Tax in US vs other nations and Tax Flight

I was wondering today about the canard that we cannot tax the rich in America too much or they will flee to other countries. Until now, I hadn’t thought about the opposite perspective. Taxes in America are pretty darn low versus anywhere where you’d actually want to live. If tax flight is true, why don’t more rich foreigners move here?

Or are taxes actually pretty high on the rich versus some places in Europe? For instance I hear that capital gains taxes are low or non-existent in some places in Europe although I might be mistaken. Maybe I’m thinking of corporate taxes.

Plus, why don’t more upper-middle class Europeans retire here, for the same reason? Property is cheap and there isn’t a very large VAT/sales tax vs Europe and prices are low.

Since I don’t see a large influx of retirees and ex-pats moving here for tax purposes, I don’t believe the line about our rich people moving overseas if we raise our taxes too high.

There are more reasons for one’s choice of domicile than just taxes. And it’s not like the taxes are prohibitively high, even in places where they are higher.

More than what? How many move here now? Some statistics would help back up your claims. BTW, who makes the claim that people will move out of the country because of high taxes? Capital can move without the people behind it moving.

Claims? I’m asking. People who think that there will be a flight from America if we don’t slash taxes should back up their claims.

Who is making that claim?

That is what John Mace is asking about and I suppose I am too now. I never heard the claim that much higher U.S. taxes would cause rich people to flee the country. That isn’t really something that makes a good scare tactic. Where did you hear this and how often? The usual claim is that the money will move offshore or rich people will always be able to find ways around tax laws, not that they will physically flee the country. I don’t think most people care if they want to move somewhere else.

Plus, physically fleeing the country wouldn’t be sufficient to escape the US’s tax jurisdiction. They would need to renounce U.S. citizenship. It’s hard to imagine more than a tiny handful of billionaires having enough money to make something so drastic worthwhile.

Healthcare, for one. They’re going to need more of it, not less, after retirement – and I suspect that the cost of non-socialized healthcare, for those individuals, is more than any lessened tax burden might be. (There’d also be less incentive to move after retiring since income tax would no longer be an issue. Other taxes still would be, sure.)

Firts, taxes in the USA are NOT low. You have to pay:
-income tax (Federal)
-income tax (State-and in some cities as well!)
-sales taxes (most states)
use/excise taxes (most states)
-inheritance taxes/death taxes
motor vehicle and energy use taxes
It is a big lie that US taxes are low-plus, you pay taxes on the income you derive from invested/saved money (double taxation).
Unlike in Europe (where you actually get something for your taxes-like tax funded healthcare), in the USA, your taxes go to pay for a huge military and endless foreign wars.Pls, we have an enormous government sector (hge and increasing all the time).

Music’s Top Twelve Tax Exiles.
Top ten celebrity tax exiles.
Wikipedia lists a few more.

Another article about Bono and U2.

Looking through the list in wikipedia, it seems most wer fleeing tax rates of 80% or more. If we were talking about raising taxes in the US to that level, then maybe rich folks would think about fleeing. As it is, we’re nowhere near that.

Hard numbers on tax evasion or “tax optimisation” are hard to come by for obvious reasons, but according to this cite, the French government estimates it loses between 40 and 50 billion euros per annum thanks to Switzerland and offshore fiscal paradises (3% of the total GNP). In the UK, 97 billion pounds (6% of the GNP, 16.6% of the total tax base).
But the same cite claims that the IRS says they lose out 300 billion dollars per year, or 16% of the federal total tax base too. So it would seem the rich will move their money to where it’s taxed less in the same proportions, no matter what the exact tax setting is back home.

At the federal level, no. Federal civilian employment has held pretty steady around two million for some 70 years while the US population has more than doubled. Now if you want to include the number of private employers (and their employees) that have federal government contracts you may have a case.

Try again.

The popular argument has always been that extremely high tax rates on top earners will result in those earners using various off-shoring tricks to pay a lower effective rate or doing things that makes their income much lower than it actually is. I think there will always be **some **of that.

What is more concerning about very high tax rates on top earners is that it makes your budget extremely unpredictable year to year. In the 1990s there was a guy who worked for the State of California and he grew very alarmed because he found that a huge portion of California’s budget was coming from the top 1% of earners. In historical data he had always found that California’s tax revenues were directly linked more or less to employment markets and the general economy of the State. However, during the dot-com boom he noticed that tax revenues were moving higher in a manner not consistent with the broader Californian economy. What he realized was that a small portion of Silicon Valley types were now contributing disproportionately to the State’s revenue, and that if he wanted to accurately forecast government tax returns he would have to start making his forecasts based on tech company performance and not the broader California economy.

What he also realized is that the income levels of the top 1% are so volatile, and that if the entire state’s fiscal situation was essentially dependent on the top 1%, so too would the state’s revenue be extremely volatile. He forecast that unlike in the past, California’s revenue would swing wildly from year to year. When the dot-com bubble burst, he was essentially proven correct–the AGI of top 1% individuals in California decreased by far greater percentages than did the rest of California. However by 2005 the lessons of the dot-com bubble/burst essentially were forgotten and he was making the same warnings. This time saying you could end up with revenue shortfall of $6bn or more. Sure enough a few years later and California is printing IOUs.

