Want to Pay Less Taxes? Go abroad!

According to this report by the New York Times, there is a significant portion of ex-americans who have renounced their citizenship because of stiff tax penalties (Don’t ask them to confirm that though.). This is another clear example of economics in action. People who live abroad presumably do so because they prefer to live there rather than in the united states. In some cases, I am sure that it is due to a family or a relationship issue. However, in the cases that it is not strictly a relationship issue, there is likely some monetary reason that these people live outside of the United States even though they are US citizens.

Follow The Money:

For many of these people, they are following the money in their quest to “earn the big bucks” in order to sustain themselves and their families for the future. This is obvious. However, the united states has instituted strong, expensive, costly penalties to these people in the form of higher taxes to people even though there is a reason that they are living abroad already; they aren’t making enough money.

Lack of Common Sense:

To me, someone who does not understand all of the ins and outs of immigration law, it seems certainly like we are kicking these people out the front door. This is because of economics. People now, as a result of the new taxes, have even less money if they remain a citizen. There are unlikely to be more lucrative jobs for people in the united states because if there were, those people would already be working them (Remember, we are talking about non-relationship issues here). That means that money is the major objective for moving abroad. However, by taking even more money, they have made it even more costly to live abroad as a US Citizen which reduces the perceived value of living abroad.

Foretell The Future:

Understandably, it is difficult to foresee the future. However, in the circumstance that you can foretell the future and it seems like you are unlikely to make more money by traveling back to the United States in the future, but could somehow remove the tax burden, you likely would. That is the reason, ultimately, that people are renouncing their citizenship.

The U.S. is the Loser:

The problem with this is that the people who leave the United States are actually those who are quite lucrative. Instead of taxing these people, we might offer some kind of incentive as a means to obtain funds from these people like reduced rates on airfare back to the United States or something similar. The basic economic idea is that the taxes overall will stifle free economic trade and growth and encourage a black market and “cheating” whereas incentives improve the economy and spur development. Even with the number of people being small, I would submit that these people are a valuable resource and we as a country should be fighting to keep our wealthiest citizens living here, and living happily.