Saturday, May 12, 2012

If not Elected, will Romney Renounce his Citizenship to Avoid Taxes?

According to IRS data, almost $1 trillion a year in adjusted gross income is NOT taxed for Social Security or Medicare, because the top one-percent's "investment income" isn't taxed for FICA. And half of that "investment" income is only taxed at 15% for "capital gains", not at the higher marginal rate of 35% (and that doesn't include the billions that is lost every year due to tax evasion).

Medicare and Social Security taxes (FICA) are paid on "ordinary payroll wages" at 6.20% for Social Security (capped at $110,000) and 1.45% on all wages or salaries for Medicare. Most of us pay these taxes on 100% percent of our regular hourly wages or salaries -- but most of the highest income earners are exempt from these taxes altogether because of a tax loophole they've enjoyed since 1965, including the $110,000 cap on Social Security.

They've also enjoyed the preferential treatment of capital gains taxes for 91 years, since 1921.

But with ObamaCare®, this "investment" income may be subjected to Medicare taxes starting January 1, 2013 if the law isn't struck down my the Supreme Court. And that's another reason why the GOP and the top 1% is so opposed to universal healthcare...and because they don't need it for themselves (it has nothing to do with "trampling on the Constitution").

But even with the present historically low tax rates (and the gobs of loopholes they have in the U.S. Tax Code), will the wealthy still continue to renounce their U.S. citizenships to avoid paying Medicare taxes? Would Mitt Romney eventually renounce his U.S. citizenship if he loses the presidential election, and Obama raises his taxes when he passes the Buffett Rule?

One answer is: YES!

The Facebook co-founder has already renounced his U.S. citizenship before selling his stock to dodge a fortune in taxes on income he was allowed to accumulate in the U.S. -- now he's jumping the ship like a drowning rat.

From the New York Times by Bruce Bartlett: "On April 30, 2012 the Treasury Department announced that 461 Americans had renounced their citizenship in the first quarter of 2012 (Here's the list) A 1996 law requires that every person doing so be named, with their names published in the Federal Register. The idea is to shame those who may be renouncing their citizenship solely to escape taxation." (Read the whole article here)

Even today, with our historically low tax rates, rich Americans are still evading taxes by abandoning this country by renouncing their U.S. citizenships -- ever since a crackdown on tax evasion four years ago. The Financial Times has labeled these people the "stateless and super rich". These uber-wealthy have no interest in the notoriety of renunciation, they just live their lives as if they had no nation to call their own. “The more money you have,” explains Jeremy Davidson, a property consultant, “the more rootless you become because everything is possible.”

With their vast wealth, these people want for nothing, are loyal to no one, and are not Patriotic Millionaires; but more like "traitors" to their country who used taxpayer-paid research and redevelopment to create personal wealth for themselves, and then abandoned them and refused to give back to the community.

Wealthy people have been quitting their American citizenship for tax reasons for years. Billionaire John Dorrance III, the grandson of Campbell Soups founder John Dorrance, renounced his United States citizenship in the 1990s to avoid capital gains taxes -- so did members of the Getty Family.

"Another positive is that investments in individual savings accounts and self-invested personal pensions will not draw scrutiny from the Internal Revenue Service and remain tax-shelters," say advisers at London & Capital, the wealth management firm. Mitt Romney still has many off-shore bank accounts, several in the Cayman Islands and in Luxembourg. He claims he closed his Swiss banks accounts and that he pays taxes on his other off-shore accounts (Not true, Mitt Romney is a tax dodger! Prove me wrong and release ALL your tax records!)

Renunciations are higher in Switzerland because American expatriates expect extra scrutiny of their affairs after the UBS case and as the U.S. probes 11 other Swiss financial firms for aiding offshore tax evasion, said Martin Naville, head of the Swiss-American Chamber of Commerce in Zurich.

New York Times: "Almost three years after UBS, Switzerland’s biggest bank, paid a $780 million fine for helping Americans evade taxes and agreed to hand over the names of more than 4,500 American account holders, the Swiss banking industry [still] refuses to exit the business of tax evasion."

