Yesterday Maryland passed an income tax increase on resident individuals making over $100,000 and couples making over $150,000. This is either a brazen attack on the middle class, a stark redefinition of what counts as rich, or both, depending on who you ask. I believe it’s both.
It’s shameful, but also a bit humorous: a few years ago this same Maryland passed a tax hike on its 3,000 millionaires. Instead of bringing in more revenue, revenue actually declined because one year after the tax went into effect there were only 2,000 millionaires left to pay the tax. If at first ye don’t succeed at eating the rich, lower the definition of “rich.”
Did these millionaires all magically disappear? Of course not—they moved. And with many states to choose from that don’t tax income at all—including places as diverse as Florida, Texas and (ahem) Wyoming—it’s the smart move. Although the rich can “afford” to pay more taxes because they make more money (a fine moral justification, to be sure), with their disposable income the rich pay the same amount to buy stuff as everyone else. An extra 1% tax on $1,000,000 of income is $10,000, and even a rich person with rich tastes can take a luxury trip to New Zealand (or just about anywhere) with that kind of money. When faced with the decision to live in Maryland and pay more or elsewhere and pay less, it’s a wonder 2,000 millionaires stayed in Maryland. How many will leave this time?
Tax policy and fiscal policy as a whole are things that make federalism great: if you don’t like your state’s governance on these or any number of other issues, move to one of the other 49. Alas, since the 16th Amendment gives the federal Congress the power to tax income, which is currently at a whopping 35% for yearly income over $388,350 (and 25% for the $35K to $85K most Americans earn), their reach extends to all 50 states. This can only be changed by serious governmental overhaul or… leaving the country.
What a crazy idea! Quasi-libertarians like me who can’t shake the coolness of certain national monuments and local projects like greenways also have distaste for the idea of renouncing citizenship. This is America, darnit. But that’s changed: there are now many other countries worth living in, some of them offering the same rights, protections and opportunities of the U.S. without such hefty costs to the most prosperous. Other countries offer more protections for the rich at still less cost; un-American, sure, but true.
It shouldn’t be a surprise then that more Americans are choosing not to be Americans. But unlike Maryland, which can’t reach too far beyond its borders, some United States Senators are a bit miffed and want to penalize former citizens. Today Sens. Chuck Schumer and Bob Casey unveil the “Ex-PATRIOT” (how clever) Act, imposing taxes on expatriates and a 30% tax on capital gains of anyone who renounces U.S. citizenship. This proposal comes in reaction to 1,700 renunciations last year. The most scandalous example: Facebook will soon go public, and one of its founders Eduardo Saverin recently renounced his U.S. citizenship. This will save him millions in federal taxes.
I am unfamiliar with tax law and the international law that will allow the feds to get away with this if the Ex-PATRIOT (seriously, enough with the acronyms Dear Leaders), but I rest assured that for the mega-rich like Saverin it will be a gigantic savings to refuse to pay the taxes and instead spend a-lot-but-still-a-lot-less retaining the best tax attorneys to fight back.
But for the rest of “the rich,” who may soon be redefined federally to match Maryland (read: anyone not on the dole?), the law could serve quite effectively to prevent renouncing citizenship.
The communists used concrete and border guards to keep people from leaving. Schumer and Casey would use the Tax Code, leaving America looking pretty and free, but ultimately one giant Hotel California:
You can check out anytime you’d like /
but you can never leave.