Tax Haven or Tax Heaven 8: The US attempt to “suck and blow” at the same time – keeping corporate profits out of the USA

The previous posts have argued that:

1. The purpose of a “Tax Haven” is to lure or entice capital from “foreign” jurisdictions.

2. The purpose of U.S. citizenship-based taxation is to lay claim to the capital of other nations and transfer that capital to the U.S. Treasury.

The attraction of capital is a good thing and helpful to nations. In fact, the purpose of “citizenship by investment programs” is another way that countries attract capital.

Yet, the United States has an Internal Revenue Code that (leaving aside the tax rates and the narrow circumstances of Internal Revenue Code S. 871) operates to keep capital out of the United States.

Examples include:

A. The rules that keep U.S. corporations from repatriating corporate profits to the United States.

B. The rules that prevent gifts and bequests (yes this is capital) from “covered expatriates” from returning to the U.S. economy.

C. The oppressive corporate tax rules that incentivize corporations to “invert” and effectively renounce their citizenship.

D. The S. 877A Exit Tax rules that incentivize “Green Card Holders” to move from the United States before they become “long term residents” and subject to the Exit Tax.

The problem is NOT tax havens. The problem is NOT tax evasion. The problem is an “Internal Revenue Code” that operates in a way that is contrary to the formation, investment and retention of capital in the United States. Why is this not obvious? Why doesn’t the United States face up to this obvious problem?

Outside looking in vs. inside looking out …

This seems so clear if one is outside the United States looking in. Perhaps it is impossible to see if one is inside the United States looking out.

The biggest threat to the United States is NOT what takes place outside the United States. The biggest threat to the United States is the Internal Revenue Code of the United States.

What follows is an article that I wrote that appeared in Forbes Magazine.