Peter Schiff on Renouncing US Citizenship – Gold Videocast
In 2014, a record number of Americans renounced their United States citizenship for the second year in a row. Even though exit fees are rising, more and more people are willing to jump through hoops to escape the American tax man. Indeed, our Chairman Peter Schiff even relocated one of his companies to Puerto Rico last year to reduce its tax burden. From his new condo in Puerto Rico, Peter shares his insights into this new American diaspora and how you can opt-out of overbearing government without leaving your country behind.
Follow along with this full transcript:
Last year in 2014 a record number 3,419 US citizens renounced their citizenship and gave up their US passports. Unfortunately, that record’s not going to last. It’ll likely be broken this year, and again the following year. The reason is taxes. America has the world’s most oppressive tax regime, and the cost of staying compliant is going up. Many Americans living abroad find their US citizenship to be a liability rather than an asset, and they’re willing to spend a lot of money to renounce that citizenship. In fact, up until 2010, the form that you needed to fill out to give up your citizenship was free. In 2010 they imposed a fee of $450, which made the US the most expensive nation with which to renounce your citizenship. Yet people had no problem paying it. Last year, they increased the cost of that form to $2,350. Again, record numbers of people were willing to pay that just for the privilege of renouncing their citizenship.
Now the cost of that form is going to continue to rise with the benefits of giving up your citizenship. The Internal Revenue Service is going to continue to turn up the heat on Americans both here and abroad by making it particularly expensive to comply with those laws, especially now that the US government has enlisted or forced the help of foreign financial institutions in enforcing these tax laws. In fact, the United States is one of only two nations in the world that taxes its citizens on their global – their worldwide – income. In other words, it’s a tax on the privilege of being a citizen. The only other country that does it is a country in Northern Africa that basically nobody has heard of. Even in that country the tax rate on the global income of its citizens is just two percent, whereas in the United States you’re talking about upwards of 40% in a marginal rate of tax. Who knows how much higher that rate might go in the future?
The origin of this worldwide income tax system is in the Civil War. That’s where the income tax was first enacted, along with paper money. We got a lot of bad things that came out of the Civil War. Of course, freeing the slaves was one of the few good things that we got, but we also got the worldwide taxation. The motivation behind it is that when the war started, the Union was having a hard time getting volunteers. The Confederacy had no time and no trouble in encouraging people to volunteer for the cause. But the Union had to resort to constriction, and it was the first time we had draft in this country. A lot of people didn’t want to fight, and they left the country to avoid the draft. The idea of taxing Americans no matter where they lived was, in effect, a way to tax the draft dodgers. They didn’t want people to also dodge the income tax when they dodged the draft. The income tax applied to Americans even if they didn’t live here. But there was two rates– there was 3%, and the top rate was 5%. It wasn’t that bad compared to what we have now, but that’s where the concept originated.
When the war ended, the income tax ended shortly thereafter, and so too did paper money; the greenbacks disappeared. Unfortunately, both have since been resurrected, but in a much worse form. Now the marginal tax rate is not 5% max, it’s above 40%. Instead of the Federal Reserve notes we have now, the greenbacks during the Civil War days were redeemable in gold. They were backed by gold and they were redeemable in gold. Now the Federal Reserve notes are backed by Treasury debt, subprime mortgages, auto loans, and they’re not redeemable in anything.
The US government continues to turn up the heat. I said to American citizens, not only here, but living abroad, who knows how high the cost to buy that form to renounce your citizenship could go? It could go to maybe $10,000 or more. At some point America could be like a giant debtors prison where if you have a US citizenship you can never get rid of it. Now it’s not about dodging the draft, but it’s about dodging your share of the national debt. Americans today are born with an enormous burden – repaying the debts of prior generations. As many Americans decide that they can’t shoulder that burden, that they want to renounce their citizenship and look for more economic freedom in other countries, the cost of giving up that liability is going to get higher and higher. Of course, who knows how much higher income taxes may go in the future, which means the benefit of giving up your citizenship will be that much greater and there the cost of doing it that much higher. But there might be a point of political resistance where there’s no way for the government to try to collect the taxes it needs through taxation, through income taxes.
The most likely source of funding will be through inflation, where the government will simply print the money and spend it into circulation to meet its obligations. Although, it’s not actually meeting them, because it’s repaying them in money that doesn’t buy very much. The inflation tax is going to be one that no American could avoid if they own US dollars, but it’s one tax that you can avoid, and you don’t have to renounce your citizenship. You don’t have to buy an expensive form or pay a tax to renounce. All you have to do is renounce your dollar by holding gold or silver. If you hold real money that the Federal Reserve can’t create, they can’t tax you through inflation.
My advice to Americans who are still living in the United States? You don’t have to renounce your citizenship to avoid or dodge the inflation tax. You just have to renounce the dollar. Obviously not in its daily use; you certainly can spend dollars and transact in dollars. But when it comes to your savings, when it comes to putting away money because you want to access its purchasing power in the future, you need to renounce the US dollar, and you need to save in real money – gold or silver. Something that the Federal Reserve just can’t print into existence at will, something that has real value, and something that you can count on to preserve its value into the future. The cost of renouncing your dollars and acquiring gold and silver is very low.
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