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Will "White Flight" Strike the U.S.?

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I've noticed several trends in recent years, and I wonder if they won't all come together

The United States is on an unsustainable trajectory of spending. Politicians get elected making promises to spend money for stuff, and as long as they can find money, they're going to continue using it to get votes. No real news here.

Many third-world countries are becoming attractive places to live. Cost-of-living is low, the governments are getting more stable, and the land is not as over-developed as it is in the states.

The tax situation in the U.S. is getting crazy. Already people are beginning to renounce their citizenship because of the legal morass they get into when living overseas. While still at a small number, this is projected to increase.

Given these trends, which i believe to be true, I wonder if large numbers of U.S. citizens aren't going to start leaving the country to live in another country? Just like we saw with poorly-ran cities, I wonder if the country as a whole will suffer a kind of "White Flight", where the better off people move out of the city because the burden it is placing on them does not match the value of the services they are receiving? Meanwhile poorer people move in, further decreasing the tax base.

There is already a number, probably around 10K per month, where a person could take the same money they are paying in taxes and live in Central or South America and do quite nicely. They could pay for their own security, medical, electric, and communication services -- for much less than they are doing now. In addition the local labor rates are extremely low. A startup I was speaking with a few years ago was working with a growing market of ex-pats living in beautiful countries for a bargain. But for most people, the hassle of living far away from friends and family isn't worth it. As the tax burden increases, the difference between the pain of moving and the benefits of moving will become less and less.

17 Comments

Abandoning your citizenship to save a few bucks a year on taxes doesn't strike me as the most patriotic action one can take. I guess it's a matter of what an individual stands for.

Especially when you consider US federal income tax rates are actually at or near all time historical lows. You want to see a real "crazy US tax situation", you should investigate what the "Greatest Generation" paid post WWII, and how they sacrificed, endured, and in the end succeeded overall.

Also, third world countries will have generally equal if not greater tax rates overall, because in addition to income tax (which may or may not be lower than the US), they also generally employ a VAT as well. I was surprised how high income taxes are in the 3rd world (fairly comparable to the US: Thailand 37%, Vietnam 35%, Argentina 35%); then, you pay 10-15% VAT tax on top of that. You cannot be a "stateless" individual, so you'll either have to pay their taxes or ours. I'll take the higher salary, and higher standard of living in the US, myself.

Further, the people you cite about renouncing their citizenship (generally about 500 people/year) do so because they have set up permanent residence and citizenship with family in other countries, and simply do not want to get *double* taxed... they are generally *not* fleeing this supposed "tyranny" of the IRS and American tax system.

White flight? US citizens of European ancestry will mostly try to move back to Europe but who says Europe welcomes you with arms wide open? There's already enough problems as it is.

Plus keep in mind that you might not have the rich expat lifestyle you expect in most 3rd world countries. You'll be a target because of your wealth, far more than you'd ever be in America, and if there's a problem either with your pension or with the government you're isolated with no social networks to rely on.

I imagine that many of the people who would find this argument compelling are dedicated conservatives, and I'm certainly not opposed to fewer of them in the United States. So I endorse this position!

I think you guys misunderstand.

I'm not making an argument to move anywhere. I do not plan to move anywhere, and people moving out of the country is generally a bad thing.

The title, which is a question, is whether or not these trends will lead to an exodus of people, not whether or not leaving is good.

And as far as politics go, I don't understand why you would have to be conservative or liberal in order to be able to balance your budget and find the best place for yourself to live. If this is some kind of political argument, I fail to see it.

Interesting theory but unfortunately it makes little sense.

Why would wealthy families leave the country and effectively declare to their friends and community that they can't afford to pay taxes? Such a thing would be the equivalent of driving a Hyundai minivan to save on insurance premiums (which are far more taxing, by the way). Surely a successful ego makes this at best unlikely and at worst absurd.

In addition, all of the worlds greatest cities to live in are all countries of significant income taxation. There's no coincidence there. For a country in which individuals can make enough to live in opulence by purely passive income -after taxes, tax is the best way to secure income for infrastructure and services.

How do you Americans expect to run a country without money?

