Category: Taxation and Estate Planning

Starbucks billionaire advocates for higher tax rates and moves to Florida

by philg

Washington State moved to add to its portfolio of state income taxes yesterday by imposing a 9.9% tax on income over $1 million/year (“House passes millionaires tax 52-46 after day-long debate”). Also, yesterday, the Starbucks billionaire Howard Schultz announced his move to Miami:

In 2022, Washington State imposed a 9.9% tax on the only income that a guy like Schultz is likely to have (capital gains). They also have a 35% death tax (estate tax). Moving to Florida will save Schultz and his wife more than $1 billion because the Florida income and estate tax rates are 0%.

Schultz says that he yearns to pay higher taxes:

(Taxing “all capital gains as [ordinary] income” would be truly epic given that capital “gains” aren’t calculated with respect to inflation, i.e., a person who sells a property or stock at a loss in real dollars may still owe capital gains tax due to the rise in nominal dollars.)

Also from 2019:

“I myself should be paying higher taxes — and all wealthy Americans should have to pay their fair share. I think we can all agree on that,” Schultz said at the university.

Maybe this is the explanation for why Howard Schultz won’t be joining Donald Trump in Palm Beach. From 2020:

“In my view, our choice this November is not just for one candidate over another,” Schultz wrote in a letter to supporters. “We are choosing to vote for the future of our republic.” Schultz went on to say, “What is at risk is democracy itself: Checks and balances. Rigorous debate. A free press. An acceptance of facts, not ‘alternate facts.’ Belief in science. Trust in the rule of law. A strong judicial system. Unity in preserving all of our rights of life, liberty, and the pursuit of happiness.”

Taking aim at President Trump’s repeated attacks on voting by mail – which many Americans feel is a safer option due to health concerns over in-person voting at polling stations amid the coronavirus pandemic – Schultz stressed that it’s “essential that Americans turn out to vote, that every American is able to vote safely, whether by mail or in person, and that every vote is counted. It would be a grave miscalculation to think this election is secured for a Biden victory.”

He believes in Science, but voluntarily moves to a state that rejects Science and a city that rejected masks in favor of partying on?

Speaking of Science, what has the proud owner of a condo in a beachfront Four Seasons building (i.e., sea-level coastal exposure to Climate Change-caused hurricanes) said about Climate Change? In 2019, he said that he was “gravely concerned about our planet, climate change and things that we have to do” (though he wasn’t on board with Full AOC)

What does ChatGPT have to say about a guy who is moving within an easy drive of Alligator Alcatraz?

Schultz has also backed a legalization/citizenship approach on immigration. In his 2019 Purdue speech, summarized by GeekWire and OnTheIssues, he called for “common-sense immigration reform,” including “a path to citizenship for Dreamers” and broader legalization measures. Florida’s recent immigration policy has moved in the opposite direction: SB 1718 bars local funding for IDs for people without proof of lawful presence, invalidates certain out-of-state licenses issued to unauthorized immigrants, requires some hospitals to collect immigration-status information, and strengthens penalties tied to employing unauthorized workers.

What about the move to a state with the 14th Amendment’s Equal Protection guarantee is taken seriously?

Schultz’s race- and DEI-oriented corporate activism is also hard to square with current Florida policy. His “Race Together” initiative and his broader view that companies should engage on racial issues fit poorly with Florida’s anti-DEI direction. Florida’s Board of Governors regulation now bars state universities from spending state or federal funds to “promote, support, or maintain” programs that advocate DEI or engage in “political or social activism,” and the regulation defines DEI in part by reference to classifications based on race, gender identity, and sexual orientation. Florida law also restricts certain race- and sex-related instruction in education settings

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Perfect photo for Bernie Sanders and Ro Khanna’s “tax the rich” effort

by philg

The perfect photo for stoking envy among the peasants:

(It’s an Aston Martin V12 Vantage (10 mpg?) in front of a Pilatus PC-24 (not as spacious as a typical billionaire’s Gulfstream, but useful for getting into smaller airports) in front of an FBO called “Million Air”. Austin, Texas.)

