What if No One Pays Taxes?



Image from Drudge Report

 A recent headline on the Drudge Report tells the story from Bloomberg that the co-founder of Face Book renounced his US citizenship in September.  Wonder why?  It seems that he was a naturalized citizen who came to the US in 1992 and received citizenship in 1998.  So why go through the trouble?  Why study and earn citizenship, only to renounce it 14 years latter?  It's all about money.  Seems that Face Book is preparing an initial public offering of stock.  It is expected to value the company at $11.8 Billion, with his share just under $4 billion.  Taxes on this amount would make your head spin, so he decided to move to Singapore, ostensibly where the tax rate is lower.  Nice if you can get away with it.  Now he will have to pay some exit taxes, but that is an estimate, from the company of its worth when he renounced his citizenship.  Much lower, I would assume, than the market will value the company.

An earlier blog talked of unintended consequences.  This is one of them.  He is just one high profile person doing what 1780 people did last year, which is up 7 fold from the 235 in 2008.  The United States has been the bastion for intellectual property and finance for most of our lives.  Whether it is our banks, movies, software, or music, we are the most productive in the world.  Unlike manufacturing which is slowly moving away from us, intellectual property and finance has stayed here and thrived.  But for how much longer?  Now the intellectual property expert who helped found Face Book is leaving.  The other day I read a story of a Mainland China Bank buying controlling interest in a US Bank, for the first time.  Am I alone in thinking this cannot be good for our economy?  That once there are no large companies or wealthy individuals left, our economy will crash?

What if the economy crashes?  We argue now politically about expanding the safety net.  It is an argument about which part, not the argument of elimination.  For a politician to suggest Social Security needs to be remodeled is doomed at the polls.  One party even courts illegal immigrants to this country, promising health care and amnesty.  If the next big thing comes from one of these, they will not have to renounce citizenship at all, just move back.  So if we live through a crash, the safety net WILL break.  And, since the economy, in crash status, would have no jobs to offer, people will die.  There is nothing any president from any party can do about it.  The last momentous crash was in the 1929.  The politicians only fixed that through a World War where many people died.  Do we want to be the next Greece or Italy?  Just under 50% of Americans pay no taxes, but they can vote.  The candidate that offers them the most will win.  Sounds like raiding the treasury to stay in power to me.  How long before that price is too high?  Is it too late to fix it?  Is this why people are preparing for the worst?  An email from Sam's Club recently listed survival rations as one of their best sellers, do We the People perceive a crash?

We are the best country on Earth.  No other country is trying to clean up their environment like ours.  Our standard of living is the envy of most in the world, as is our freedom.  I contend that we will rise up to meet this challenge as a country, we will survive.  As we did in World War II, as we did in the Cold War, and as we did after 9/11, we will endure.  I'm just not sure of the cost.