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What Do We Do if the Rich Start to Leave?

The commentary below is for the benefit of our readers from opinion makers and writers not associated with Euro Pacific. We do not guarantee the accuracy and completeness of third-party authored content. Opinions expressed are those of the writer, and may or may not reflect those held by Euro Pacific, or its CEO, Peter Schiff.
By: 
Bill Frezza
April 14, 2010

The numbers are small. A modern record, to be sure, and an embarrassment to some. But nothing to be alarmed about. Better to just curse their greed, slap an exit tax on their assets, and move on. There are plenty more where they came from.

But what if more of them start to leave?

500 American citizens and green card holders in the last quarter of 2009 said goodbye to America forever. Not many, but double the number of expatriations in all of 2008. Good riddance, other millionaires will take their place.

But what if more of them start to leave?

Businesses may have been shifting jobs out of the country for decades but their fat cat CEOs still live here, right? I don't believe many of them would give up US citizenship just because they refuse to pay their fair share. What are they going to do, learn Chinese?

But what if more of them start to leave?

1% of US income tax filers pay 40% of our nation's income taxes. It's only fair given how much money they make. So what if 40% of filers actually get handouts from the IRS? Didn't our President come out on the campaign trail and promise he was going to spread the wealth around? He won the election didn't he? Everybody knew what the deal was.

But what if more of them start to leave?

When the Bush tax cuts expire top marginal tax rates are going to shoot up. Add in city, state and local taxes the rich are going to have to fork over 50 cents of every last dollar earned. Inheritance taxes are scheduled to soar when death tax reform expires - all on money that was already taxed. An extra 3.8% Medicare tax got slapped on dividends and capital gains courtesy of healthcare reform. Blah, blah, let the rich squawk. We outnumber them and somebody has to pay the bills.

But what if more of them start to leave?

Congress is trying to triple the taxes hedge fund managers, private equity firms, and venture capitalists pay on their gains. Who cares, these tycoons don't have enough votes to stop it. Sure, the smart ones are setting up shop in Asia but they're never going to move there, right? The US will always be the best place in the world to start a business, won't it?

But what if more of them start to leave?

The IRS recently began strictly enforcing requirements that U.S. citizens with more than $10,000 in foreign accounts annually report all their assets to the government. Not just income, assets. Get caught failing to file and they can seize half your account balance. This data base should come in handy if rich defectors try to evade exit taxes. There's no right to privacy in the constitution, keeping an eye on these bastards will make them think twice.

But what if more of them start to leave?

Healthcare. Energy. Banking. Housing. Automobiles. Insurance. Pharmaceuticals. There is so much that needs to be regulated or nationalized if we hope to achieve equality. Why should we let a few exploiters make obscene profits selling essentials when so many are unemployed? We need jobs for the little man, not bonuses for the bosses.

But what if more of them start to leave?

How dare they leave after all we did for them! If expatriations keep growing Congress should triple the exit tax. In fact, why should we let deserters take any money with them at all? They should be thankful we let them out with the clothes on their backs. Didn't they enjoy the benefits of this great country while the getting was good?

But what if more of them start to leave?

Maybe we can't put up walls but there are ways to keep people from fleeing, lots of countries do it. We can lean on foreign governments to deny economic defectors citizenship. If anyone tries to sneak out the IRS can hold their children hostage. We have so many complicated laws and regulations, surely we can find some obscure rule that they broke, and if we can't we can pass more laws and make them retroactive. Even better, let's pass enough laws to make sure that no one is allowed to get rich in the first place! That'll solve the problem once and for all.

Bill Frezza is General Partner at Adams Capital Management, a venture capital firm specializing in early-stage applied technology investments with offices in Austin, Boston, Palo Alto, and Pittsburgh. Earlier in his career, Bill served as the Director of Marketing and Business Development for Ericsson's wireless data division, where he managed a skunk-works project with Mike Lazaridis of Research in Motion that launched the precursor of the BlackBerry. He earned his BSEE, BS Biology, and MSEE from MIT.

Article originally published on April 12, 2010 at RealClearMarkets. Bill Frezza and Adams Capital Management are not affiliated with Euro Pacific Capital, Inc. Euro Pacific Capital does not guarantee the accuracy and completeness of third-party authored content.