Take a look at these names and you will know what unites this disparate group:
- Pop icon Tina Turner
- Facebook co-founder Eduardo Saverin
- French movie star Gerard Depardieu
These three individuals have in common good sense and a keen grasp of the bottom line on a profit and loss sheet.
And they all recently have been in the spotlight for ending their native citizenship and moving their residence elsewhere. They were sensationalized by the news media and accused by politicians of unpatriotically avoiding high taxes at home.
Tina Turner has gone to Switzerland, and has been joined by Gerard Depardieu, and Saverin, a native Brazilian, went to Singapore.
They also joined an illustrious list of fellow expats, such as Bill Clinton buddy and Clinton Library donor Denise Rich; rock star Johnny Hallyday, tennis star Amelie Mauresmo, racing driver Alain Prost, singer Charles Aznavour; Canadian Shania Twain; Italian actress Sophia Loren; British pop star James Blunt and rock star Phil Collins; German Michael Schumacher, former Formula One race car driving world champion (all Switzerland); and grand slam German tennis star, Boris Becker went to Monaco.
Then there was Swede Ingvar Kamprad, founder of Ikea and one of the richest men in the world (Switzerland); billionaire Campbell Soup heir John (“Ippy”) Dorrance III (Ireland); Michael Dingman, chairman of Abex and Ford Motor director (The Bahamas); J. Mark Mobious, leading hedge fund manager (Germany); Kenneth Dart, heir to the billion dollar Dart container fortune (Belize); Ted Arison, head of Carnival Cruise Lines (Israel); and millionaire head of Locktite Corp., Fred Kreible (Turks and Caicos Islands) – to name but a few.
One of the forerunners of this phenomenon, the late Sir John Templeton, respected international investor, businessman and philanthropist, surrendered his U.S. citizenship in 1962 to become a citizen of The Bahamas and the U.K. as well. That saved him more than $100 million when he sold the well-known international investment fund that still bears his name (Franklin Templeton) and that also saved his heirs millions more in estate taxes. [adcode]
Chasing Away Success
This sentiment was echoed by classic comic book hero Superman, who also declared his plans to renounce his U.S. citizenship in 2012 in Action Comics. “’Truth, justice, and the American way’ – it’s not enough anymore” after both the Iranian and American governments criticized him for joining a peaceful anti-government protest in Tehran.
Common sense dictates the right not to pay more taxes than you owe; and also the right to escape taxation when it becomes confiscation. That escape is called expatriation and it is a legal right upheld by the U.S. Supreme Court.
The late Judge Learned Hand, of the U.S. Court of Appeals in New York, was a progressive who believed fervently in judicial restraint. Called one of the greatest judges in American history, in a memorable tax case dissent, Judge Hand wrote: “There is nothing sinister in arranging one’s affairs so as to keep taxes as low as possible… nobody owes any public duty to pay more than the law demands. Taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant.”
Keep in mind Judge Hand’s description of the right to avoid taxes by all legal means when you hear politicians weep and wail about U.S. persons who choose formally to end their citizenship – the only way by which Americans can end their tax obligations.
The Long Arm of the IRS
Unlike almost every other major nation, U.S. taxes follow American citizens wherever in the world they go. Most other nations only tax the income of their citizens from sources within their borders. When a Frenchman, a Canadian or an Englishman leaves and makes a new home in another country, most of their home country tax obligations end.
Radical leftists like Michigan U.S. Senator Carl Levin prefer U.S. style worldwide taxation because it undermines tax competition among countries, removing individuals’ and companies’ ability to escape high taxes by shifting activity to jurisdictions with better, lower tax policies. That is why they back the imperial Foreign Account Tax Compliance Act (FATCA), an attempt to extend the jurisdiction of the U.S. Internal Revenue Service over every country in the world.
Indeed, as Cato’s Dan Mitchell says, this is why politicians from high-tax nations, like Levin and President Obama, are so fixated on trying to shut down so-called “tax havens.” It’s difficult to enforce bad, high-tax policy, after all, if some nations have strong human rights policies on financial privacy.
This same common sense geographic re-ordering based on taxation levels is occurring within the United States on a grand scale.
Higher Taxes Equals Less Revenue
The recent feeble complaint of golfer Phil Mickelson, a man worth $100 million, about California taking 65% of his income is only a symptom. The more famous Tiger Woods is worth more than $1 billion. He left California in 1996 because of high taxes and has saved millions in result.
In his book, Travis Brown, author of How Money Walks, writes that from 1995 to 2010 Americans moved about $2 trillion in wealth from California, Illinois, New Jersey and other high-tax states to states such as Florida, Nevada, Arizona and Texas that impose no income tax.
The 2010 U.S. Census showed these four low-tax states had the fastest population growth. The states that lost people were all high-tax states like California, New York, New Jersey, Connecticut, Maryland, and of course, President Obama’s home state of Illinois.
But “Big Brother” politicians everywhere think they can bleed the rich dry. They’re wrong.
In 2009, when the Labor Party in the U.K. raised the top income tax rate to 50%, two-thirds of the country’s 16,000 £1 million earners disappeared from British tax rolls. In 2010, HM Revenue and Customs reported only 6,000 remained. Rather than increasing revenue, the tax actually cost the U.K. £7 billion ($11 billion) in lost tax revenue.
Similarly in France, when Socialist President Francois Hollande imposed a 75% tax on 400 to 500 families worth more than one million euros ($1.3 million), a flood of top-end properties were put up for sale and Monsieur Depardieu headed for lunch with President Putin and a new citizenship.
When Presidents John F. Kennedy and Ronald Reagan reduced income tax rates, the result was much more revenue. As long as there are ships, autos, trains and planes, high taxes will only drive the highest earners elsewhere.
Chairman, Freedom Alliance
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On This Day, the Market Will Crash
What would you do if you knew the exact date of the next stock market crash? This may sound absurd to you, but we’ve recently uncovered details of an event that will cause the next crash.
Everything you need to know is buried inside a little-known government document called FT-900. It reveals when the next crash will occur.
This controversial new video reveals the timeline of this event and the four simple steps you need to take immediately in order to protect your wealth and your family.
But hurry … this event is only months away (at most).