Cross posted from RenounceUScitizenship.
Why you ask? It’s simple. With Congressman Ryan on the ticket, tax reform will move to “front and center” of the 2012 Presidential campaign. Congressman Ryan supports territorial taxation. Congress just passed HR 6169 a bill called “Pathway to Job Creation through a Simpler, Fairer Tax Code Act of 2012“.
On August 8, 2012 “Just Me” posted the following at the Isaac Brock Society:
One of the last acts of the House before they went on summer recess was to pass HR 6169. It has a snowball’s chance in Hell of passing the Senate as currently configured. It was seen as a partisan political document to campaign on, rather than a realistic attempt at tax reform. That is how the game is viewed in DC by the political wonks, and in fact it is how it plays out in reality. However, since it is “game on” time, I like that this gauntlet was thrown down. The title appeals.
It was called “Pathway to Job Creation through a Simpler, Fairer Tax Code Act of 2012″
Here is the text version. It got NO votes from the Dems in the House. So why do I bring it up?
Take a look at Section 2, (B) (5) (F) of the legislative language, and you will see the following language that should be of interest to all here:
(5) makes American workers and businesses more competitive by–
(F) transitioning to a globally competitive territorial tax system;
Here is how the non partisan global publication, Tax News reported it, if you wish to read further. You can Google search for many partisan opinions if you are interested.
Congressman Ryan discusses HR 6169 here:
Representative Ryan discusses Bill HR 6169 (tax reform bill)| U.S. Congressman Paul Ryan paulryan.house.gov/news/documents… – Change to territorial tax!
— U.S. Citizen Abroad (@USCitizenAbroad) August 12, 2012
This is worth listening to. Mr. Ryan talks about the U.S. in the global economy and the role that taxes play. He actually compares the rate of business tax in the U.S. to the rate in Canada. I do agree that all the discussion of “territorial taxation” is in the context of corporations. But, once the principle is recognized in relation to corporations, it is a smaller step to argue that it should be extended to people, as this comment thread starting here recognizes.
Bottom Line: With Congressman Ryan on the Republican ticket, tax reform will become a very public and prominent campaign issue. This is very good news for U.S. citizens abroad. Speaking of tax reform, see what Dan Mitchell has to say and note that he endorses territorial taxation.
Very important! Dan Mitchell makes the case for territorial taxation – Thanks Dan! danieljmitchell.wordpress.com/2012/08/11/a-p…
— U.S. Citizen Abroad (@USCitizenAbroad) August 12, 2012
Shadow Raider, that is HUGE. I wonder if those dummies are ever going to wake up and see that they are really at a disadvantage. US financial services are walled-off and Americans are flat-out prohibited from doing business with foreign companies already (and vice versa). Try using an American credit card with Skrill (like Paypal from the UK). Mine was denied. Yeah, I still have to keep some US bank accounts and credit cards because I can’t set up an account anywhere BUT the US and Brazil. Some vendors don’t like Paypal because their fees are kind of high. So if the vendor only accepts other forms of payment, the American has to go without. If things keep going the way they are, Americans will have to carry Travelers Cheques because their ATM card isn’t going to work at a foreign bank, especially if it’s a non-FATCA compliant bank. To the best of my knowledge, no other citizen of any other country has to deal with these issues.
(Just for clarification though, Brazil doesn’t have lower tax rates; if you calculate the total tax here, it’s worse than most of Europe. Things are very expensive here.)
@Just Me, Petros, the problem with the WP article is that it is written with all the typical Democrat tax increase dog whistles. Take this sentence:
So cutting taxes on rich people is “regresssive” and raising taxes on them is “progressive”. Despite the fact that less progressive doesn’t equate to regressive at all, isn’t it disgusting how the left have managed to hijack this terminology? Earth to liberal IBS readers: Any switch away from citizenship based taxation is “regressive” in the eyes of the left.
So Miller thinks that Ryan stating that everyone can’t suck on the government tit for everything is somehow outrageous?
