> . I and a lot of my peers are planning to leave our home countries specifically so we don't have to spend a single penny supporting...
I have a friend who's planning on doing exactly that. If the US ever stopped taxing income earned by US citizens living in foreign countries, the number of expatriates flocking to Scandanavia, England, and the Netherlands would be astounding. You'd get the best of both worlds.
The problem is that the people complaining when their benefits are cut are often the same ones complaining that our tax rate is 'too high' compared to the 92% (!) marginal tax rate during Eisenhower's administration. But of course, that's around the time that the baby boomers were born, so they don't remember that.
A recent study of the Tea Party [1] found that most grassroots members didn't oppose benefits (SS, Medicare, etc.) to people like themselves, just to "freeloaders" like young or poor people:
"Older, middle-class Tea Partiers mostly approve of Social Security, Medicare, and generous benefits for military veterans. Their opposition to “big government” entails reluctance to pay taxes to help people viewed as undeserving “freeloaders” – including immigrants, lower income earners, and the young." [2]
(I'm not a tax attorney) Most of those countries have double taxation agreements with the US. You can take a credit or deduction for taxes paid.
In general, if you're a US citizen, you pay the maximum of US or foreign taxes. Usually you end up paying mainly foreign tax, since most (worthwhile to live in) countries tax individual income higher than the USA does. There's also a ~95k income exemption if you're out of the USA.
If you move to a zero or low income tax place, then the global taxing power of the US becomes relevant. Still, you don't pay higher taxes than if you remained in the USA.
Taxes probably shouldn't be a major factor for a US citizen in deciding to expatriate. If you want to live in Sweden more than the US, and can get a job, go for it. You don't have to go forever. I think the only issue is that you might not end up paying enough Social Security tax to the US to earn the maximum amount, but for someone paid like a tech worker, not an issue.
The other thing is if you move to a place with lower cost of living, you might have lower wages for the same quality of life, which means lower taxes paid (in absolute rate, and in progressive tax tier).
I don't think there's a better place to do a tech startup than Silicon Valley now, but if you want to do a wind or solar energy startup, moving to Germany might make sense. If you want to go SCUBA diving a lot, move to Malaysia or Australia and put up with worse jobs.
Taxes really shouldn't be the primary reason why you do anything.
What if the low tax country had low tax because it had low government spending on benefits, etc. You'd still have to pay US tax rates for little benefit.
You would still have the us foreign exclusion, at least. But most of the low tax places are not places I'd want to live (which is sad, as a libertarian); I've lived in several of them. Hong Kong is the sole exception, and there the benefits (at least roads, security, etc) are superior to the USA, due to high density and efficiency and a long period of good governance.
(also, most of the benefits of living in a high tax high service economy are not really delivered by the US government now, even given moderately high taxes. Defense spending is not particularly improving my quality of life, and to the extent it does, it is a global value which taxpayers in Japan benefit from as well. I'm not sure why the US Government and California are relatively less efficient at delivering worthwhile services than other governments around the world.)
I guess if your idea of paying 60%+ taxes is "the best of both worlds", then by all means do it.
"The problem is that the people complaining when their benefits are cut are often the same ones complaining that our tax rate is 'too high' compared to the 92% (!) marginal tax rate during Eisenhower's administration. But of course, that's around the time that the baby boomers were born, so they don't remember that."
Should we also talk about the state of women's rights or minorities during that time? Oh yeah, and stop complaining.
92% marginal tax rate was wrong then..and it's wrong now.
1. "stop complaining" is the best advice to give to someone who wants to ruin a democratic country.
2. "state of women's rights or minorities": Please don't embarrass yourself by giving said advice after waving around a huge red herring to distract from an enormous, subtly woven social problem that touches every part of modern society.
You're somehow suggesting that because policy on rights for women and minorities was poor, the taxation system used at the time was also wrong. Beyond attaching your claim that high tax is wrong to the universally accepted claim that institutionalised racism and sexism is wrong, you give no real justification for what you're saying.
Perhaps the smallest income disparity ever seen in modern society occurred during that period of high taxation. The gradual erosion of high tax rates (similar levels occurred in the UK around the same time) is almost certainly due to pressure from the wealthy. Tax is a great leveller, providing an underlying safety net for the most vulnerable or the most unfortunate in society, and limiting the self awarded incomes of those at the tops of companies.