Separately, it would be a lot simpler to tax billionaires if the federal government eliminated or capped charitable deductions and imposed a foreign remittance tax on nonprofit orgs. Currently Bill Gates’s and Warren Buffett’s fortunes, for example, can be entirely sheltered from income tax via the money going into the Gates Foundation. Then the Gates Foundation can export the money away from the U.S. economy for $20 (wire transfer fee) by sending it all to Africa. With a cap on charitable deductions, Bill Gates and his subordinate-turned-wife-turned-plaintiff would have had to pay 20 percent federal capital gains tax plus 3.8 percent Obamacare tax. Let’s assume an additional 25 percent tax on sending money to Africa. and the U.S. Treasury could have become fat and happy as a result of Bill Gates’s success with Microsoft. Billionaires, despite trying, haven’t figured out how become immortal. Thus, they’d all pay 40 percent at death via estate tax on any money that wasn’t given to a nonprofit. Eliminating charitable deductions or capping the deductibility at $1 million per lifetime could be called the Elvis Presley Spirit of Charity Act of 2026. That’s because Elvis didn’t write off his charitable contributions, saying “that would take away from the spirit of the gift.” The Bernie and Khanna “steal 5 percent every year” plan seems doomed to fail because if you accept their reasoning (billionaires are too rich and didn’t truly earn their wealth) then the rate should be much higher than 5 percent. By contrast, there is no obvious reason for unlimited charitable deductions, especially given how lavishly nonprofit orgs spend.

What does Million Air look like inside, you might ask?

(It would look better if a slob hadn’t left his jacket on the chair at right…. said slob being yours truly (it was down near freezing in the morning).)

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Immigration kills pride in paying income tax?

by philg

It’s National Immigrants Day, perhaps known to Native Americans as “National Steal All the Land Day”.

Before the personal income tax Americans enjoyed a feeling of pride in their private charitable and community efforts. When a natural disaster occurred (see Climate Change Reading List: Johnstown Flood for an 1889 example) people knew that there was no FEMA and therefore they voluntarily contributed money, materials, and time to relief efforts and felt pride in helping their fellow Americans. One of Aristotle’s criticisms of Plato’s “eliminate private property” proposal was that humans enjoy feeling generous and if you don’t have the option of voluntarily donating property then you are denied an opportunity to feel good.

In the 20th century we switched to a system of forced extraction for good works, especially during the Lyndon Johnson administration when Medicaid, food stamps, and other cradle-to-grave welfare programs were introduced. To the extent that these welfare programs were being spent on people for whom a taxpayer had some fellow feeling it might have been possible to feel pride in paying tax. Irving Berlin was famous for enjoying his role in contributing to American society via paying tax and the Treasury Department promoted a song that he wrote on the subject:

Some of the lyrics that today’s pro-Hamas Americans might not appreciate…

You see those bombers in the sky,

Rockefeller helped to build them,

So did I.

A thousand planes to bomb Berlin.

They’ll all be paid for, and I chipped in,

That cert’nly makes me feel okay.

Ten thousand more, and that ain’t hay!

I wonder if open borders has finished the process of killing any joy a typical American might feel in sending his/her/zir/their money to the IRS. Almost all of us agree that it is worth paying taxes to finance infrastructure construction, e.g., gasoline tax to build and maintain the Interstates. Some of us agree that it is worth keeping an American underclass on welfare for four generations or more. Very few of us, however, seem to be excited about providing migrants with taxpayer-funded housing, food, health care, etc. Some Americans would rather help the world’s unfortunate in situ at a vastly lower per-person cost (if we spend $1 trillion/year on welfare for immigrants and their descendants, for example, that’s $1 trillion that we can’t spend on relatively low-cost-per-person programs that would save vastly more lives if spent on poor people in poor countries). Some Americans are haters and don’t want to help foreigners other than via voluntary trade.

