For those of you who have U.S. passports (or have permanent residency status AKA “green cards”), leaving the country just became a little more expensive.
We now have an exit tax–new Section 877A of the Internal Revenue Code.
The new law was signed on June 17, 2008. I’ll get a “plain English” explanation shortly. In the meantime, feel free to print off and read the Joint Committee on Taxation’s explanation. (Warning: massive PDF). The discussion you want to read starts on page 36.
The exit tax will raise an estimated $411 million in tax over the next 11 years, they think. (Sorry, the source is in Tax Notes Today, locked inside Lexis-Nexis. 2008 TNT 118-2 is the cite, if you want it. I couldn’t find the source of the estimate, which apparently was a Baucus/Grassley press release).
Comment #1: good luck with that.
Comment #2: peanuts, really.
The exit tax rules (new Internal Revenue Code Section 877A) are buried in a special law aimed at giving tax relief to people serving in the Armed Services.
Comment: this is a classic example of “for the children” politics.
2 comments ↓
Comment #1: good luck with that.
If you mean the IRS will not get any money.
The law is designed to prevent US citizens with assets like mutual funds from renouncing and living in Belize. Those assets are in the US and under US gov control. The law will not collect revenue, but will prevent losing future revenue. Notice the very low limits $2million total, $600k gains that trigger it.
If you had assets outside the US you would be risking the possibility of a future tax treaty with the US gov. And other forms of retribution, for example if your flight made an emergency landing in the US, or even flew over the US. You might find yourself in the airport detension center.
Finally I suspect the law is a set up for a massive tax increase as with the economy the way it is government salaries pensions and SS are adjusting up with CPI increases, but private sector incomes are going down or being lost. That leaves taxation of assets to make up the difference. I would not be surprised if they are considering a wealth tax of say 1% of net asset value, which is what is done in France I believe.
BTW interesting site
Agree with George. They are constantly downsizing what they call “rich” and are also planning on eliminating tax deductions for 401Ks and replace contributions with a forced social security program. It is time to get the hell of this country.
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