Two years ago Senate Finance Committee Chairman Max Baucus had urged the IRS to be more vigilant in cracking down on tax evaders. (The Hill: IRS official urges additional action to curb offshore tax abuse). But since that time, the millionaire-members of Congress have cut the budget to reduce the IRS auditors. (The Republicans would prefer to cut food stamps to make up this shortfall in tax revenue while they continue to wage war on the unemployed by cutting unemployment benefits.)

Reuters - January 17, 2012 - There is "around $19 million of lost revenue annually for every senior corporate auditor position cut from the [IRS] payroll. Keep in mind, the IRS costs just a half penny for each dollar of tax collected." So how much tax revenue is lost with an $11.8 billion budget cut?

The winners will be tax cheats among sole proprietors and other business owners such as hedge funds and private equity firms like Bain Capital, who are subject to less verification. The latest IRS tax gap report, issued Jan. 6, 2012 estimates that just one percent of wages escapes tax, while 56 percent of “amounts subject to little or no” verification do so.

America’s biggest corporations, those with more than $250 million in assets, also may escape some tax if the IRS budget is cut. From 2005 to 2009, hours spent auditing the biggest corporations declined by 33 percent.

Two decades ago, when the economy was a third smaller, the IRS staff numbered about 118,000. Now it numbers 95,000 and is on the way to about 90,000. The likelihood of a big company being audited has plummeted 50 percentage points -- from 72 percent in 1990 to 22 percent in 2010.

IRS budget cuts worsen budget deficits and send a corrosive signal that only "chumps" file honest tax returns. Thirteen years ago the New York Times reported that "the poor were more likely than the rich to have their tax returns audited." IRS whistle-blowers have lost their jobs.

The GOP has been de-funding the IRS because they don't want the IRS to have enough funding to do their job. De-funding the government is a major goal of the GOP, and part of their bigger plan of "Starve the Beast".

Maybe we should draft these tax dodgers into the U.S. Army for punishment. According to the U.S. State Department’s website: “Persons who wish to renounce U.S. citizenship should also be aware that the fact that a person has renounced U.S. citizenship may have no effect whatsoever on his or her U.S. tax or military service obligations.”

To President Obama: Would you consider signing an executive order branding wealthy American citizens traitors for renouncing their U.S. citizenship to dodge taxes, then freeze their U.S. assets and forbid them from returning to this country - - - even for medical care? The super-rich Americans now have their own emergency rooms anyway. (See: Wesley Snipes and other Rich and Famous Celebrity Tax Dodgers)

Yet the Republicans still insist, "We don't have a revenue problem" --- and they want to lower taxes on the top 1% even more, claiming they are all "job creators" like Paris Hilton. (I wish they would renounce their citizenships!)

* Garry Davis, a World War II veteran and peace activist, renounced his United States citizenship in 1948 in Paris in order to become a "citizen of the world". He created the first World Passport.

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  1. ===== GIFT TAXES =====

    The very wealthy also have a $5 million lifetime gift-tax exclusion. ($10 million for a married couple). The rich have the ability to shift assets out of their estates tax-free while they're still alive. Think of trust babies like Paris Hilton.

    You can now create a $10 million dynasty trust just by writing a check," Michael Gooen, a tax and estate attorney at Lowenstein Sandler. "All that appreciation is now locked up in a trust, and you will never pay estate tax or gift tax on it."

    (More here at Reuters)

  2. It's not just rich Americans who are bailing out of their country to evade taxes.

    Worsening financial and political turmoil in southern Europe caused a surge of interest in London property last month with buyers from Greece and Spain showing strongly among investors seeking a safe haven for their money. The number of Greeks searching for homes costing more than $2.4 million jumped 39 percent in April.

    "The reason Greeks are coming is very simple: Greece is screwed, there are no jobs and it has been run by crooks."

    Growing interest from Greece in the last three weeks has been buoyed by buyers looking to rent out property as an investment. There seems to be an endless flow of wealthy Greek buyers, old Greek family money coming to London, both renting and buying. Interest has pushed prices for prime central London properties up by 44 percent in the last three years.

    Most buyers are reluctant to talk publicly. With the Greek tax system the way it is, these people don't want others to know how much they are moving out of the country or where they are putting it.

  3. DISCLAIMER--------------

    Almost everything I post, if not linked to another source, can also be found with a simple GOOGLE search. Consult a tax attorney for tax advice. Mitt Romney can probably help you.

    ---- END DISCLAIMER ----