I am certainly more afraid of Matt Miller than Paul Ryan. But Ryan is a wind bag.
@geeez, I was referring to personal income taxes, whose top rate is 27.5% in Brazil. This is much lower than the 40-50% in most of Europe, Canada (with provincial tax) and the US (with state tax). Investment income tax in Brazil is mostly 15% and some investments like savings accounts are not taxed.
However, from what I’ve read, I agree with you that Brazil has higher total tax than the US (but not western Europe, see http://en.wikipedia.org/wiki/List_of_countries_by_tax_revenue_as_percentage_of_GDP). The corporate and consumption taxes there are very high and it makes products and services expensive, as you said.
Re: The difference between Romney and Obama is ornamental at this point.
The one thing this VP choice has done, is move the conversation of the election back to budgets and deficits. That is probably good, although it is so easy to demagogue this, I am not sure it benefits anyone, or leads to intelligent choices and shared sacrifice that will be necessary to get out of the conundrum.
Now, I agree with your characterization above, as I don’t see how, the supposed Wonk, does anything to change the trajectory of the debt in spite of how he is portrayed in the media.
I don’t think Americans are willing tolerate the pain necessary from the depression they need to have with all the entitlement and percent discretionary budget slashing that would be necessary to bring things back into balance. (Can’t stop the war machine spending, you know!)
Now, ConfederateH (and most Republicans) doesn’t think they (we) should have to pay any more taxes to pay for the proliferate spending in the past or pay for our WARS and Medicare part D, even seeing how low the ‘effective rates’ have been, so, inflation seems the only option by default. We can only hope all the other fiat currencies are equally inflationary, and relatively speaking, the U.S. dollar remains within tolerable ranges.
Bottom line, just like businesses find it very hard shrink yourself to profitability. (In the airline business I was in, it created a death spiral.) America will not shrink itself to budgetary balance either. The answer is some major economic growth, but with the consumer demand that usually comes from growth, then inflation is baked in the cake.
Right now, all the extra dollars are just being moved around trying to be hide from governments, and just being accumulated by the super rich whose spending doesn’t really add anything to aggregate demand, so not contributing to inflation yet as represented by Treasury bill rates. How much longer that will be true, and how much inflation there will be is open for debate.
No option is good. Neither contractionary or inflationary regimes are attractive. There will be more pain to come, for sure.
Interesting read tonight by David Stockman, Conservatives God Reagan Budget Director…
Paul Ryan’s Fairy-Tale Budget Plan
“Now, ConfederateH (and most Republicans) doesn’t think they (we) should
have to pay any more taxes to pay for the proliferate spending in the
past or pay for our WARS and Medicare part D, even seeing how low the
‘effective rates’ have been, so, inflation seems the only option by
Wow, I haven’t lived in the US for 25 years and I renounced 2 years ago and you think I should have to pay for those wars and Medicare? It sounds like you want me to pay an ex-post-facto exit tax. Bravo, Levin would be proud of you.
The correct term is “Odious Debt”. It applies when a the debts of a dictator, or in the US’s case a thug-labor-union-ocracy, are rescinded.
“even seeing how low the
‘effective rates’ have been”
Bwaaa! Why don’t you tell Petros that 383% of his wealth is a “low effective rates”. You sound just like those guys who automatically label ANY tax cut as “regressive”. I am very tempted to call you a knee-jerk liberal.
@Confederate, actually I’m quite happy for the United States to raise taxes on the around 50% who pay no income taxes, so that they can avoid going after expats. The problem as an investor, and I saw the writing on the wall, was that I knew they were planning to increase taxes on so called “passive” income. My goal in life is to live off passive income and hell if the USA was going to get whatever was leftover after Canada got done picking me over. I can deal with government as predator, but I can’t handle US government scavenging as hyenas and vultures after the Canadian government has already gotten the lion’s share of my profits.
Governments should really focus on the meat within their own border instead of going after expat meat. Let them feed on the citizens within the country and leave expats alone. We have predators of our own to deal with.
