David Lesperance shares the following through an email:

Dear Mitch:

I thought I would follow-up on my last email now that the news has broken that Eric Schmidt applying for Cypriot citizenship. As an advisor to wealthy American families for over three decades, I can confidentially say that I was not at all surprised by this revelation. In fact, I have had a number of American clients acquire citizenship in EU countries like Cyprus over the last two years. Some were entitled to those citizenships through lineage, including Sephardic heritage. Those who did not happen to have the family history opted for either a) Citizenship by Investment or b) Residence by Investment which would lead to citizenship after a naturalisation period.
Their motives for acquiring these citizenships were often a combination of:
a) Having the option of renouncing US citizenship should certain tax proposals become reality: (which will likely be the case if the Democrats can win both of the January Georgia senate races): Specifically, capital gains rates rising significantly makes the math obvious for those with large capital gains;
b) Mobility in a time of Covid-19: Many of my American clients engage in significant and critical business and personal international travel. The current restrictions on their mobility were obviously not going to lift given the present track of the pandemic in the US, so they armed themselves with this mobility tool;
c) Backup Plan: No matter where one stands on the US political map there is little argument that the recent elections have shown that a deep polarisation exists in the US. While my clients hope for the best for the US, they also realise that there are a number of ways that things could go sideways. Therefore having a Backup Plan for themselves and their families ranks in prudence with having fire insurance and a fire escape plan if you live in a wildfire zone. Acquisition of these things does not mean that one desires a fire, it is simply a recognition that if a fire does come, these tools can be used to avoid devastation.
Please find attached a recent Press release which discusses the current trend of Wealthy Americans getting such Backup Plans. If you are thinking about writing more expansively on this topic, please don’t hesitate to contact me.
Stay Safe
Here are the contents of the attachment:

The 6045 Americans who renounced their US citizenship to date in 2020 are just the tip of the “lost-tax-revenue” iceberg asserts International Tax & Immigration Expert David Lesperance

Oct 31, 2020

“The 6,045 US citizens who renounced their US citizenship so far in 2020 is just the tip of the iceberg and represents a substantial and permanent loss to the US tax revenue base” says tax advisor David Lesperance. Lesperance has been helping High Net Worth and Ultra High Net Worth American clients permanently leave the US tax system for 30 years.

The Federal Government’s Quarterly Publication of Individuals, Who Have Chosen To Expatriate lists only those renouncing US citizens (or long-term green card holders) who exceed the minimum threshold of over US$2Million in worldwide assets and/or averaging US$170K in annual tax paid (meaning their taxable income was greater than $500-600K per year). Once these “Covered Expatriates” reach these minimum thresholds, the government does not report whether they are worth $2M or $2 Billion!

Given current estate tax exemptions, renunciation as a strategy does not make financial sense for those who have less than $25Million in wealth. Therefore, those on the List can logically be considered “Super Tax-Payers”. Lesperance says, “They are the proverbial Golden Geese of the IRS…the top 0.1%. To replace the lost tax revenues of just a single one of these Super Tax-Payers would require several hundred new average tax payers.”

Lesperance warns “Under the current tax collection model, the US tax system is highly dependent on the Golden Geese. Given that in the most recent data (2017), the top 0.1% contribute over 19% of the total personal tax collected, the future lost tax revenues from departed Golden Geese is enormous! “

The US Government does not comment on why these Golden Geese have left and why many others are considering leaving. Indeed, Mr Lesperance observes, “ The US Government collects a final cheque from the Golden Geese but doesn’t acknowledge the loss of future income or state why this exodus is exploding.”

He goes on to say, “This leaves the politicians free to ignore the devastating loss of future annual tax revenue and to continue their populist rhetoric of claiming even more revenue through new ‘Tax the Rich’ proposals. Instead of understanding the drivers behind their departure, these Super Tax-Payers are increasingly vilified by politicians and the media as – greedy, selfish, un-patriotic, etc.”

There is foreboding in Lesperance’s assertion that “ After decades of dealing with these Super Taxpayers, I can conservatively estimate that a minimum of 10 Golden Geese are thinking of renouncing for each one that has already left. This means there are currently well over 60,000 Super Tax-Payer US citizens contemplating renouncing…and if they do leave, it will blow a giant hole in government tax revenues!”

Lesperance points out that thirty years ago the main reason for renunciation was estate tax – an issue that has peaked and waned with changes in tax laws over the years. “However, in the past few years my clients cite extreme political polarization and dysfunction as equal motivating factors along with taxation.

“Due to globalization, Golden Geese can now reproduce their personal and business lives in many places. If they wish they can still access American benefits, such as the stock market, without the burden of being US taxpayers.

“Logically US politicians should develop policies to retain the Golden Geese and their oversized tax contributions. Instead they succumb to espousing short-sighted populist “Soak the Rich” rhetoric. Remember Elizabeth Warren’s ‘Billionaire Tears’ coffee mugs?”

Lesperance sums up: “Each time the Golden Geese are attacked or feel nervous, my phone rings. Unfortunately, until the day that this accelerating loss of tax revenue is acknowledged and addressed, I don’t see anything other than a very busy future.”