About Me

In writing the "About Me" portion of this blog I thought about the purpose of the blog - namely, preventing the growth of Socialism & stopping the Death Of Democracy in the American Republic & returning her to the "liberty to abundance" stage of our history. One word descriptions of people's philosophies or purposes are quite often inadequate. I feel that I am "liberal" meaning that I am broad minded, independent, generous, hospitable, & magnanimous. Under these terms "liberal" is a perfectly good word that has been corrupted over the years to mean the person is a left-winger or as Mark Levin more accurately wrote in his book "Liberty & Tyranny" a "statist" - someone looking for government or state control of society. I am certainly not that & have dedicated the blog to fighting this. I believe that I find what I am when I consider whether or not I am a "conservative" & specifically when I ask what is it that I am trying to conserve? It is the libertarian principles that America was founded upon & originally followed. That is the Return To Excellence that this blog is named for & is all about.

Wednesday, January 26, 2011

Heritage Foundation's Economic Freedom Index Omits Major Point The FairTax Would Correct

Many of you saw the Heritage Foundation's 2011 Index of Economic Freedom's annual rating of the freest countries (economies) in the world & were dismayed to find the USA had slipped again this year barely hanging in the top ten - let alone not being #1. Hong Kong (not a separate country but a part of the People's Republic of China) remains #1 for the 15th straight year & Canada, thanks to the USA's decline, is embarrassingly the freest country in North America. The top four economies are all part of the Asian sphere of influence.

The ratings are based on countries' commitment to capitalistic systems by measuring the following categories of economic freedom: fiscal soundness & openness to trade & investment, government size, business & labor regulations, property rights, corruption, monetary stability, & financial competition. Per capita GDP is measured in another survey.

James Jameson presents a major point omitted from the Heritage Foundation's ratings when he writes:

"For all of its methodological strength, the Index of Economic Freedom entirely leaves out one of the most treasured individual freedoms—the freedom to migrate out of one's own country without undue interference from government. As long as a person has remained current on tax payments, the ability to leave a nation to establish citizenship elsewhere should be a sacrosanct human right. As Article 13 of the Universal Declaration of Human Rights states: 'Everyone has the right to leave any country, even his own.'

In the U.S., the economic penalty for permanent expatriation is so severe that it is unduly burdensome to exercise the 'right to emigrate.' If the Index were to account for this freedom (or lack thereof), there is no doubt that our country would finish even further down the list.

Under U.S. tax law, a citizen who wishes to renounce his citizenship must pay a mark-to-market exit tax. This tax treats all assets in excess of $600,000 as if they had been sold, and thus liable for immediate payment of capital gains taxes. There is also a 10-year reporting requirement to the IRS, post expatriation.

Adding this metric would enhance an otherwise interesting set of measurements on economic freedom. It would also further demonstrate our eroding economic freedom."

Below is an excellent letter from a subscriber to ReturnToExcellence.net that shows how the FairTax would eliminate this further erosion of our freedoms. The letter ends with what I call "the principle of the opposite," namely always look @ the exact opposite of what you plan or expect because @ least half the time that will happen.

---Letter Addressing James Jameson Economic Freedom Concern---

Mr. Jameson's letter describing how the code shackles our citizens who seek to leave the country exemplifies the plenary and overreaching nature of income and estate taxes - and it buffs the FairTax.

Mr. Jameson describes the "Liz Taylor" amendment. When Liz returned to the United Kingdom and renounced her U.S. Citizenship, the IRS said "not so fast!" The IRS then created a presumption that, anyone exercising his or her Article-13 Universal Human Right to leave his or her country does so for the purpose of avoiding taxes. The presumption pursues the refugee for ten years.

This presumption is, candidly, presumptuous. It is not shared by civilized countries. Germany, for example, ascribes unlimited income tax liability only to natural persons who have their residences or usual places of abode in country. EStG, Sec. 1. Others are ascribed an income tax liability that is limited to income from German sources. Citizenship plays no role.

Under the American income and estate tax regime, citizenship plays a significant role. The tax tentacles extend to American expats who maintain no residence in the United States. In a generous whim, Congress allows expats to exclude $91,500 in foreign "earned income," as long as that income pushes remaining income into the higher tax brackets. There is also a credit for taxes paid to a foreign country, but only to the extent of U.S. tax on the same income.

The expat gets the worst of both tax worlds. The U.S. citizen living in Germany, for example, who owns tax-free U.S. munis pays tax on the income in Germany. That same person who wins 1 million Euros in the South German Lottery pays no tax on those winnings to Germany but must pay them to the U.S.

The citizenship-conscious American tax spotlight that shines outward also shines inward. U.S. citizen spouses may make tax-free gifts to each other, both in life and post-mortem. But a U.S. citizen wanting to make a gift to his or her non-citizen spouse must be careful and set up a "QDOT" - a qualified domestic trust. The IRS is petrified that the non-citizen spouse will return to his or her native country, and the gift will escape taxation.

The octopus nature of our tax code is shared by only two other countries: North Korea and the Philippines. We should view the Philippines more indulgently because they had our tax code when they became independent from the United States in 1946.

Our current tax laws can represent the most fundamental abridgment of freedom and privacy. Under the FairTax, these extraterritorial laws would disappear. Perhaps the greatest irony would be that, when the American state makes it easier for its citizens to leave, more will choose to voluntarily remain.

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