Although we have many readers from all over the world, we have a big following from the U.S.A. It is no surprise that many Americans have realised that their country has, sadly, been taken over. It is no longer ‘the land of the free’ – and many of the brave there are looking for a new home.

In fact, as we regularly point out, US citizens are the only people in the world who are legally required to file and pay taxes based on their country of citizenship, rather than where they live. The only legal escape method is to renounce US citizenship and acquire a second passport, which is what many US citizens are doing… whether via economic citizenship programs like St Kitts and Nevis, or by some of the more liberal citizenship by residence programs such as that offered by Uruguay and Paraguay.

Below is an excerpt from the FREE 29-page American Expatriation Guide, written by a former U.S. citizen who wants to remain anonymous, and reproduced here by kind permission of Casey Research. Read what he has to say – from a “been there, done that” perspective – and maybe take your ownfirst steps to move to greener pastures…

TEN GOOD REASONS WHY US CITIZENS SHOULD EXPATRIATE

1) Freedom from the global U.S. tax net.

Taxing you no matter where you breathe on this earth is wanton American exceptionalism. What other nations don’t dare do to their citizens, the U.S. government doesn’t think twice about. Once you renounce, it’s your choice either to live the rest of your life free of any tax net, or to pick a place you want to be year-round and opt into the tax system (assuming it’s not a tax-free jurisdiction). If you do, you’ll at least know you have the freedom to walk away from it by simply moving elsewhere.

Taxes in the U.S. are already high, and rates are set to increase across the board. To gain some perspective, it’s clarifying to calculate the number of months per year you work for the government. How many months did it take to pay all the federal, state, and local income taxes, capital gains taxes, FICA taxes, property taxes, and AMT – plus the raft of permitting, licensing and accounting costs you incur over the course of a year? Add corporate taxes if you’re a business owner. And don’t forget the new 3.8% health care surcharge tax on all investment income, including dividends. Be honest and add it all up. You’ll then have a decent idea of how much it costs you in time and money to be a U.S. citizen every year. That cost will rise dramatically going forward.

Here’s the take-away: The biggest guaranteed return on your capital that you’ll ever have is investing your money free of taxes. Do some long-run compounding calculations with and without taxes to see what I mean. I’ll wager John Templeton did.

2) Freedom from the death tax.

Its political label is the “estate tax,” but the fact is the tax is based solely on your demise. I used to think the death tax only applied to gains on assets that had not been taxed already. How naïve I was! It grabs half of all your assets, regardless of the fact that you’ve paid taxes on them.

If you have over a few million dollars net worth, your heirs will be writing a heart-stopping check to the IRS. They also may be forced to liquidate your assets to raise cash. This has happened to countless small businesses and family farms. And if you’re a young, talented entrepreneur who goes on to earn substantial wealth over the course of your life, the death tax has you in its crosshairs too.

The death tax is 45% now and is scheduled to jump to 55% in 2011. Either way, the amount is staggering. Expatriation lifts the death tax burden from your children and other heirs.

3) Freedom from the U.S. government’s War on Solvency.

Washington’s crazed debt addiction is uncontrollable and endemic. U.S. politicians have strapped an inconceivably large debt burden on the backs of their subjects. It pays to spend some time on www.usdebtclock.org. The multi-trillion dollar debt avalanche roars on, headed straight towards economic hell. After “Debt Per Taxpayer” and “Liability Per Citizen,” check out “U.S. Unfunded Liabilities” to see a number that’s suited to astronomical calculations – not economics.

Don’t be tricked into thinking this is a partisan issue. It’s sobering to review the debt records of both Democratic and Republican administrations…to behold what politicians do when given trillions of dollars of other people’s money. They spend it all – and then borrow trillions more! Of course, the burden of servicing that debt is on you, not them. Their six-figure salaries are guaranteed, along with their uber-perks and fully funded pension plans.

While often described as “the richest nation in the world,” the reality is that the U.S. is the most indebted nation, by a country mile. No other government comes close to matching the debt burden that has been dumped onto every taxpayer. The U.S. government is rampantly incurring debt in your name, and you have no way to stop it or slow it down. Standing in free speech zones with protest signs didn’t work when it came to war and crony bailouts, and it won’t work for the debt burden either.

