As the debate over the United States’ fiscal cliff continues with seemingly little progress, we can’t help but take a different (albeit predictable) view on the whole fiscal cliff thing and how the media is portraying it.
But before we get into more details on how we view the fiscal cliff, let’s talk about what a fiscal cliff is to start with.
What is a Fiscal Cliff Crisis?
We have been reading “Fiscal cliff” all over the news, but what does fiscal cliff actually mean?
Let’s put it in simple terms, the fiscal cliff refers to the combination of five tax increases, or tax hikes, with two government spending cuts that were going to occur on January 1st of 2013, under President Obama’s rule.
The fiscal cliff must have been correct to avert an economical cliff, a financial crisis, and a possible recession.
The chain reaction of the massive fiscal cliff includes decreased household incomes, plunged unemployment rates, which on its part will cause governmental expenses due to the federal unemployment benefits, and all of which will cause shaky investor confidence.
Obama wanted “an extension of the 2 percentage point payroll tax cut” also known as payroll tax holiday, and spending of “at least $50 billion” in 2013 “to boost the economy.”
Bush Tax Cuts, Government Spending Cuts, and Alternative Minimum Tax
Let’s take a closer look at what caused the fiscal cliff: the tax increases and spending cuts.
The tax increases were partial because the Bush tax cuts expired: the Economic Growth and Tax Relief Reconciliation Act.
Bush-era tax cuts were designed to stimulate the economy and end the 2001 recession, but after the tax increases took place
Going over the fiscal cliff on the other hand would noticeably reduce the federal budget deficit.
The federal government spending was going to exceed the $16.394 trillion national debt ceiling early in 2013.
The federal government even pushed the Budget Control Act: going above the debt ceiling or even canceling the debt limit altogether.
The fiscal cliff deal later came to life, which does two things: permanently adjusts alternative minimum tax income exemption levels to inflation while giving lower-income taxpayers bigger exemptions and new credits to take them out of the AMT.
The Fiscal Cliff and Going Nomad
In fact, it is government debacles like the fiscal cliff and its sequela that form the very core of the Nomad Capitalist philosophy: don’t let yourself be eternally tied to any one government.
The United States has long been known around the world as a place for innovators, hard workers, and people seeking a better life to come.
Despite arguably much better options (including, for some aspiring expatriates in the developing world, their own home countries), that luster continues to shine around the world to this day, as investors from China, Costa Rica, and points in between flock to file for EB-5 investment visas and fork over million dollars investments for U.S. green cards.
Once they get one, they’ll become subservient to the U.S. government’s far-reaching hand as a thank you for their cash, and for buying into the patina of America as the world’s shining city.
This relates back to the fiscal cliff in that it’s important to not only know your options but to act on them if you value your freedom.
Many savvy American entrepreneurs and innovators are getting a brutal reminder that both they and their capital are at the mercy of an increasingly desperate electorate and government that don’t often have their best interests in mind.
Business owners from small shopkeepers to captains of industry have been publicly wringing their wrists about the tax increases, health care mandates, and other “pro-consumer” (read: anti-business) regulations that are forthcoming.
The Pro-Consumer Law for example proposes a series of new obligations to suppliers of different markets.
The new set of obligations highlights in its content the incorporation of obligations regarding the protection of personal data, which would significantly modify the suppliers’ processes of commercialization of products and services. It is currently being processed with the utmost urgency.
I’m here to say it’s time to stop the wrist wringing and to start planning for your escape.
If you’re an entrepreneur or innovator, there will always be other options. You’re in control of your destiny.
The Freedom of a Second Residency or a Second Passport
If you’re worried about tax increases, a recessionary environment, more spending cuts, angry labor unions, focusing on earned income tax credit, and the envy class of so-called “99%-ers” who don’t share your values, start planting flags in other places.
Find another country you could see yourself living in and take steps to acquire residency.
For an investment of varying amounts, you can get residency anywhere from Ireland to Hong Kong to Bulgaria to Costa Rica.
You may not need to live there for that long or at all, but you’ll have the option of a place to go and potentially start the clock on future citizenship if you decide to leave the U.S. for good.
Even Austria is rumored to have a program to grant citizenship on the quick if you’ve got several million to invest.
And if you’re of Irish, Italian, Lithuanian, or several other heritages with recently departed ancestors (think two generations usually), you may qualify for “citizenship by descent” on that basis.
Of course, you should also have a (legal) plan for your money in case capital controls hit.
Go Where You Are Treated Best
The U.S. already has strict regulations on taking money out of the country and scrutinizes all international transactions, making it less free than nations like Switzerland or Hong Kong that believe your cash should be freely movable.
Because the United States is the only country in the world that has high tax rates on its citizens AND any green card holder or resident (in theory, even a tourist who spends more than 183 days in a year within its borders) on their worldwide income, Americans worried about the impact of the effects of the fiscal cliff and the greater societal undertones at stake are especially in need of a plan.
Americans are the only people that can’t just move to another country to escape the high capital gains taxes, raising taxes, and mandates back home; the IRS will follow them with draconian paperwork and threats of heavy fines for even accidental non-compliance.
Don’t wait for another fiscal cliff scenario or until it’s too late. Things can change at any moment and you need to take steps to prepare before it’s too late.
Despite our general libertarian thinking, we and many others rallied behind the government after 9/11, only to be slapped in the face years later with an out-of-control TSA and a litany of anti-freedom policies.
It’s Time to Go
Don’t get too comfortable or believe it can’t get any worse than another fiscal cliff, more spending cuts or another form of Budget Control Act.
Don’t limit yourself or your abilities at the hands of a government that claims to promote freedom but makes it more and more difficult for you to have the freedom to leave.
Don’t believe that patriotism is forking over endless amounts of money (when others contribute nothing) to prop up a government, simply because you were evacuated from a womb on American (or any other) soil.
Andrew renounced his US citizenship to get the treatment he deserves.
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Capital flows where it is treated best; follow the same rule for your person and you’ll never have to underachieve or be a slave to any particular government.