Free To Leave?

Some believe that individuals are free to leave the U.S., no questions asked. Unfortunately, this is not the case. A few points:

Citizens abroad who make more income than a certain threshold (I believe about $85,000) must pay U.S. income tax equal to the amount he would pay were he residing in the U.S.. The number of countries that tax in this way–on the basis of citizenship instead of residence–is very low. (It’s gated, but see Taxing American Expats in the Economist.)

It is illegal for a U.S. citizen to keep and fail to disclose any foreign account whose value exceeds $10,000. Failure to disclose results in a fine equal to fifty percent of the account’s value. (More info here.)

In accordance with the 2008 Charlie Rangel bill perversely named Heroes Earning Assistance and Relief Tax (HEART), any U.S. citizen or Green Card holder who renounces his ties to the U.S. will be taxed on all his assets as if they were sold on the day of expatriation (equivalent to a mark to market capital gains tax). There are a few exceptions and thresholds, for instance the value of assets must exceed $600,000. Here’s a good summary. Here’s another.

True–these laws only apply to the well off. But the consequences affect many. Max Marty suggested I orient my question on the right of exit towards the future:

“Should individuals, groups, or businesses, seek jurisdictions with an eye towards minimizing the future cost of exiting from those jurisdictions?”

Well, the HEART Act certainly gives potentially productive immigrants and investors less reason to come to the U.S.. It also removes a powerful check on government expansion. And, if we care about such things, it takes away the right of these people to exit freely.