Besides, it’s already too late. The interest alone on the debt is trillions of dollars. Trillions…as in thousands upon thousands of billions. Google “interest due on U.S. debt” if you think I’ve veered into the realm of fiction. Once you’ve returned, I think you’ll agree: The one truly meaningful act you can take as an individual is to opt out. Unload the government’s debt burden off your back. Don’t let yourself or your family be a casualty of the government’s War on Solvency.

4) Freedom from being treated like a “toxic citizen.”

When traveling abroad, being a U.S. passport holder used to be a positive thing. Now it’s an albatross. The New York Times article I cited earlier explains it plainly: Americans abroad are being treated like “toxic citizens.” They’re cut off from banking and other business and offshore investing opportunities solely because of their U.S. citizenship.

Typical currency controls don’t permit you to take money out of a country. The U.S. doesn’t have that (yet). Instead, and this is quite clever, the government enacts laws and regulations that function as indirect currency controls. There are so many Patriot Act and other costly impositions forced on foreign banks that handle U.S. customers that they’re simply refusing to put up with the harassment. Here’s the upshot: Your money isn’t fenced in; it’s fenced out.

If you seek firsthand evidence, visit a major banking center outside the U.S. and try to open a bank account. Odds are you’ll be turned away when the bank finds out you’re a U.S. citizen. Reports abound of U.S. citizens’ long-held accounts at foreign banks being summarily terminated. The U.S. government has made its subjects, along with their money, persona non grata.

I’ve read that some foreign banks are now setting up, in essence, holding pens designed to handle U.S. citizens who want to bank offshore. But, really, what’s the point? You’re burdened with having to file extra IRS paperwork, along with FBAR forms to the Treasury Department. And even if you don’t file all the extra papers (not a smart move), new laws force foreign banks who accept U.S. customers to report on you anyway. They are pressured to sign “information reporting agreements” to have U.S. citizens as customers. Google “FATCA” and “qualified intermediary agreements” if you want details.

Now for the most extreme instance of liability. Being a U.S. passport holder can mean life or death in the context of a terrorist attack. The U.S. government’s never-ending War on Terror makes the world more dangerous for Americans. After so many years of bombing and military occupation in the Middle East, how can the hundreds of thousands of civilians who’ve been maimed and killed by the U.S. government NOT be the source of enduring resentment and blowback? Needless to say, the U.S. passport is on the short list of ones you least want to have if somebody sticks a gun in your face and says, “Passport.” Unfortunately, this has happened on more than one occasion, and it would be unreasonable to assume it won’t happen in the future.

5) Freedom from the paperwork prison.

Millions of Americans are plagued every year by days, sometimes weeks, of preparing tax documents and paying thousands of dollars to accountants to decipher the IRS tax code. There are, literally, hundreds of different IRS forms. The tornado of rules and regulations in the tax code fills roughly 70,000 pages. And then you have to save boxes and boxes of papers for years in fear of someday being audited and not being able to produce the demanded documents. If you’re unfamiliar with audits, here’s how they work: You’re guilty of whatever the IRS claims, unless you prove yourself innocent. If that sounds preposterous, I encourage you to ask a tax lawyer. “Innocent until proven guilty” does not apply. Freedom from spending days of tedium on mind-numbing paperwork and thousands on accounting fees has been an absolute joy. Highly recommended.

6) Freedom to invest without tax distortions that encourage capital misallocation.

The U.S. tax system encourages misallocation of your investment capital. It obscures the act of buying and selling securities based on a rational assessment of their value. For instance, you end up not selling a security you otherwise would simply because you don’t want to trigger taxes yet. Or you hold on longer than you might otherwise to get long-term capital gains treatment. Or you sell securities you normally would keep – for “tax loss harvesting.”

Moreover, you’re incented to give an artificial value premium to municipal bonds simply because they aren’t taxed, despite their negative real return after inflation. And your assessment of real estate’s value is warped too, by mortgage interest deductions and capital gains exemptions. The phrase “letting the tax tail wag the dog” encapsulates these distortions. Expatriation instantly liberates you from them.

7) Freedom from being crushed by the fiat currency landslide.

If you pay attention to the world’s major currencies, you’ll notice they fluctuate, often dramatically, against each other. In a year’s time, the price of an item can increase or decrease 20%, 30% – sometimes more – solely based on which currency you use to pay for it. The same item! The reasons for this are beyond the scope of this guide. Suffice to say, it has to do with government central banks manipulating their currencies by price-fixing interest rates and continually printing money.

