FORWARD BASE B

"Pay my troops no mind; they're just on a fact-finding mission."

Capital Flight Controls In The USA & New Types of Currency

Right now there is still enough talent in the US to warrant keeping citizenship for most people, even at the cost of taxes. However if the IRS becomes more belligerent or if the wealth and talent concentrates into a select few states, then we’ll be dealing with a very different situation. It’s possible that the surveillance infrastructure that the NSA has built can be used to go after people who have “What belongs to the government”.

The wild card in this is the creation of local currencies and encrypted digital private currencies that are not backed by the US Government or any of the central banks. I’m not as bullish as most people about returning to a gold backed currency though. You can go after tax protesters, but outlawing new types of currency like this is much more difficult.

“If you ask me if the U.S. dollar is going to hold its purchasing power fully at the level of 2011, 5 years, 10 years or 20 years from now, I would tell you it will not.”

“I can go out drinking all night, but if I’ve got a printing press, my debt is good,”

– Warren Buffet

That is the lesson from the disclosure that Eduardo Saverin, the 30-year-old billionaire who helped found Facebook, has renounced his U.S. citizenship to become a resident of Singapore.

Singapore offers huge tax advantages for people like Mr. Saverin, whose wealth is primarily in the form of capital gains. The Southeast Asian city-state has no capital-gains tax and its top income-tax rate is 20%—compared with rates of 15% and 35%, respectively, in the U.S.

The new penalties for a willful failure to report a foreign financial account are up to 50% of the highest value of the account each year, notes David Lifson, a CPA at Crowe Horwath in New York who has many international clients. “Two years of willful noncompliance can empty an account,” he says.

In 2010 lawmakers also enacted an ambitious law, the Foreign Account Tax Compliance Act, or Fatca, requiring foreign financial institutions to certify that U.S. taxpayers aren’t hiding money in them. Foreign banks and investment funds already are refusing U.S. customers because they don’t want to cope with Fatca compliance, Mr. Lifson says.

You might owe an exit tax. U.S. citizens who expatriate are treated as though they sold all of their property the day before they renounce, even if they will continue to own it and pay property or other taxes.

Capital gains (net of losses) are taxed at the current top rate of 15%, after an exemption of $651,000. The tax on some assets, such as an individual retirement account, will be at ordinary income rates up to 35%, notes Dean Berry, an attorney with Cadwalader, Wickersham & Taft in New York.

The tax applies to U.S. taxpayers whose net worth is greater than $2 million or whose average annual income tax for the past five years is $151,000 (adjusted for inflation).

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