Lack of pride in paying taxes seems to be a factor in state-to-state moves. Quite a few of our neighbors say that they moved from California or the Northeast because they didn’t agree with what their state and local governments were spending money on, e.g., race discrimination (“DEI”), gender-affirming surgeries for teenagers, a fully funded work-free lifestyle for migrants, etc. Without taking the dramatic step of renouncing U.S. citizenship, though, and paying the associated exit tax, none of us can escape paying federal income tax (exception: moving to Puerto Rico). Therefore, the shift in government spending in favor of migrants wouldn’t motivate Americans to move but it could result in less life satisfaction.

Speaking for myself, the taxes that I most enjoy paying are the following:

  • property tax, despite the epic quantity, because Palm Beach County and Jupiter do great jobs with the schools, the roads, public safety, etc.
  • aviation fuel tax because I love airports and air traffic control
  • gasoline tax because I value being able to get from Point A to Point B on smooth roads without traffic jams (Florida accomplishes the smoothness, but nearly every part of the U.S. seems to be plagued with traffic jams)

I’m sure that there are some progressives in Maskachusetts who actually do love paying state and federal tax that funds a work-free lifestyle for migrants, but my suspicion is that overall our decision to open U.S. borders in 1965 was one that has made us significantly less happy with the 30-50% of our working lives that we spend working for the government’s benefit. Running an asylum-based immigration system has perhaps made the situation worse because tens of millions of the migrants currently resident in the U.S. never expressed any affinity for the U.S. or American culture. They just said that they were afraid of being killed or attacked in their home countries.

Related:

  • “The downside of diversity” (New York Times, 2007): “the greater the diversity in a community, the fewer people vote and the less they volunteer, the less they give to charity and work on community projects. In the most diverse communities, neighbors trust one another about half as much as they do in the most homogenous settings. The [Harvard] study, the largest ever on civic engagement in America, found that virtually all measures of civic health are lower in more diverse settings.”

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Inheriting money from the UK branch of the Greenspun family

by philg

Happy National Estate Planning Awareness Week to those who celebrate. Remember that the first advice from any attorney to a client in Massachusetts or New York is “move out of Massachusetts [or New York] to a state that doesn’t have an estate tax”. Here’s a map from the Tax Foundation (people with money should move from the colored-in states to the grayed-out states, especially to those grayed-out states that also have no income tax, e.g., New Hampshire, Florida, Tennessee, Texas, etc.):

This post is about Mr. Evans Greenspun, a relative who lived in the United Kingdom and who was unable to spell “Evan” correctly. Evans left $200 million in a Cayman Islands bank but neglected to write a will. Here’s a hardcopy letter from attorney Elliot Barnes that I received this summer about my petroleum chemical engineer relative:

I expect to receive my 50 percent share of the funds imminently and will be following divorce plaintiff MacKenzie Scott Bezos’s example by donating much of it to Zohran Mamdani’s election campaign.

Separately, I’m wondering how the above scam can be profitable given that it required putting a stamp on an envelope (sadly I didn’t save the envelope so I can’t remember if it was actually mailed from the UK). “Attorney” isn’t a title that lawyers in the UK use, is it? “Solicitor”, perhaps, would be more credible? The letterhead street address in London doesn’t match precisely in Google Maps. A first name of “Evans” is likely to raise suspicion; wouldn’t an LLM have suggested changing it to “Evan”?

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WSJ: Open borders make the U.S. rich and also Social Security is going broke faster than expected

by philg

Happy Independence Day for those who celebrate our traitorous rebellion against legitimate British rule and a total tax burden of 2 percent of income, not a penny of which the British ever spent outside of North America (the Brits spent a huge amount of treasure defending the white immigrants from Native Americans who objected to being replaced via white immigration).

Since a country is defined primarily by its people, let’s take a look at two perspectives on low-skill immigration today. Both perspectives are from the same newspaper, one from when Joe Biden was still running for reelection on the basis of what the media reported to be his perfectly sharp mind. The second is a recent piece, published during the Trump Dictatorship v2.0.