Regardless of the reason for the volatile swings in the value of currencies, there it is. Reality. So what’s the risk for you? For one thing, you can have all your money in one currency, earn a positive investment return on paper (that you’re taxed on), but actually lose purchasing power. Think about it this way. The U.S. imports goods from all over the world. When the U.S. dollar drops in value, it takes more of them to buy those goods. That makes you functionally poorer, no matter what your account statement says. It’s that simple.

Every time the dollar drops, you get the short end of the stick. The value of your savings erodes. Your money is like ice cubes. The longer you wait to use them, the more they melt. According to the government’s official “inflation calculator,” the dollar has lost 95% of its purchasing power since 1913. See for yourself here: Inflation Calculator from Bureau of Labor and Statistics

When you’re out of the global U.S. tax net, you can freely diversify the currencies you own to protect your purchasing power from being diluted. If you do this as a U.S. citizen and the dollar drops, you’re taxed on the paper gains from those other currencies. In other words, you’re taxed for simply preserving your purchasing power. And if you choose the monetary metal, gold, as a fiat currency hedge, you’re taxed even more heavily. No matter what you do to try and preserve the purchasing power of your dollars, one way or another you’re slowly being bled. That ends on the day you expatriate.

Freedom from the accountability for how the U.S. government spends your money.

I sleep much better knowing I no longer fund the military-industrial-banking complex. Anybody can get mugged, but every U.S. taxpayer is a constant patsy for the political establishment. The rip-offs are so unthinkably big and endemic, there’s nothing an individual can do to stop them.

If you step back and take an honest look, you’ll see that the unfortunate state of affairs in America has resulted from the reign of both political parties. Don’t fall for the divide and conquer strategy that politicians use to corral people into “red” and “blue” sports teams. Donkeys and elephants are sold as team mascots pretending to be in mortal conflict. In reality both parties work together to advance their agendas in lockstep…logrolling…and when necessary, one side “takes the hit” whenever the illusion of accountability is needed. The system depends on the delusion that people can “vote the bums out.”

Meanwhile, every government failure becomes the pretext for more government growth. If you don’t get distracted by the spectacle, it’s impossible not to notice the pattern: Every political solution to any problem involves more regulation of your life and more taking of your money.

What are the consequences of this vicious cycle of growth through failure? Most Americans are familiar with the oft-chanted phrase, “We’re #1!” Humor me for a minute and try this exercise. Mentally separate yourself from the government you’re paying trillions of dollars to fund. Then, consider that the U.S. is:

• #1 in government debt and deficits
• #1 in unfunded liabilities, most importantly Medicare and Social Security
• #1 in building and maintaining the biggest WMD stockpile in the world
• #1 in weapon sales to foreign governments
• #1 in bombs dropped and missiles fired on other nations
• #1 in causing civilian casualties and property destruction
• #1 in “defense” spending – about as much as all other countries combined
• #1 in lawyers per capita, with over 1.1 million total
• #1 in law suits filed – millions and millions every year
• #1 in political lobbyists, special interest groups and campaign donations
• #1 in taxpayer bailouts of the politically connected “too big to fail” corporations
• #1 in people imprisoned – “The United States has 4% of the world’s population and 25% of the world’s incarcerated population.” -Wikipedia

I’ve avoided citing sources for these claims (save the last one) because I’m hoping you’ll be moved to verify them for yourself. The process is eye-opening. If you fall for the political fallacy that “the government is the people,” you end up with the faulty conclusion that America must be overrun by war-crazed, lawsuit-happy, debt-addicted criminals. How could anybody buy this after even a moment of clear thought? There’s certainly no resemblance to the American people I know. These problems stem from the military-industrial-banking complex, the dark heart of the U.S. political machine. Why continue being the stooge that supplies the money to run it?

Looking at the world with fresh, open eyes isn’t easy. One of the great benefits of liberating yourself from the grip of the U.S. political system is that the world becomes your oyster. You’re free to embrace places that welcome individuals who seek to live peaceful and prosperous lives.

9) Freedom to radically increase your charitable giving.

