What Does A Record Number Of Renunciations From the US Mean For You?

[Editor's Note: The following post is by TDV Editor-in-Chief, Jeff Berwick]

There is a brain drain taking place. And no, it’s not from Ethiopia, Malaysia, Jamaica, Mexico, South Africa or any of the usual suspects. It is a little known brain drain, but it is a very real one, and it is taking place from the former sole superpower of the world: the United States.

Renunciations from the US have reached a new record for 2013, breaking the previous record set in 2011.  People the world over are Going Galt.

Once this multi-year (or maybe multi-decade) process of increasing renunciations from the US is said-and-done, and the history books have been penned, it will unequivocally be understood as the nail-in-the-coffin for US society competitively on things like trade. 

Why exactly are people leaving the US en masse? We will get to that later, but first. What is a brain drain?

Brain drains terrify political leaders. Not only do able-bodied and productive people leave a certain society, but so too does their money.  This means, usually, no tax for the states. People usually leave a nation because of perceived injustices or economic strife. A certain nation just might not be that safe, economically-sound or people might sense a some sort of cataclysm with the current status-quo. 

The most well-known, modern brain drains have taken place from Europe and the Soviet bloc. The antisemitic feelings and laws in Europe throughout the 1930s and 1940s caused emigration of many scientists, most of whom went to the US or Soviet Union. Albert Einstein, for example, left Germany for the United States as part of the German brain drain preceeding World War II and the holocaust.

By 1922, the Soviet Union had restricted emigration of its citizens to other countries. Even to travel between cities you needed a passport-type document. As the Soviet Union expanded into the Soviet Bloc, the Berlin sector of the border represented a “loophole” through which East Bloc citizens could still emigrate. The 3.5 million East Germans, called Republikflüchtlinge, that had left by 1961 represented 20% of the entire East German population, paralyzing some sectors of the East German economy.

Those who left Germany and the Soviet Bloc tended to be young and well-educated. Doctors, scientists, professors. Oftentimes, also, those who spoke foreign languages. Today, we are seeing the same thing from the United States.

I’ve experienced this firsthand. For instance this weekend at the TDV Wealth Management Crisis Conference, where diverse, very smart and productive people gathered around and learned ways to get their assets and families out of the US. These were people with lots of talents, insights that would be of value to any community in which they lived. It is a shame when a government gets between these people and their homelands. It’s also a shame for their neighbors who have to toil in a society losing its best talent. 

SOMETHING TO WRITE HOME ABOUT

2013 marks a record year for renunciation of citizenship by US taxpayers, exceeding by two-thirds the previous high set in 2011. Since 2006, expatriations have increased tenfold from the US. 630 individuals renounced US citizenship or ended long-term US residency by turning in their green cards during the fourth-quarter.

The fourth-quarter figure increased the total number of expatriations for 2013 to 2,999. The previous record was 1,781 in 2011. That’s a staggering 221% increase!

WHY?

A surge in awareness of FATCA and the negative plight of the US economy has clearly led to the trend, and the government is clearly serious about overseas funds, preying upon billionaires who don’t know how to legally internationalize assets.

The US is one of few nations on planet which require its “citizens” and green-card holders to file tax returns, no matter where they live, even if they don’t owe taxes. (a fact which confuses many citizens abroad) Those US citizens who do expatriate can also be subject to an exit tax. That means, whereas the power to renounce citizenship is supposed to be voluntary, in the US have you pay a heavy fine in order just to do so. Why do you want to do so? Because no matter where you live the US will want to know what you’re making, and to tax you on anything over a certain threshold. (just under $100,000 for now)

Since 2009 the US has been trying to bring all expatriates under its tax regime. Just this week Internal Revenue Service Commissioner John Koskinen told a congressional committee that since 2009 over 43,000 US taxpayers have entered a special program for taxpayers with undeclared offshore accounts and paid more than $6 billion in back taxes, interest and penalties. But, of course, the IRS wants the several billion dollars it perceives it is still owed.

The Foreign Account Tax Compliance Act will continue to lead people to renounce their US citizenship or expatriate as US law becomes more draconian than most other nations on planets.

WHAT THIS MEANS FOR US CITIZENS

If you are still in the US, wondering why so many of your fellow Americans are leaving the homeland, you need to look no further than history to get a good idea.

For one, when people have left societies historically, it has been before a major cataclysm in how that society operates. Two obvious examples are the Soviet Union and Germany. Both spiraled into genocides of undesirable parts of its population. Both, also, were economically destroyed during the period.

We know that the US economy is not getting better, with mainstream press suggesting the Fed will go from taper to credit expansion soon, and we also know that high officials in the US government are not opposed to US concentration camps. (and I don’t mean on that stuff they have in Colorado and Washington)

The US is no different from the rest of the world, prone to coups, confiscations, genocide and so on. It’s got a massive bureaucracy, doesn’t it?  It is not insulated from the global economic crisis, also, which makes it even more prone to these outbreaks! In fact, it is ground zero for the banking crisis. As the global reserve currency, the US might seem more stable than much of the world, but once the crisis continues, and more people begin to look at the underlying factors of economic destablization, the US dollar will seem like an easy thing to blame. And that’s when the fireworks will start. (Hint: they’ll be in the USSA, so make sure you’ve already found any “loopholes” through that border fence)

TDV PASSPORTS

Are you currently looking to renounce your US citizenship?

Don’t move so fast. It is not as easy as one might think. That border fence wasn’t cheap! Instead, a long and arduous process, there is lots to consider when you decide it is time to leave your homeland for good.  Let TDV help you through the process. Where would you like to live? What sorts of conditions are your prefefence? How about the weather? Our friendly staff can answer all those questions, but if you’re not quite ready to pack-up-and-go, the TDV Newsletter will help get you there, with actionable advice from around the world, you’ll know how your world works, now.