The US gets tough on tax exiles

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The US is getting tougher on tax exiles. As the Wall Street Journal reports:

Hundreds of Americans formally renounce their U. S. citizenship every year, many in order to protect their wealth from income, estate and gift taxes.

They do, of course, leave the US, usually for a tax haven, at the same time.

But now Congress has decided to do two things:

1) It has imposed on exit charge on those leaving the US on the unrealised capital gains they export with them;

2) It has imposed a tax charge on gifts from former US citizens to those still holding that status meaning that US charges on estates cannot be avoided simply be leaving the US tax net as the tax will be charged on the re-entry to the USA.

Of course, these must be read in the context of the US' distinct and unique citizenship based tax regime but both are important. What they say is simple: capital may be mobile but ultimately people are tied to a place and have a duty to it. That duty is settled by the payment of tax, and it is right that this duty be enforced.

I welcome both moves.