June 2024, Wall Street Journal:

Immigration Is Behind the Strong U.S. Economy

The U.S. population is aging, and millions of baby boomers retire each year. We can expect that absent immigration, we would have a decreasing working-age population and shrinking employment for decades to come—especially considering the low fertility rate. … immigrants help the economy in a few other ways. First, immigrants are more likely to be of working age than their U.S.-born counterparts, so they can help support American retirees through their labor and taxes. Second, immigrants bring innovation that helps the economy grow.

June 2025, Wall Street Journal:

Social Security’s Potential Insolvency Date Moves Up One Year

With an aging U.S. population and a smaller share of American workers who pay into it, Social Security could become unable to pay full retirement and disability benefits in 2034, one year earlier than reported last year, the program’s trustees said Wednesday. … The report also said that Medicare’s hospital-insurance trust fund would be able to pay 100% of benefits until 2033, three years earlier than projected in last year’s report. At that stage, the fund’s reserves would be depleted and the income going into the program would be able to pay 89% of total scheduled benefits.

We had four years of open borders under the Biden/Harris/WhoeverWasActuallyInCharge administration and at least 10 million migrants who enriched us economically as well as culturally. We had SARS-CoV-2, a virus that killed nearly 1 million over-65 Americans who were, according to #Science, otherwise in perfect health and would have been collecting Social Security and Medicare for 10 additional years. Despite these massive tailwinds, Social Security and Medicare are running out of money faster than expected?

I wonder if this changes the calculation of the optimum time to begin drawing on Social Security. Traditionally, healthy people are told to wait until age 70, three years beyond Full Retirement Age (67 for those born in 1960 or later), in order to maximize the payout. But if benefits are likely to be cut in 2034, it might be smarter for a 67-year-old in 2025 to begin taking Social Security right now.

See also “Immigration does not solve population decline” (Aporia):

The thing is: immigrants age too. This means that while immigration can definitely reverse population decline, it can’t do much for population aging. Assuming immigrant age-structure and fertility remain constant, the difference in the working-age share of the population in 2060 between zero net migration and 2019 levels of migration in the United States is… 2% (57% vs 59%).

The good news for those who believe that working age migrants will solve all of our fiscal problems: “Kilmar Abrego Garcia brought back to US, appears in court on charges of smuggling migrants” (ABC). Also “Ohio man hid horrific role in 1994 Rwanda genocide to enter US, arrested after years on the run: DOJ” (New York Post). Imagine the taxes that Vincent Nzigiyimfura, admitted to the U.S. at age 49 and currently aged 65, will be paying after he serves the 30 years in prison that our wise government overlords are currently attempt to impose on him.

Loosely related, residents of Westfield, Maskachusetts who appear to have a personal stake in Social Security benefit levels hold a whites-only “No Kings” protest:

Also, it is never appropriate to conduct a fiscal analysis when considering immigration. If you’re not a hater you have to support open borders. Sticker on a mailbox outside a coffee shop in Boise, Idaho, yesterday:

Love has no borders.

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Florida aircraft sales tax avoidance talk at Sun ‘n Fun

by philg

Happy Tax Day for those who celebrate (i.e., Americans who aren’t smart enough to have joined Mitt Romney’s Club 47).

David Brennan and Jackie Mustian, attorneys at Moffa, Sutton, & Donnini, gave a talk at Sun ‘n Fun about how people avoid owing a 6 percent sales tax when buying an aircraft that will ultimately be based in Florida. (Imagine the potential liability for an elite buying a $100 million Gulfstream!)

First, it seems unlikely that Florida is getting any real benefit from imposing this tax. The true beneficiaries are attorneys and accountants who set up schemes to avoid it. Perhaps because of that, there is no urgency among legislators to eliminate the tax, as Maskachusetts did back in 2001. Under the assumption that the tax, and the army of professionals whose job it is to avoid it, are with us forever, here’s what we learned…

A nonresident who owns a new-to-him/her/zir/them aircraft has to be careful about visiting Florida for reasons other than maintenance or flight training. If the aircraft is here for 21 days within the first six months of ownership, Florida sales tax is owed. A flight that lands at 11:55 pm and departs 10 minutes later at 12:05 am is considered to have spent two days in Florida out of the allowable 20.

