Posted on 07/05/2002 8:04:38 PM PDT by Action-America
Defending the American Dream
How the Wealthy Defend Against
Taxes, Tort and Terrorism
July 4, 2002
John Gaver
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As our elected representatives argue among themselves about how best to exert even more legislative control over citizens and corporations, in the name of "fighting terrorism", they fail to realize that just that sort of draconian legislation is actually brewing a virtually unseen crisis of terrifying proportions. Combine that with the effects of the terrorist attacks of September 11, 2001 and more data that we have uncovered and what you have is a recipe for disaster.
The wealthiest people in the United States - those who have achieved the American Dream - those who pay almost all of the taxes - those who are responsible for the vast majority of US investment capital - are leaving the United States large and growing numbers. This isn't news. We have known about the growing expatriation rate for some time and common sense tells us that it isn't the poor who are leaving. But, new data that we have uncovered confirms that it is indeed, the wealthiest Americans, who are being forced to leave. Furthermore, we can now expect to see this government induced capital flight increase dramatically in the near future, as a result of the growing media attention to this issue and the effect of the terrorist attacks.
This is a very serious problem, because as we have shown in previous articles, if only the top earning 1% of taxpayers leave (just over a million taxpayers), it will mean a loss of over one-third of income tax revenue, requiring a 50% tax increase for those who remain.
It would be a serious mistake to call those who are leaving, unpatriotic. After all, what could be more patriotic than defending the American Dream. In fact, all that they are doing is responding to a recent spate of oppressive laws, designed to punish the wealthy for having achieved the American Dream. If anyone in this equation is unpatriotic, it is our elected lawmakers, who are attacking the American Dream and forcing these patriotic Americans to defend what they have achieved, by taking it elsewhere.
Those who have followed our articles on Action America (http://www.ActionAmerica.org) in recent years are already aware of this disconcerting trend of government induced capital flight that has been growing like a cancer, just under the surface. But, rather than report on an issue and then just set back on our laurels, we're constantly looking for new sources of information that might indicate that things are either better or worse than first reported. The reason for this article is that we have, indeed, uncovered new information.
It's getting worse.
I'm sorry to have to say this, but it looks like the flight of wealth from our shores is much worse than originally reported; worse even than reported in our annually updated article on this subject, "Tick-Tick-Tick - The Economy Bomb" which you can find at (http://www.ActionAmerica.org/taxecon/ticktick.html). There are three new facts that point to this ominous conclusion. Actually, it is two new facts and one that has been around for a while, but it took some work to uncover it.
1) The major media is taking notice.
In recent weeks, I have read numerous news articles about how Congress is considering several different pieces of legislation aimed at preventing major corporations from reincorporating in offshore jurisdictions, in order to remain competitive with their foreign rivals and punishing those corporations that leave anyway. What those corporations are doing is referred to as corporate expatriation and is not only legal, but in many cases, necessary in order to stay competitive with their foreign rivals. But, it's not corporate expatriation that this article concerns. I only mention it, because it demonstrates that the media is beginning to take notice of capital flight issues.
In previous articles on the subject of capital flight, we have pointed out that even though the number of wealthy individuals choosing to leave the United States, for more wealth friendly climates, is increasing rapidly, the worst flight will not occur until the media takes notice of what is happening and draws attention to the problem.
Oops! The media is taking notice.
Granted, the current news is not about the government induced individual expatriations that represent a true threat to our economy, but only about corporations that expatriate and cause no real harm to the economy in the process, since their jobs stay here. But, if the media is now reporting the smoke of government induced corporate expatriations, how long do you think it will be before they find and begin reporting on the fire of government induced individual expatriations?
As the media tries to bleed every ounce of interest out of the story of corporate expatriations, it's almost certain that some industrious journalist, eager to make a name for himself, will soon stumble across the facts surrounding expatriation of wealthy individuals. After all, it's not that hard to run across that info, once you start looking. For example, let's just take two likely search terms that a journalist might use in such research and try them on the Google search engine (http://www.google.com). Since we are talking about "expatriation" and "capital flight", let's use those terms.
Note: To enter a two word phrase into Google, you need to quote the phrase. So, to see how easy it will be for a journalist to stumble across this information, go to Google and enter:
"capital flight" expatriation
On July 4, 2002, if you entered that search criteria on Google, you would have found that 11 out of the 42 listed links related to the increasing level of expatriation of wealthy individuals. In fact, 5 out of the 10 links on the first results page directly addressed individual capital flight and four of those were Action America articles.
Even dropping the quotes in the search does not significantly change the outcome of the search, other than increasing the number of results. One National Review article that was returned verifies, "As taxes continue to soak up a larger percentage of the GDP, the number of U.S. citizens moving out of the country is increasing". If National Review is reporting on this ominous trend, how long do you think it will be before other major news sources pick up on it?