It's good to have options. I've leased land and am having a house built in the Philippines. They don't charge any income taxes, have a rising standard of living, and really like Americans (more so than some Americans seem to).

The country offer retiree visas that are really attractive and the prices for housing, healthcare, and food are a lot lower than here. Plus, the Filipinos speak english better than a lot of immigrants in the US.

I won't escape the income taxes unless I renounce my citizenship, but at least the costs are lower and there is no sign of nationalization of any segments of the economy. Plus, in 10 years a resident can apply for citizenship.

If all someone cares about, if all their life revolves around, is money and their personal balance sheet, I'll do volunteer labor to help them pack and leave ASAP.

Some of us understand how lucky we are in this country, even with the problems that seem, at the moment, insurmountable, intractable, and growing.

We can solve ALL of the problems that face us. When we WANT to.

I'm not going anywhere. I lived through the hell of the 1970s in NYC. I didn't leave then and won't leave now. And will never leave my country.

And don't color me with your political biases: I voted for Nader.

It's really tempting I must say. Especially coming from the uk. It's scary how high the house prices are here.

The only thing that worries me a little about living in some of these cheaper places is the education system. Know in some of these beautiful countries that most adults have a less than 10 year old education level, scary.

Personally I think I will be retiring abroad through

I'm really surprised that so many people would be emotional about such a thing -- it's politics, it's anti-patriotic, it's divisive, etc.

I think if I was making only 600 bucks a month on a retirement check and I was 70 or something I would do what made the most sense to me financially. Don't really see where patriotism comes into it, unless you're saying that the elderly living in poor conditions is somehow their patriotic duty. If so, I can't quite figure that out. Guy serves in a war and gets a medal for bravery, but because he'd rather live in a nice house on the beach in Brazil instead of a crappy apartment in Toledo suddenly he's a traitor? Doesn't make sense.

And like I said, I don't think this is a good thing at all. I'm simply wondering if it is likely, not if it is good or right or just or anything.

Interesting that so many would get so upset over such a simple question.

"I think if I was making only 600 bucks a month on a retirement check"

This is not how you framed your original thought. You explicitly mentioned a $10k/month figure. At that point, you'd have an income of $120k/year, in the 25% tax bracket (before any deductions).

So at most, that person would be paying 120k *.25 = $30k in taxes per year. Compare that to your hypothetical person making $600/month living in the third world (not on US Social Security i'd hope!) who is pulling in *gross* $7,200/year.

You framed your initial post as a way for the wealthy to escape their basic tax obligations to their country, and when called out, you fall back on the "poor retiree" scenario. I'm not buying that.

And again, we do have the stark reality that US Federal tax rates are currently among the lowest in history. Perhaps I could better understand your position if you clarify why you think that "The tax situation in the U.S. is getting crazy".

There is a number, which is right now around 10K per month, where it might make more monetary sense to move overseas. That number will continue to drop if current trends continue. The question was, and continues to be, if my analysis of these trends are correct, will the number of ex-pats and people fleeing citizenship increase? Or not? If not, why?

If you have more sympathy for one human being over another because of the amount of their income then that's a problem you're carrying around with you. Good luck with it. The question was about future trends. In this context, the guy making 5 bucks a week is the same as the guy making 5 million. Amount of income is not germane here. Sorry I ever mentioned wealth. Progressives and flat-taxers relax.

Aside from the tax-fleeing bit, you're saying that a person that paid into SS all their life shouldn't receive it if they live abroad? if that is the case, then it seems like the correct option would be to stop paying in, but that's not much of any option, is it? So basically if you prepay for your retirement at IBM and leave, you keep your retirement. But if you prepay the same amount to the U.S. government for your retirment and leave, thanks for the money, bub?

Again. Perhaps I could better understand your position if you clarify why you think that "The tax situation in the U.S. is getting crazy". Federal tax rates, as far as I can tell, are at near all time lows.

"If you have more sympathy for one human being over another because of the amount of their income then that's a problem you're carrying around with you."

my post didn't imply sympathy. rather, it explicitly mentioned motivation. big difference.

"you're saying that a person that paid into SS all their life shouldn't receive it if they live abroad?"

no. i am saying that Social Security benefits are not foreign earned income, and therefore taxed the same regardless of location.

