Assume that 1) a person has several million dollars and wants to retire, 2) they probably have 30 years left to live, 3) their investment style is such that the majority of their future income would come from long-term capital gains. Given these assumptions, wouldn't it make sense for that person to acquire citizenship in a country that has no capital gains taxes (e.g. Switzerland, New Zealand, etc) and renounce their US citizenship? Without capital gains taxes, assuming a 9% annual return, each unspent $1m would grow to $1m x (1 +9%)^30 or $13.27m in 30 years. With a 25% cap gains tax, each million would only grow to (1 + 9%(1 - 25%))^30 or $7.10m. It seems to me that such an individual would gain another 87% (13.27 / 7.10 - 1) in long-term investment earnings simply by changing their citizenship. If this is true, it would seem to provide wealthier US citizens a compelling reason to take their money elsewhere which would hurt the US economy in relative terms. Is this correct?
2006-10-28
09:48:59
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2 answers
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asked by
polyglot_1234
3
in
Business & Finance
➔ Taxes
➔ United States