array(s) of Mars to Earth expect lots of competition.

  • Nicholas (Unlicensed Joker) Gray

    If you can send colonists to Mars, the US Government (exercising extraterritorial powers) could also send troops and nukes. Maybe the first thing a Martian colony should do is go looking for Uranium in them there hills…..

  • Tim

    “If you can send colonists to Mars, the US Government (exercising extraterritorial powers) could also send troops and nukes. Maybe the first thing a Martian colony should do is go looking for Uranium in them there hills…..”

    Maybe. But a launch window from Earth to Mars opens up only about every 26 months and it takes 6 months to a year to get there. Those numbers would likely change with improved propuslion systems but still; the Earth-Moon system yes would be easy for Earth to control Mars much more difficult. Said US troops would have very limited logistical support from Earth; they would be on their own. Mars is a big place there could be hundreds of settlements on Mars by then with several hundred thousand to low millions worth of “colonists” to control.