Individual liberty sparks our charitable instincts. If you care deeply about philanthropy, expatriation frees up vastly more of your capital to give away. Also, your philanthropic impulses are no longer distorted by the IRS. You can give to any charitable cause worldwide without being penalized if it’s not anointed as a tax-deductible entity.

The human impulse to help another in need is older than any government. Your judgment about how to contribute your capital to best help others will forever be superior to that of bureaucrats. Expatriation opens up new possibilities for you to reach out and help others in need.

10) Freedom from the risk of getting trapped.

Politicians don’t like it when the people who pay their salaries, fund their pensions, and fuel their jets close their wallets and walk away. As the number of renunciations continues to rise, it inevitably will turn into a political hot-button. The media will set the stage for politicians to denounce renunciation, paving the way to make exercising the right more difficult and costly. Wealthy people who renounce will be called greedy and unpatriotic. “Turning their backs on their fellow Americans” will be the sound bite wielded by politicians to conjure up the demand to “do something.” When that happens, I expect the exit tax to become dramatically worse. Instead of taxing unrealized gains at their regular rates, it may function more like the death tax. Add up everything you own – then cough up half. Otherwise sit down and shut up.

The other timing consideration is that getting a second passport is becoming more difficult, more lengthy and more costly. You need a second passport to expatriate, and countries are increasing the number of years it takes to gain citizenship. There are only two countries left in the world that have an economic citizenship program, which is by far the fastest way to get a second passport. If these two programs are pressured to fold, escaping the U.S. political combine will take most people five or more years, instead of less than one. You can bet on this: No matter what happens, it won’t get any easier.

If you like the above article, you’ll be pleased to know that the full 29-page FREE report American Expatriation Guide – How to Divorce the U.S. Government is a virtual treasure trove of information for anyone thinking of leaving the US… including in-depth, practical advice, and links to useful websites and forms you’ll need for expatriation. Read and download it here.

Frank. When I think of America I always keep a pocket of optimism alive somewhere in my soul. To be honest, I think this bill [the Healthcare bill] is the straw that breaks the camel´s back. We are already technically insolvent, and yet keep inventing ways to spend money (and raise taxes). This Healthcare bill precedes a debt downgrade, massive inflation, and the demise of the dollar. What was likely to happen is now written in stone. Seeing what is ahead, I am now afraid.

This article by Frank R. Suess is reproduced by kind permission of BFI’s Mountain Vision newsletter.

HIRE, FATCA, QFFI – BEWARE OF RAMPANT LAWS IN RESPONSE TO RAMPANT SPENDING

My friend´s concerns in the quote above are a reflection of the concerns and fears many of you may be experiencing these days. Here at BFI, we get numerous e-mails and comments that express a growing concern over government insolvency, debt, inflation and the increasing fiscal repression found in most of the G7 countries.

Indeed, over the past few weeks, an amazing sequence of laws, treaties and acts have been put in place to facilitate more deficit spending and more big brother powers. None of these laws enhance your liberties. None of them are aimed at protecting fundamental rights of freedom, property, or privacy. None of them enforce government fiscal discipline and accountability. On the contrary, they are tailored toward a continuation of out-of-control Keynesian madness — more public spending, more deficits, more debt, and of course, more taxation.

Instead of fixing fiscal and monetary issues at their roots, an internationally concerted crusade against ‘tax evaders´ and ‘offshore investment strategies´ has been launched. However, what may be considered as enforcement of law has long become a game of capital controls, protectionism and taxation horror.

In the UK, for instance, as part of the UK 2010 Budget, the British government last week decided to come down yet a little harder on offshore tax evasion. Penalties for offshore evasion were increased to a maximum of 200% of the unpaid tax. Penalties of up to 150% will apply where exchange of information is on a “upon request” basis rather than automatic. The stiffest penalties apply where non-compliance arises in jurisdictions that have not signed exchange information agreements with the UK.

Meanwhile, in Germany, the Anti-Tax Evasion Act was passed. This Act, approved by the German Federal Council, entails new regulations that deal with tax evasion and “unfair tax practices” (translation: low-tax jurisdictions with healthy balance sheets, such as Switzerland). Even in Israel, the Parliament permanently approved regulations for “enhanced” reporting requirements, as well as regulations against “aggressive” tax planning measures.

Finally, the worst — and most amazing — law of all was passed in the US under the very marketable title (you have to give them that) of ‘HIRE´. I briefly discussed this phenomenal law and particularly its section on foreign accounts in the last Mountain Vision Update.