So the real problem I think with having the top 1% pay a disproportionate share of tax revenue is it becomes very difficult to budget and you end up with massive budget shortfalls. A solution doesn’t even have to mean reduced taxes. Instead it could mean having a strictly managed Rainy Day Fund; unfortunately Rainy Day Funds are rarely funded adequately by State governments and they are frequently targeted as fat cows from which legislators can get money for other things. Another solution is also to allow high income earners with variable pay to “average” their tax payments over several years, to the benefit of both the tax payer and the government.

Tax does not equal “income tax”.

I don’t know if the US pays high or low taxes, but selectively choosing income tax out of all the taxes doesn’t prove it one way or the other.

Here is a link showing ALL taxes as a percentage of GDP. Again, the idea that Americans are overtaxed just doesn’t stand up to even the lightest scrutiny.
same numbers, different write up:

You changed the argument. You’re not talking about the overall tax burden, you’re talking about the tax burden on high income individuals. Taxes in the U.S. are low as a percentage of GDP in part because the poor and lower middle class pay very little in tax compared to many other countries - the lack of a VAT and the huge number of tax credits and tax breaks for families, home ownership and other activities have driven effective taxes way down for the bottom half of the population.

Do high tax rates cause wealthy people to move to lower-tax jurisdictions? Of course. All you have to do is look at the movement of people within the U.S. from high-tax states to low tax states to see this pattern. In Canada, when our taxes were much higher we had constant articles in the papers about ‘brain drain’ - people who expected to make very large incomes would leave Canada and move to the U.S.

But the people themselves don’t have to move - they can just move their income-generating activity out of the country. GE and other big corporations pay a lot less in effective taxes than the tax rate would indicate, and one of the primary ways they do that is to move production offshore, then leave the profits offshore as well because they are only taxed on the profit when it comes back into the U.S. So many big companies have massive cash accounts sitting in overseas banks.

Another factor that will drive businesses and capital out of the U.S. is the immense size of the debt. Anyone planning for the long term (and businesses plan for the long term as well as the short term) has to consider that at some point, all that deficit spending has to be stopped, and when that happens taxes will have to be increased to pay down the debt and maintain the level of current services. Or, the U.S. will maintain the debt, and that will cause the U.S. economy to grow at a lower rate than other countries like Canada, which will in turn cause its standard of living to lag and you’ll lose people that way.

In Canada for example, when our debt was up around 70% of GDP our interest rates were about 2 percentage points higher than the U.S.'s, and our dollar was 20% lower. The net result of that was a reduction in growth and a hit to our standard of living compared to Americans. That in turn caused some Canadians to emigrate. Now the situation is reversing itself because we took the initiative to get our fiscal house in order over the past twenty years.

If you’re worried about people leaving the country because of high taxes, don’t look towards Europe - look towards Canada, which is the obvious place such people would go. We’re your main competitor for people, your main trading partner, the biggest source of your imported oil, etc. Our culture is almost the same, we have open borders, and people who emigrate to Canada can easily travel to and from the U.S. to visit relatives or maintain business activity or whatever.

In my opinion, Canada is poised to trade on some very significant advantages we have over the U.S., which includes a less progressive tax system and lower taxes on corporations and high income individuals. Right now we’re pretty close to you - within a couple of percentage points in most measures - but that gap is going to widen substantially over the next few years as you tackle the major shortfalls in your entitlement programs and the debt.

Canada’s top federal marginal tax rate is 29%. Our corporate, capital gains, and dividend taxes are all lower than yours. We have no estate tax. Provincial taxes are typically a bigger slice of the overall tax pie than state taxes in the U.S., so in some provinces like Quebec taxes are still significantly higher than they are in the U.S. for upper-income people. But in other provinces, that’s not the case.

Here in Alberta we have a provincial flat tax and no sales tax, and our overall tax burden here is lower than in any other jurisdiction in North America. If you insist on cranking up the taxes on the rich by a large amount, I fully expect to see some immigration to Alberta and Ontario from the U.S., and I expect to see more U.S. businesses set up offices and factories in Canada to avoid U.S. tax. That’s exactly what happened in reverse when the U.S. had the tax advantages, so I don’t see why it wouldn’t happen again, only this time in the other direction.

I don’t think moving from state to state falls into what the OP is talking about. There are no barriers to doing that, and many to moving to another country. It’s not that easy to just emigrate to any random country-- you’ll have to qualify for residency in the that country. Some are easy, some are very difficult.

At any rate, I still don’t think your going to find many people making the argument that “we cannot tax the rich in America too much or they will flee to other countries”. Unless, that is, we’re talking about bringing back the crazy rates we had years ago-- like the 80% tax rate mentioned for other countries in the wikipedia link, above.

The point is that the fact that people will move from one state to another means they will also move from one country to another, The margin for moving to another country is undoubtedly higher, which means fewer people would choose to do so, but moving to another state is no picnic, and the fact that people will incur those costs to flee high taxes means that some smaller percentage of them will do so even by crossing country boundaries. We can argue over how much smaller the percentage would be, but not that it wouldn’t happen at all.

It is not very hard for a wealthy person to emigrate to Canada. If you’ve got a certain amount of wealth, you’re welcome here. Culturally, you’d notice a bigger difference moving from California to Texas than you would moving from Seattle to Vancouver.