Exit tax passes Congress
The U.S. government is about to close off the last refuge for Americans who seek to escape the clutches of the IRS.
Every year, a few hundred Americans take the fateful step of surrendering their U.S. citizenship to avoid paying U.S. taxes. Many of them already live abroad, and are subject to U.S. law which — almost alone among the world's nations — taxes the income of its citizens no matter where they live or where they earn that income.
Now, buried within a bill furnishing tax benefits for soldiers and veterans is a provision that amounts to an "exit tax." As explained by the Wall Street Journal, the law will "that will tax the assets of those who leave for good on their way out the door, as if they were selling those assets."
But wait, there's more! In what looks like a hideous application of retroactive law, ex-U.S. citizens who die and leave their assets to heirs who retain their citizenship will find those assets taxed at 45% — the gift-tax rate.
And it gets still worse. The law applies not only to U.S. citizens, but also anyone who's been a permanent resident longer than eight years. (Call this one the Foreign Investment Discouragement Clause.)
Given how this is buried in a popular bill that "supports the troops," it's sure to gain a presidential signature.
So, in effect, your only hope for preserving your wealth now is to grow it — grow it so large that you'll be OK no matter how high our confiscatory tax rates end up looking like in the years ahead. (FDR maxed it out at 94%. Who says it can't happen again?)
One possibility worth considering is something we call the "Chaffee Royalty Program." On its first go-round, it turned every $1 invested into $50 — until it was closed in 2002. Now it's open again… but be aware this offer expires at midnight EDT tonight.
Sphere: Related Content
[...] Exit Tax Passes Congress addthis_url = [...]
Pingback on May 28, 2008 @ 10:29 am
But if the whole family changes citizenship, say to Argentinan, and announces such at the US govt office in Argentina, what is the US govt going to do? Ah heck, what if you just temprorarily write your kids out of the will while you change citizenship? There are ways around this, esspecially if you are in a country that doesn’t much like the USA and would much rather your money was spent in THEIR country. I think this is more bluster and bluff pandering to a few lobbyists. The few in the USA that will get thrown under the bus will make a sqeak and then a squish and joe sixpack aint gonna care.
Comment on May 28, 2008 @ 11:54 am
I’ve just read thin in the DR newsletter :
“Now, it appears that the gains from mechanization, bioengineering, chemistry and land clearing may have reached their limits. We may soon reach “Peak Food—
Now, let me ask : Has the DR morphed into a marxist newsletter or something ??
Comment on May 28, 2008 @ 5:38 pm
Seems the new law will apply to those with net worth of $2m+ only (per WSJ).
Also, when this should go into effect? As of signing or on the 1st of Jan next year?
Comment on May 29, 2008 @ 2:15 am
I have been in and out of the US consulate in Hong Kong for the past 10 years to help my clients to give up their green cards and US passports. I lost most of my clients because of that but I am happy for them making that decision and never in a single minute regretting it!
Comment on May 30, 2008 @ 6:10 am