We all know that some of the wealthiest multi-millionaires and billionaires in America are looking into to the idea of becoming an expatriate (leaving the United States to live in another country, usually to avoid taxes). In order to do this properly and in order to fully escape the long arm of the Internal Revenue Service, one must renounce their US citizenship. The United States is one of the only countries on earth that will tax its citizens from anywhere in the world; even if their money was made outside of the US. This is a huge burden for many wealthy Americans, and renouncing their citizenship and leaving to a tax friendly nation is an option that can free them from paying these hefty taxes.
Today, the top federal income tax bracket is 39.6%. Think about that for a moment. That is nearly half of your income just in federal taxes! At what point does this become considered slavery? Now, add this 39.6% to your home state’s income tax. In California, the top income tax bracket is 13%. If you are wealthy in California, you are likely to be paying over 52% of your income just in federal and state income taxes. We haven’t even talked about being taxed on the other end yet. You may be paying a 10% sales tax if you live in some parts of California. If you own a home or land, you will also be paying between 1-2% in property taxes. As you can see, things start getting a little ridiculous.
The image below (from Wikipedia) shows the number of US citizens who renounced their US citizenship by year. Obviously, in a nation of nearly 330 million people, these numbers do not reflect a large outflow of American citizens. However, the increase percentage-wise in recent years is substantial. You can be sure that the majority of these people are wealthy and trying to escape the high taxes (why else would they be leaving?).
Most people find that there are far too many reasons not to give up their citizenship than to save money on taxes. Not only must you find a new place to live outside of the US, you are also giving up your protections under the US constitution. Freedom of speech, freedom of religion, right to bear arms, freedom from unreasonable searches and seizures, no double jeopardy etc….
Although many countries can offer similar rights, there is no nation on earth that gives its citizens all of these protections the way the US constitution does. It is certainly argued that many of these rights are being abused by the US government such as gun control laws, the NSA collecting “metadata,” etc…. however for most people, the US is still as good as it gets.
So what about the rest of us who would like to remain in the US and retain our citizenship but want to pay less taxes?
Stay in the US, but expatriate from your current State to a “tax haven state.”
I live in Sacramento, which is the state capitol of the Peoples Republic of California. I pay extremely high taxes and must abide by laws which are seen by many as absurd. We have a governor who one minute declares he wants to make the state a “sanctuary state” and defy the federal government, but the next minute is begging on his knees to president Trump for federal assistance in fixing the Oroville dam which was damaged this last winter. The people of California voted to spend state tax dollars on a multi-billion dollar bullet train that will connect the SF bay area to LA even though the state is in a severe financial deficit. It’s absolutely moronic. Business regulations are overkill in California. If you want to register a limited liability company (LLC) in California, it will cost you a minimum of $800 per year. In other states it can be as low as $30 per year. Basically nothing makes any sense in the golden state, and I don’t want to be around to pay 13% of my income to an insolvent, irresponsible government institution.
My plan is to move to a more tax and business friendly state in the near future. Currently there are just seven states that do not have a state income tax. They are:
- South Dakota
For me, I am looking to Reno, Nevada as a possible place to take up residency. It is only about 2 hours from where I currently live. If I move to Reno I will not have to completely abandon my extended family and friends, but at the same time I will save tens of thousands of dollars or more in taxes every year.
Most of these 7 states are fairly business friendly states as well, which is a plus for us entrepreneurs and investors! Consider expatriating to one of these seven states when you eventually start making big money, it is a very simple solution to saving up to 13% per year in income taxes.
Let us know what you think about the idea of leaving your home state for a “tax haven state” in the comment section below.