A Florida resident cannot take advantage of the above exemption. If the Florida resident is the sole owner of a Maskachusetts, Delaware, or Montana LLC that owns the aircraft, the 20-day exemption might apply, but an auditor might also try to look through the LLC shell to the real owner. The Floridian ideally would keep the aircraft out of state entirely for six months and also not display an obvious intent to bring it into the state on Day 183 (maybe the Floridian is a super douche and also is looking at buying a house in Nantucket and has written to the airport there about getting on the hangar waitlist).

Where the tax advisors seem to make money is in setting up an LLC that is in the business of owning an aircraft and reselling it or its use to others. Prior to the aircraft purchase, the LLC is registered with the State of Florida to collect sales and use tax. The “real owner” then dry leases time with the aircraft from the LLC and the LLC collects and remits sales tax on the dry lease payments, e.g., $75/hour, but only for those hours flown within the State of Florida. In the speakers’ opinion, the State of Florida doesn’t have a legal basis for challenging the reasonableness of the lease rate. The state is entitled to collect tax only on the money that is actually changing hands. That said, a $10/hour dry lease rate for a $1 million aircraft could seem ridiculous. (Other states where this kind of scheme is employed have some rules about the minimum cost for the dry lease based on prevailing interest rates.)

It’s too bad that DeSantis and the Legislature haven’t cleaned this up. In my opinion, the efficient way to tax aviation is a fuel tax and if the state wants more money from aircraft owners it should simply raise the existing aviation fuel tax (FL 206.9825):

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What happens with federal tax policy?

by philg

Now that folks have had a chance to digest the Election Nakba… what are you all forecasting for tax policy? This is one of the few areas of federal policy where we could productively change our behavior given a change in the policy.

My guess is that the Trump Big Bang tax law that went into effect 2018 gets extended, more or less unchanged, thus revoking the expiration dates of 2025 and 2028 for various individual and business tax provisions. My basis for this prediction is that Congress hates cutting spending, but enjoys cutting taxes. That’s how we get the deficit spending that started in earnest when Congress refused to implement Ronald Reagan’s proposed spending cuts, but did oblige him on the tax rates that he suggested.

My first prediction for a change is that the limit on state/local (SALT) tax deductibility will be raised or eliminated in order to get some cooperation from the Party of the Economic Elite (i.e., the Democrats). My second prediction is that there will be some sort of enhancement of the current system for extracting money from the childless (the “drones”) and giving the cash to those with children, e.g., via tax deductions or tax credits or “refundable tax credits” for those who don’t bother to work and instead enjoy playing Xbox with their children for all after-school hours. There is nothing that American politicians love more than making the childless work another few hours every week so that parents can enjoy time with their kids.

What would I do about taxation if I could be dictator for a day?

  • no change to current tax rates (I assume these are already the revenue-maximizing rates and the federal government needs at least $36 trillion just to pay back debt)
  • no change to the mechanisms that Donald Trump put in place to keep multi-national companies from parking all of their profits offshore
  • the IRS prepares a draft tax return for every American income taxpayer (i.e., about half of us) with all of the information that it has received and enables us to edit it
  • eliminate the estate tax, which generates a huge amount of unproductive legal and accounting activity and hardly any revenue (about $20 billion/year against a federal budget of $7 trillion)
  • eliminate the Generation-Skipping Transfer Tax, which is a complicated add-on to the estate tax
  • eliminate the step-up in basis that assets get upon an owner’s death (so capital gains liability would increase on inherited assets once they’re sold)
  • index capital gains taxation to inflation so that fictitious (inflation-driven) “gains” aren’t taxed (see Uncle Joe’s capital gains tax (what could have been, unburdened by what was) for an example of what would happen to a long-term investor in GE stock who actually lost money in real dollars and then loses more to a tax on inflation)
  • eliminate charitable donation deductions (this prevents multi-billionaires from escaping taxation by giving money to the foundations that their kids control, etc.; Warren Buffett has already announced that the U.S. Treasury will get bupkis after he croaks because 99.5% of his money will go “to a charitable trust overseen by his daughter and two sons when he dies.” (USA Today))