I enjoy this dialog and hope you post more. I have called this type topic, "US turning Russian". Personally, I weigh topics as, "how can I get around it".

For example, speeding tickets. I don't pay the fine, I say, "how can I get around it"?

I am a filesharer (not flattering but true). So when the net-neutrality goes away and the ACTA (copyright) bill goes into effect, I ask, "I know ways to get around it".

I know these are bad trends, perhaps I am just a bad person, but I have given up on Washington and just say to myself (like my wife also does), "How does this effect me, and how can I get around it"?

The only cause I will fight for is States-Rights. If North Dakota (?) can get hand-gun laws back into the right of states, then I hold hope for the US. If not, we are slipping to becoming Russia, a place of bribes and heathens.


Jim Pruett, you are everything that is wrong with America.

You probably supported the $2.5Trillion Bush tax cuts to the wealthy. You probably supported the $1Trillion+ decade long wars in Iraq and Afghanistan. You probably supported the $1Trillion unfunded Medacre Part D.

And now, when the economy turns sour, you don't like paying your fair share of the policies you supported under president Bush.

well boo-hoo to you.

> You probably supported the $2.5Trillion Bush tax cuts to the wealthy.

The rates were cut, but the taxes paid didn't go down - they went up. Some "cut".

Post Bush, the tax system was more progressive than before. Part of the switch was fewer people paying taxes (the majority don't pay federal income taxes these days) and the rest was a greater percentage paid by those who in the upper income cohorts.

Note that the average tax burden in the US is right in the middle of Europe's yet we get far less. Why is that an argument for paying more?

http://www.themoneyillusion.com/?p=4626

> You probably supported the $1Trillion+ decade long wars in Iraq and Afghanistan. You probably supported the $1Trillion unfunded Medacre Part D.

Huh? Many conservatives opposed Medicare Part D. Note that the alternative offered by the Dems was more expensive.

The last deficit with a Repub Congress was $100B/year and had been decreasing for 4+ years. Yes, including the war.

$100B/month is the Obama deficit as far as the eye can see.

Is it really unreasonable to be more concerned about a deficit that is 10x as large? Is it really reasonable to be unconcerned a $1.5T/year deficit and horrified by a $100B/year deficit as Joshua is?

Andy, your stats are made up and misleading.

"The last deficit with a Repub Congress was $100B/year and had been decreasing for 4+ years. Yes, including the war."

no, NOT including the war. both wars were waged off budget. Obama brought them back on.

see:

http://www.politico.com/news/stories/0108/8080.html

"the last deficit with a Repub Congress was $100B/year and had been decreasing for 4+ years."

Well, let's not examine the situation they inherited from Clinton era (budget SURPLUS) or it might utterly demolish your entire train of thought. Republicans have recklessly spent this nation to the ground during their tenure, and we are still paying for their mistakes... and will for a good time to come.

"$100B/month is the Obama deficit as far as the eye can see."

Obama inherited the worst global financial meltdown since the great depression, two wars waged OFF BUDGET, a $1.3 TRILLION deficit all on day one. see:

http://blogs.reuters.com/frontrow/2010/02/01/obama-reminds-americans-he-inherited-the-high-deficit-from-republicans/

Get real, andy. And be intellectually honest with your arguments.

your comments are true and I believe people should be willing to sacrifice for their country, but you saying that they paid higher taxes post WWII is not quite right. Up until then, only the very wealthiest elite paid any taxes at all, and when the average american had to start paying, they paid a very small .5 to 1.0 percent. This country was founded in such a way that no one should have ever had to pay taxes. The only reason prior to WWII the people voted to accept the small tax, was because only the very wealthy would be paying it. The government knew full well that soon they would expand it to every american and then slowly start raising it. Its really easy to vote something in when you think it won't affect you. Yes the boom after the war affected the ratio, but did taxes go back to nill when that happened? No, they slowly kept raising. I think nothing will change until we stop electing the wrong people into office. I do agree with you however, that fleeing this country helps no one.

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This page contains a single entry by DanielBMarkham published on April 22, 2010 1:25 PM.

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