While I wouldn't argue for taxation rates to be increased to those levels, I really struggle to understand how the erosion of tax rates is in any way beneficial to the vast majority of people. Assuming the target of society is to have some level of equality across it's population, tax reduction is simply wrong. The actions of politicians working to reduce tax are clearly driven by the interests of those already wealthy enough to have a voice.
The target of society is not equality, per se, but a high minimum standard of living. pg has a great essay on this at http://paulgraham.com/gap.html. As a quick summary: as technology increases and multiplies people's abilities to be productive, we would expect the income gap to widen; someone 10x-50x as productive as someone else should be compensated accordingly. Conversely, if the marginal tax rate is 92% above 100k income, people will seek other forms of compensation in their work - for example, shorter hours. No one is going to put in 100 hour weeks to earn $300k a year, because after taxes that comes out to an extra $27k; I'll relax at a 9-5 instead and just earn my government mandated salary cap.
That essay is really rather interesting and makes some great points. I do think that it misses some important areas though. Given that it was written in 2004, I'll give Paul Graham the benefit of the doubt. Most of my points have only really surfaced in the last few years.
1. He states at one point that "It's absolute poverty you want to avoid, not relative poverty.", which is certainly true to an extent, but not completely. A recent BBC documentary looked at some of the poorest people in America.[1] The thing that really struck me about that is that these people, in absolute terms, are not poverty stricken. They're not short of shelter, food or water.
In relative terms though, they've been left behind. The modern american society simply isn't designed for people living on their income level. They live in motels without kitchens, so the option of cooking the basic staple foods eaten by those on similar income levels elsewhere is unavailable to them. They have to buy expensive packaged foods. The high cost of the society they live in means that their disposable income, and their ability to climb out of the economic hole that they're in, is almost certainly less than that of people with their absolute income in a poorer society. Poverty has to be considered in both relative and absolute terms. The people depicted in that documentary have fewer options available to them than those in poor countries. American health costs, education costs and rents are all designed for the average American income level.
2. There are aspects of society that set their own value. I know it's popular to complain about bankers right now, but they're probably the best example of this. Banking a necessary evil to allow us to deal with the vast, money based economy we've created. While almost every other industry operates by trading goods or non-monetary services for money (and so only sees money that's in some way related to their business expenses), banking sees all the money. A "normal" business can increase profits by maintaining or increasing income and reducing expenses (eg outsourcing, manufacturing in China, reducing material costs). Banks, by virtue of their operation, handle incredible amounts of money. They're in a unique situation that allows them to set the value of the service they provide. Not surprisingly, that service value is set considerably higher than perhaps it truly is.
It's obviously hard to place a value on the services provided by banks. In his essay, Paul Graham talks about wealth creation, giving a farmer as an example. The banking (and financial trading system) is not primarily a wealth creator. It's a system for moving that created wealth around. Banking can enable wealth creation with funding, but the system we have today has developed to reward activities with high returns over short periods. What I'd argue as true human wealth creation - manufacturing and valuable service provision - doesn't provide the returns that the banking system was looking for. The house of cards built up by high frequency trading, derivatives, futures and other hugely abstracted banking and trading concepts is far removed from this wealth creation.
Society rewards bankers with large amounts of money. Paul Graham argues that Steve Jobs increases material wealth, and so his monetary wealth in return was deserved. That's almost certainly true, but banking isn't a case of the average person going out and buying an iPad because it increases their material wealth. Bankers are rewarded richly because they've constructed a system over the last hundred years which takes large rewards for itself. There is very little true wealth produced by the system.
That essay was however written during the good times. In 2004 none of us were aware of just what a damaged financial system our economies are based on. In 2004 the families featured in that BBC documentary had a house with a hot tub. While I agree that there needs to be an incentive for productive working, there also needs to be a safety net. In our technology driven society, people shouldn't be struggling hard just to stay under a roof and feed their children. History has shown that the rich are the ones who have a voice, and so craft the system to benefit them.
I have a friend who's planning on doing exactly that. If the US ever stopped taxing income earned by US citizens living in foreign countries, the number of expatriates flocking to Scandanavia, England, and the Netherlands would be astounding. You'd get the best of both worlds.
The problem is that the people complaining when their benefits are cut are often the same ones complaining that our tax rate is 'too high' compared to the 92% (!) marginal tax rate during Eisenhower's administration. But of course, that's around the time that the baby boomers were born, so they don't remember that.