Despite the elimination of the estate tax, note that the above changes would result in a huge increase in revenue from dead people and their heirs. Right now someone can inherit a $20 million house from two parents, completely tax free (estate tax exemption for a married couple is about $28 million), and the basis is $20 million, not the $1 million price that they paid in nominal dollars way back when or the $3 million price that is the $1 million adjusted for inflation. Thus, the heir could sell the $20 million house and pay no tax at all because the basis was stepped up to $20 million. If the above changes were implemented, an immediate sale of the inherited house would subject the heir to capital gains and Obamacare tax on a $17 million inflation-adjusted gain or 0.238 * $17e6 = $4 million. Same deal with a $2 million house (i.e., a Biden starter home!), but it would be perhaps $400,000 in revenue for the Federales rather than the current $0. (States that impose a capital gains tax (i.e., not Florida!) could be similarly fattened by these changes.)

Since my ideas are never popular with anyone else, I guess we can say for certain that none of the above changes will ever happen!

Readers: What do you think will happen?

Background…

and what if Congress can’t agree on any bill?

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Will Kamala Harris and fellow Democrats have to make Puerto Rico a state before implementing their new taxes?

by philg

Kamala Harris has big dreams for what rich people can do for the U.S. Treasury via new taxes and higher tax rates (see The Harris unrealized capital gains tax and Bidenflation and Unrealized capital gains are already taxed by the federal government… for example).

The typical American of means, however, can already escape federal taxation by moving to Puerto Rico. “How Puerto Rico Became the Newest Tax Haven for the Super Rich” (GQ):

In 2012, Puerto Rico had passed two laws intended to make the island a “global investment destination.” Act 20 allows corporations that export services from the island to pay only 4 percent tax. Act 22 goes much further: It makes Puerto Rico the only place on U.S. soil where personal income from capital gains, interest, and dividends are untaxed.

The last big tweak to U.S. taxation was in 2018. Plainly, the rates were low enough that most rich Americans refrained from making the move to the Ritz-Carlton Dorado. But what if Kamala Harris and fellow Democrats are able to deliver on their promise to soak the rich? Wouldn’t there be a lot more rich people who would make the move for 183 days per year in order to avoid losing a big percentage of their wealth? If so, the only way to stop the erosion of expected tax base would be to eliminate Puerto Rico’s ability to offer Act 22 treatment and the only way that I know to strip Puerto Rico of its tax sovereignty is to make Puerto Rico a state.

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The Harris unrealized capital gains tax and Bidenflation

by philg

The Democrats’ latest tax schemes, recently highlighted by Kamala Harris, include collecting tax on unrealized capital gains. To me, one of the strangest things about the US tax system is that losses are taxed as capital gains so long as there is even the slightest amount of inflation. For example, if you bought a stock in January 2021 for $100 and sold it today for $110 more you’d have about $10 in today’s dollars terms under official CPI and closer to $80 if adjusted for house purchasing power (Zillow). Despite the loss on what turned out to be an unsuccessful investment, you’d owe federal and, perhaps, state tax on the sale. The current not-adjusted-for-inflation capital gains tax regime is, thus, rather cruel when combined with Bidenflation but at least you can choose when to pay the tax on your fictitious profit/real loss.

Related:

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Unrealized capital gains are already taxed by the federal government…

by philg

… for those who renounce U.S. citizenship.

There has been a bit of an uproar regarding the Democrats’ plan to tax unrealized capital gains and Republicans are complaining that it is an unprecedented new area for the federal government. But this isn’t a new area, at least when it comes to Americans who decide that they’re never going to pay U.S. taxes again. The IRS web page regarding the expatriation tax:

IRC 877A imposes a mark-to-market regime, which generally means that all property of a covered expatriate is deemed sold for its fair market value on the day before the expatriation date. Any gain arising from the deemed sale is taken into account for the tax year of the deemed sale notwithstanding any other provisions of the Code. Any loss from the deemed sale is taken into account for the tax year of the deemed sale to the extent otherwise provided in the Code, except that the wash sale rules of IRC 1091 do not apply.