After reviewing HIRE again and thoroughly studying its implications, I am convinced this law could actually be a blessing. I will tell you why in just a moment. But first, a bit more background…

HIRE – or simply another layer of hidden capital controls

Last month, President Obama signed into law possibly the “worst bill ever” (Wall Street Journal, November 1, 2009). Some predict that it will inevitably lead to full-scale socialized medicine. Then, shortly after the Health Care Bill had passed, Obama slipped in another silent bomb.

On March 18th, with little if any pomp and circumstance — downright unnoticed by most — he signed off on the US$ 17.5 billion ‘Hiring Incentives to Restore Employment Act´ (H.R. 2487), in brief ‘HIRE´. Amidst a long mire of legal gibberish that few would ever bear the pain of reading, provisions on ‘Foreign Account Tax Compliance´ (FATCA) were hidden.

With these provisions, the noose on capital mobility has certainly tightened a little more for Americans. But, the implications are much broader and may well, and possibly should quickly, affect the wealth management decisions of investors worldwide.

In brief, these provisions require that foreign financial institutions (so called FFI´s — and not just banks!) not only withhold 30% of all US source capital flows (remitting the collection promptly back to the US Treasury) but also to disclose the full details of non-exempt accountholders to the US and the IRS. In order to avoid the 30% withholding tax, an FFI would have to agree to become a QFFI (a Qualified Foreign Financial Institution). Of course, under such circumstances, a QFFI must fully report all “non-exempt US accountholders”, i.e. give up any and all client confidentiality against US tax authorities.

A concise and understandable summary of the law is provided by Withers at this link. Let there be no mistake, this latest AMERICAN law may have implications for ALL of us. It may very well affect YOUR portfolio very soon. Therefore, I strongly recommend that ALL Mountaineers study this thoroughly!

So, why on earth would I consider this horrific new law a potential blessing?!?!

The FATCA provisions are draconian. America´s current administration leaves George Bush looking like a whimp. These guys really push a heavy pencil. In fact, these laws are so blatantly coercive and outrageously encumbering for these so-called “Foreign Financial Institutions” (FFIs) that I don´t think they will accept it. In fact, I think there is a considerable chance of an international backlash. And that backlash might well severely impact US financial markets.

After pushing their QI (Qualified Intermediary) rules down the throats of banks worldwide, the US Administration now aims at creating a ‘co-operative´ global network of QFFIs (Qualified Foreign Financial Institutions). In other words, this network of institutions would administer America´s desparate search for tax dollars in every nook and cranny, spying and reporting on their client´s in the interest of squeezing that wealthy taxpayer lemon yet a little harder.

I don´t think this will happen. To use my friend´s words at the beginning of this Update, I believe this law is the straw that breaks the camel´s back. Even if all these FFIs were highly willing and dedicated to supporting America´s wild goose chase, the problem is that they would not know how to do it, and even if they did, they might not be able to afford it.

First of all, these rules are not practicable. For instance, these rules would require a hedge fund with QFFI status to identify on each subscription to the fund whether the ultimate beneficial owner is a ‘US person´. Now, this might be fairly straight-forward in a constellation where the investor is an individual who subscribes directly to the fund. However, what if another fund invests in this fund? And then, what if the investor in the second fund is not an individual but rather a foundation? What if this foundation is held by an international conglomerate of corporations? You get the idea.

Secondly, let´s assume that via the proper standards, procedures and, of course, in conjunction with the required IT systems, FFIs worldwide could in fact fulfill Mr. Obama´s daydreams, most FFIs would not be able to afford it. And many will not be WILLING to afford it.

I´ve discussed this with several top Swiss bankers and legal experts. They all agree that this law leaves many unanswered questions. If indeed the US is hellbound on pushing this through as defined, there will be a backlash, and soon. As stated in our last Update, non-US banks, asset managers, insurance companies, hedge funds and financial advisors may — once and IF the law is implemented as foreseen — very well simply stop investing in US assets altogether.

There´s a world of investment opportunities that are non-US. Why bother with American markets?!?!

Further reading: Peter Macfarlane has also written at length on this topic in edition 54 of The Q Wealth Report, which will be released in the Members Area shortly. If you are not yet a member and would like to find out what you are missing out on, please check our membership benefits page.