Shadow, that statistic looks like it doesn’t include state or municipal, only federal taxes. Brazilians used to be big tax evaders/cheaters/etc.. sonegação, they even have a special word for it.. so the government implemented all sort of consumption taxes. The average amount of tax in food = 35%. Imported products and electronics = 100%. ICMS (state sales tax) here is 18%. And guess what? It’s owed every time the product changes hands!! I almost fell out of my chair when I discovered that. I’ve gotten hit with that import tax several times and it hurts. (I had to provide state and federal tax clearance certificates with my naturalisation application too, so I’m glad I paid those bills.)
Taxes on cars.. get ready for this! (These numbers are from 2011)
O Chevrolet Malibu, por exemplo, custa a partir de R$ 89.900 no Brasil.
Tirando IPI, ICMS e PIS/Cofins, o valor poderia cair para R$ 57.176.
Mesmo assim, estaria mais caro do que nos Estados Unidos, onde carro sai
por R$ 42.300 com impostos para o consumidor de Nova York.
A Chevrolet Malibu, for example, starts at R$ 80,900 in Brazil. Taking out IPI, ICMS, PIS/COFINS, the value could dall to R$ 57.176. Even then, it would more expensive in Brazil than in the US where the car goes for R$ 42,300 with tax for a New York Customer.
Hmm.. let’s do the math: all of those taxes added up to be: R$ 23,724 or 42% the value of the car. Right now the exchange rate is about 2 Brazilian Reais for 1 US Dollar.
Brazil is only cheap for a poor Brazilian that eats only beans and rice and lives in a shack. For the rest of the people that live a normal life, have a house, car, laptops, etc.. it’s very expensive.
The reason is that aside from income tax, all of the taxes are consumption based. IMO, consumption taxes are fairer because if you don’t consume, you don’t pay. But they have consumption taxes on everything!!
Ahh.. and not to forget the 8% tax on credit/debit transations outside of Brazil. Use a Brazilian credit card on eBay, pay 8% more. There’s lots of little taxes like this that I bet the statitisc gatherers left out because they are consumption-based. I used to live in Western Europe and I can say for sure that aside from food and lodging, almost everything else is higher. People who travelled there recently also confirmed the same thing for me.
Hey! Things could be worse. In Argentina, if you are farmer that actually produces, the government there will hit you with 50% (on wheat) – biodiesel just got raised to 32%.
Petros, at least for me, the US can raise taxes to 90% on incomes over $10.000/year and I can care less. What they do there is their deal. My objection is that it is so hard to cut the ball and chain and their anti-mobility rules that they create.
Amazing isn’t it how the US has come full circle and now they have implemented so many rules right out of the communist handbook. I know that most of the US Resident-Citizens aren’t aware of these rule, hence the lack of outcry. I can never talk about these things with my grandfather. He was born in the 1920s and served in WWII. He’d probably die from sadness if I painted a clear picture for him.
Welp, with more and more of the stupid limiting rules they make up, it seems to reduce the emotional distress involved with handing over US Citizenship. For me now, there is none…
*Does anyone here honestly think that Romney/Ryan ticket is going to get elected? There’s too many people in the States that think that things should be handed to them on a silver platter. Obama is going to end up getting re-elected and we’re going to have 4 more years worth of America going down the toilet. ~color me disgusted~.
@The_Animal, that will help my large short position in US dollars.
@geeez, Those statistics include all tax revenue, from all levels of government. And Brazil does rank pretty high on the list. In western Europe things may be cheaper than in Brazil, but people there pay almost twice as Brazilians in income taxes. I suppose that if you count all expenses, including products, services and taxes, it’s more or less the same. You could argue, however, that European taxes are better used as government services in Europe have a higher quality.
Thanks for the long explanation, now I understand why Brazil chose to implement such high consumption taxes instead of high income taxes. It’s much harder to cheat on consumption taxes, and this is one of the arguments for the “fair tax” proposal in the US (national sales tax as a replacement for income taxes).