And a detail page:

Section 877A(a) generally imposes a mark-to-market regime on expatriates who are covered by section 877A, providing that all property of a covered expatriate is treated as sold on the day before the expatriation date for its fair market value.

For purposes of the mark-to-market regime, the covered expatriate is deemed to have sold any interest in property that he or she is considered to own under the rules of this paragraph other than property described in section 877A(c). For purposes of computing the tax liability under the mark-to-market regime, a covered expatriate is considered to own any interest in property that would be taxable as part of his or her gross estate for Federal estate tax purposes under Chapter 11 of Subtitle B of the Code as if he or she had died on the day before the expatriation date as a citizen or resident of the United States.

In computing the tax liability under the mark-to-market regime, a covered expatriate must use the fair market value of each interest in property as of the day before the expatriation date in accordance with the valuation principles applicable for purposes of the Federal estate tax, except as otherwise provided in this paragraph.

How often does this happen? “IRS steps up enforcement of the individual expatriation tax” (KPMG partner; June 2024):

The number of individuals who renounce their U.S. citizenship or terminate their green card status has increased significantly since the enactment of the current expatriation tax regime in 2008. Lists of these individuals published quarterly by the IRS in the Federal Register show that the number of individuals expatriating has increased from 312 in 2008 to 3,260 in 2023, with a peak of 6,705 in 2020.

My big question is how President Kamala Harris will collect long-term money from the targets of her extended (not exactly new, as noted above) unrealized capital gains tax. A person targeted by the tax has two choices:

  1. pay President Harris for unrealized capital gains in 2026 (let’s assume it takes a while for this to be implemented), 2027, 2028, and every subsequent year until death
  2. pay President Harris for unrealized capital gains at long-term rates in 2025 and then never pay income taxes to President Harris, the U.S. government, or any other government again (expatriation)

Why wouldn’t a rational target of the new tax choose Option 2? He/she/ze/they renounces U.S. citizenship, moves his/her/zir/their assets into an offshore Dutch trust (as U2 did) and moves to any country that doesn’t dig into offshore assets/income for computing income tax. Or establish a residence in Italy and pay a flat tax rate of €200,000 a year (recently bumped up from the €100,000/year rate established in 2017, which means it has kept roughly even after adjusting for inflation in the costs of things that rich people buy, but the bump doesn’t affect people who signed up for this prior to August 2024). Or simply move to a country that doesn’t impose any income tax (KMPG on relocation to Monaco). If the expat is nostalgic, he/she/ze/they can return to the US for 30-60 days per year, depending on the employment situation, without becoming subject to U.S. taxation.

There is a lot to like about living in the U.S. (especially here in Florida!), but is it worth paying 100X as much in taxes compared to living in some other part of the world? If there are friends you want to see buy them a first class ticket to Heathrow and push your way through the pro-Hamas rallies to a night of theater. Or, if you’re truly one of those who has taken more than he/she/ze/they needs, send the Gulfstream or Airbus Corporate Jet to pick up the friends.

Here’s a place in northern Italy that costs less than a tract house in Palm Beach County ($2.7 million for a modern house on 22 acres):

If you don’t mind a little maintenance, a castle in Sicily on 7 acres:

Given the tax savings, maybe there isn’t any need for maintenance. Just buy a new house every few years with a fraction of what would have been paid in unrealized capital gains tax and give the old house to a charity.

Separately, why didn’t the Democrats impose their new tax regime during the first two years of the Biden-Harris administration when they had control of both houses of Congress and the White House? How can Kamala Harris simultaneously say that she agrees with everything that Joe Biden did (or read from a teleprompter) and also that she will do completely different stuff starting January 2025?

Related:

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