The major media, in general, has not yet realized how serious this is. But, as you can see, it's only a matter of time. Whether the story is broken in the Wall Street Journal, on Fox News or through any other large news outlet, the other news organizations will jump all over it and the word will spread like wildfire. In fact, as pointed out above, it actually looks like National Review is beginning to take notice.
Many wealthy individuals are already aware of this flight, but have no idea how serious it is. Oh, most wealthy Americans know a couple of people who have expatriated, but they think that those expatriations were one-of-a-kind events and that expatriations, in general, are infrequent and of little concern. When stories about expatriations start showing up in the media every day, they will realize just how serious a problem it really is and start planning their own escape. ("Escape," by the way, is the common term used by most US expats to describe expatriation. That in itself, is a sad commentary on where our government has brought us.)
Other Americans, who are already in the process of planning to expatriate, will speed up their departure, knowing that in response to such news, the government will try to slam the door shut on expatriation. This additional boost in expatriations will certainly become part of the news, which will encourage even more expatriations and that cycle will continue until such time as the government really does close the borders. But as history shows, even that won't stop capital flight.
Unfortunately, our lawmakers are so obsessed with their own power and control, that they are unlikely to realize in time, that their attempts at control are only making matters worse.
2) New evidence proves it is the wealthy who are leaving.
As we have shown in previous articles, there is ample evidence of the growing number of expatriations. However, the amount of dollars concerned has been, until now, a matter of conjecture and projections. This new evidence actually ties dollars to these expatriates.
For many years now, Forbes Magazine has been publishing annual lists of the 400 Wealthiest Americans and the World's Billionaires. When most people look at those lists, they just look at the names and net worth of the people on the lists. But, we have discovered that those lists tell a much more important story, if you dig deep enough.
Since Forbes has been using the same basic procedures to build those lists for years, I got to wondering if those lists might reflect the same alarming level of capital flight that we, at Action America, have been reporting on. They did.
In fact, the Forbes lists show that since 1999, the number of US billionaires has dropped by over 13%, with a 7% drop in average net worth, while the number of billionaires worldwide has increased by over 80%.
Think about what those numbers say. Either wealth is leaving the United States at an alarming rate and moving offshore or wealthy people in the United States are losing huge amounts of money, while wealthy people in the rest of the world are making tremendously more money. It doesn't matter which explanation you accept, because if you accept the second scenario, how long do you think wealthy Americans will continue to stay in such an inhospitable business environment before adopting the first scenario. What it comes down to is that the land of opportunity no longer offers the greatest opportunity.
You won't find the above information quoted in any major media source. I had to take it upon myself to do the research. For your information, the lists that we used were the Forbes 400 Richest Americans and the Forbes World's Billionaires for 1999, 2000 and 2001. Since the information was not easily downloadable, we had to copy and paste the Forbes data for the last few years, from dozens of web pages, into a single worksheet. We totaled up the number of billionaires in the US and worldwide for each year, along with their combined net worth and used that to calculate an average net worth for each group. If you want to go to that effort (3 to 12 hours, depending on the speed of your Internet connection), you will come up with the same results.
By doing the research yourself, you eliminate a lot of the spin. This is especially true, when you use non-political data, such as the Forbes lists. Perhaps it is for that reason that nobody in the major media ever thought to use the Forbes lists in such a manner. I certainly don't believe that Forbes has been tweaking their lists to make a political statement, just waiting for someone to stumble across that data. In fact, such unbiased information from a non-political source soundly substantiates the information that we have derived from many other sources that might be considered political.
3) Since September 11, more people who can afford it, are leaving.
[Click here to read the rest of this article.]
" gooder understanding " ?
They can't carry out but so much "cash" at one time.
It's obvious that you have not been around many wealthy people or taken any economics courses (that you passed), or you would know just how stupid that statement is.
To begin with, really wealthy people seldom do anything with cash. Most have taken the advice of the financial advisors, who generally suggest that if you have a lot of money, at least half of it should be invested offshore. When the wealthy leave, there are many very easy ways that their remaining wealth can be transferred offshore. In fact, some of the methods available can even be a legal write-off on their last income tax filing. Creating offshore debt is one of the more common ways to move money. If an offshore entity owes you 100 million dollars before you leave, that entity still owes you 100 million dollars after you settle in Bermuda, Ireland, Belize or the Caymans. The note comes due after you have settled elsewhere. Voila! Limitation avoided.
To do it all legally requires a bit more work, but there are indeed, many legal ways to move large amounts of money between countries. Wealthy individuals and corporations do it every day. Of course, Congress is busy trying to create new laws to limit how it can be done. But, it is those laws that are responsible for the capital flight that we have seen so far.
