- The wealthiest top 1% have influenced the tax system so that their investment income is barely touched, especially when there are loopholes and shelters they can use. They and their wealth can stay in the US.
- The bottom 60% depend partly or wholly on what they receive in benefits from the system. They have to stay in the US.
- This puts the burden on the middle-to-upper income-earners. But if the burden gets too heavy, the top half of those earners may choose to flee the country. If so, the system breaks down.
US citizens have to pay US tax on their earnings anywhere in the world, but if they renounce citzizenship and have over $2 million in net assets (including income-producing assets such as pensions), there is still a one-off ransom tax to pay before they leave.
If they have less than $2 million, they may not have enough to live the idler's dream abroad.
The result is that fewer than 750 Americans chose the escape route in the last year.
But Smith's article is very useful for seeing how the parts of the machine work, and why it resists reconstruction.
It's similar to the scare tactic used when they were trying to pass a health care bill. The 'word' was that loads of doctors would retire, and not be replaced, because they couldn't make enough money. Never mind that the median income for a doctor is around $300,000 after expenses.
ReplyDeleteThe fear may be overstated.
ReplyDeleteIt wasn't the way they fled Britain some decades ago.