A lot of people probably can't understand why someone would voluntarily give up American citizenship -- but if someone wanted to do that, they'd now incur financial penalties for it.
Congress just passed a new law that will stop your capital -- or at least a good portion of it -- at the border, should you decide not to be a U.S. citizen anymore. Is it, perhaps, in preparation for the possibility that Americans might rebel at the debt and taxes incurred by their government by leaving for lower-tax locales?
You probably didn't notice this little provision inserted into the Heroes Act of 2008, passed by Congress on June 17. The headlines in the press release about the law were about the increased benefits for veterans and families of deceased military.
But Richard Kohan of Price WaterhouseCoopers drew my attention to one section of the act, which states that anyone voluntarily giving up his or her citizenship will be taxed on
of his assets as if he or she had sold them -- paying capital gains on assets that have increased in value, even though they have not been sold.
That's right. While everyone in the media is focused on keeping aliens
of America, Congress has voted to lock its citizens - or at least a good portion of their assets --
America! Maybe they're thinking that patriotism won't be enough to keep the smart money from recognizing the coming increases in the tax burden.
Patriotism and Debt
We expect our elected leaders to be patriotic, to wear flap pins on their lapels? But how patriotic is it for our elected officials of both parties to drag our country into debt?
This year the Federal budget deficit will be a record $400 billion. That astonishing number will be added to our existing $9 trillion national debt. It's money that our government spends in excess of what it collects in taxes.
For an instant update on our National Debt go to the moving numbers at
-- a nonpartisan watchdog group on the national debt.
Government officials say they're shocked at the record number of American consumers who are filing for bankruptcy. Yet those same politicians are spending America into an effective bankruptcy -- building a burden of current debt and promises of future debt that can never be repaid. Now, how patriotic is that?
Patriotism and Taxes
Do you consider it your patriotic duty to pay your taxes? Do you feel unpatriotic because you spend some time trying to figure out how to reduce your tax burden, by maximizing deductions whenever possible?
If that's not unpatriotic for
, is it unpatriotic for wealthy people, or corporations, to try to reduce
tax burden? Where do you draw the line? Perhaps it's most unpatriotic for our elected officials to construct a tax system that doles out benefits to special interest groups, pitting one group of Americans against another.
What's really unpatriotic, in my opinion, is trying to divide Americans through the politics of envy. Our country has moved forward because of our optimism and our belief that any American can build a better financial future. It has been our nature to honor those who have been successful, and seek to emulate them, not to destroy them because they have more assets or income.
Of course, that presupposes that the successful people accept their patriotic responsibility to give back to the society that made their success possible. And the facts show that Americans are the most charitable and generous people on the planet.
Think of Warren Buffett and Bill Gates, literally giving away their fortunes to help humanity. Or think of the people who filled sandbags along the Mississippi this month to save the homes of strangers.
When a government encourages the best in its citizens, by its policies and its example, patriotic citizens rise to the occasion. And when a government burdens its citizens, it inspires dissent and departures.
The Beatles famously left Britain, and Bjorn Borg left Sweden, when their governments raised taxes to such high levels that even these national icons departed. Are American lawmakers preparing for that kind of scenario with this new law?
Now in America, you can love it, or leave it -- but you can't take it all with you. And that's the Savage Truth!
Terry Savage is an expert on personal finance and also appears as a commentator on national television on issues related to investing and the financial markets. Savage's personal finance column in the Chicago Sun-Times is nationally syndicated. She was the first woman trader on the Chicago Board Options Exchange and is a registered investment adviser for stocks and futures. Savage currently serves as a director of the Chicago Mercantile Exchange Corp.