You even find that when they leave, the wealthy leave nothing of value behind. You will discover that their house is owned by a foreign company that has it mortgaged to the hilt at some foreign bank. If you want to buy the house, you, not the billionaire, will be the person that is sending the money offshore to pay the foreign owners. Other properties, such as factories and office buildings, will be similarly encumbered. If the US government should suddenly refuse to enforce those foreign debts, our international credit rating would collapse and our markets would go in the toilet over night. Even the greedy, power-hungry people that we have in Congress are not so stupid as to risk that.
In fact, you can be sure that if a billionaire wanted to move 20 billion dollars or so offshore, he could probably do so within 9 to 12 months - LEGALLY. And once it's gone, it will be a long time before the US sees any of it again. In fact, since many products that were once produced and sold in the US will be produced offshore, it will mean that more and more money will be going offshore as Americans continue to buy those items. It isn't a pretty picture.
Goodnight, dear parsy; sweet drfeams. : - )
Interesting response, on this supposedly "conservative" forum... and not just from the resident Marxist, "parsifal". Class Warfare at it's finest.
If Demidog will supply the Bread, I bet we can get Nunya to scare up a Circus. And, as the loud-mouthed Christian in the group, I graciously volunteer to provide the Entertainment as soon as we can corral some suitable lions.
Hail Caesar!! We who are about to die, salute you....
Suitably distilled, that is.... beer is liquid bread, it's good for you...
I give it a 14.
Why did the Billionaire cross the Border?
Because the Taxes were too high.
If you slap Tariffs on top of Domestic Taxation, all it means is that after high taxes have destroyed your Domestic production base, the Tariffs mean that you can't import anything either.
In all of human history, there has never been a Nation which has Taxed its way to Prosperity.
The Zambonians will either keep the loot in Zambonia, thus lowering our money supply and increasing the value of the dollars that you and I have, or the Zambonians will send it back to the US where it will still fuel our economy.
ECON-101
If the billionaire creates jobs in another country, the people in that country won't be sending money back to the US. They will be sending product back to the US, which will be paid for in US dollars - dollars that will be sent offshore to pay those foreign producers for their work. The effect is a net out-flow of wealth. If you think that our trade deficit is bad today, just wait until there is no money to fund business expansions and retooling in the US. With a glut of dollars flowing offshore, the value of the dollar will take a nose-dive.
The only hope of preventing that is to keep the wealthy here. The people in Congress know that. That is why they are so busy passing laws trying to force the wealthy to stay or punish them for leaving. The problem is that in their lust for power, they have chosen to use a whip rather than a carrot and history has shown us repeatedly, that only reward, not force, can keep wealth from leaving any country.
(BTW, isn't Zambonia where they make the famous Zamboni Ice Rink Machine?)
As you suggest, the "Brain Drain" is a problem. But, since you only have to make about $120,000 per year to be in the top 5% of income earners and most PhD's (other than teachers) and other high level researchers and engineers make well into the 6 figure range, we are probably talking about many of the same people. Furthermore, since over 36% of our taxes are paid by the top earning 1%, if only that top 1% (roughly 1.2 million) should leave, it would mean that those who remain would face a greater than 55% tax increase, just to stay even.
At the current expatriation rate of about 100,000 per year, that could easily happen in 12 years. But, since the expatriation rate has been growing in recent years, the laws that are driving expatriation are getting more sinister and the media is beginning to take notice, the expatriation rate will probably continue to increase and the top 1% could easily be gone in as few as 5 years. Regardless of how fast it happens, as the people who pay the lion's share of the taxes leave, that enormous tax burden will fall upon the poor and middle class.
When taxes go up, productivity goes down, which results in lost jobs, which in turn, results in more people on welfare, which forces taxes even higher, which results in lower productivity, which results in lost jobs, ...
Of course, if you are a Marxist, you believe that all jobs emanate from government and that only those in government should be allowed to have lot's of money. In that case, you aren't alone. There are about 534 people in Congress who agree with you. But then, that's why things are going south so fast.
In fairness, we should adjust the "12 year" stats a little bit to reflect the fact that some new Domestic billionaires are still being created, but still --- My careful econometric analysis follows:
Earlier today on FR, I advised a Bush-Bot that I had little more desire for GOP "slow socialism" than I had a desire for DemonCrat "fast socialism".
But come to think of it, maybe I am a naive goon. Maybe the Kennedy/Bush "education" bill will finally hammer it through my thick skull that, much as I appreciate "rear-guard" conservative actions like those of the Republican Liberty Caucus... GOP "slow socialism" is -- when they are the Party in Power -- pretty darn fast.
What floors me here is the unbridled envy being displayed by so many towards those who have earned such fortunes. Just unbelievable........
Laugh it up.
Marx would be proud.
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