Friday, July 4, 2008

Checkout Of The U.S. Anytime, But Your Money Can't Leave

President Bush recently signed the Heroes Earnings Assistance and Relief Act of 2008, aka, the HEART bill.

Hidden in the bill is new taxation on those who renounce their citizenship. The bill specifically calls for taxation on the net unrealized gain in their property, as if the property had been sold. Call it the "Hotel California" Tax, checkout any time you want, but a good chunk of your money can't leave. The first $600,000 in estimated net worth is exempt, then the tax kicks-in at regular rates. Thus, this tax creates the potential for huge taxable phantom gains, with huge cash flow ramifications.

The bill also applies to foreigners who are living and working in the United States legally with green cards. When they decide to go home, the tax kicks-in for them, also. The green card aspects of the tax, have double ramifications. First, at a time when immigrants are a political hot potato, this tax creates incentives for them to remain in the United States. Secondly, the tax will discourage high income, highly skilled foreigners from entering the country in the first place.

From the bill, JCX-44-8,:

In general, the provision imposes tax on certain US citizens who relinquish their US citizenship and certain long-term US residents who terminate their US residency. Such individuals are subject to income tax on the net unrealized gain in their property as if the property had been sold for its fair market value.


  1. Preemptive action?

    This sounds like Zimbabwe in the early 80's. The farmers couldn't sell their farms and leave because they couldn't take the $$ with them.

  2. I would be curious what senator or congressman inserted this bill into the law. They appear to be acting like your money...”is their money”...and probably have the financial education level of a 13-year old kid. If I chose to move $80 million of my personal money out of the US....without their knowledge....(if I even had such a fortune)....I could accomplish this in a couple of days and they’d never notice. There are millions that appear in Panama each week...compliments of guys in California who don’t want their cash sitting in the US banking system.

    If I were to make a guess of the strategy of this congressman and his lobby group....they are expecting a cash-flow problem with the US economy....with fair portion of folks attempting to move the cash out of the US in a hurry...similar as you suggest in Zimbabwe as things dissolved. The lobby group probably has a mechanism in place to funnel naive folks straight to their doorstep, and get the cash quickly out (legally).

    If you find the congressman, you will find the lobby group...and all of this will be explained.

  3. South Africa has a similar policy. It is aimed at preventing emigration of productive folks out of that seething cauldron of a country.

    Wonder what this law is aimed at?