The Flight of the Golden Geese
2020-11-29 · Guest: David Lesperance (International tax and immigration expert) · 52:17
Migration of high-net-worth individuals due to tax policies
Bob Zadek interviews international tax and immigration expert David Lesperance about his book, The Flight of the Golden Geese. They explore why high-net-worth individuals (HNWIs) are increasingly leaving high-tax jurisdictions like the U.S. and the long-term economic consequences for the societies they leave behind, particularly focusing on the shift from income tax to wealth and capital gains taxes.
Topics: International Tax, Wealth Migration, Capital Gains Tax, Strategic Philanthropy, Biden Administration, Tax Policy, Citizenship Renunciation
Speakers: Bob Zadek, David Lesperance
The Migration of the Golden Geese [00:18]
Bob Zadek: Good morning, everyone. Welcome to the Bob Zadek Show, the longest-running live libertarian talk radio show in all of radio. Thank you so much for listening this fall Sunday morning.
I recall about a decade ago, my imagination was captured by a wonderful nature movie, a documentary of sorts called The Great Migration. It was a story about how many species of birds would fly tens of thousands of miles to change from one climate, from one environment to another. And I was impressed by their determination, how they were able to navigate, and their just biological determination to survive. If you recall that movie, they had transmitters and little TV cameras attached to some of the birds, and there were planes and gliders that flew along with them. It was quite a dramatic movie.
Well, what a strange introduction to a libertarian radio show, but not really. This morning we will focus on this morning’s guest and his book, The Flight of the Golden Geese. This is not about migratory birds; this is about migratory humans, specifically high-net-worth individuals, the earners, the producers of the world’s societies, and how they are, on an accelerated basis, moving from one governing jurisdiction, from one country of domicile or citizenship—you will learn the distinction during this hour—to another based upon that government’s tax policies. They become expatriates, leaving one country to go to another for the sole purpose of preserving their wealth. Not mean-spirited; everybody wants to preserve their wealth, and these individuals have found themselves to be targets of governmental tax policy. And if you don’t like the heat, you leave the kitchen.
This morning’s guest, David Lesperance, is an immigration and tax specialist. His area of expertise is the entire world. David spends his time studying tax policies and immigration policies of countries in the first, second, and third world, as they are often divided, and he advises his clients who want nothing other than to often live with peace and live in an area where society is calm, where rights are protected, including the rights to enjoy the benefits of your hard-earned wealth. David helps his clients if they find themselves living in or citizens of a jurisdiction where those important elements of a comfortable life—freedom, respect for property rights, preservation of your property—where an individual feels those rights are under attack, that individual will seek David’s help to find a more comfortable jurisdiction. In doing so, David has learned about, and will share what he has learned with us, what are the policies of countries and jurisdictions around the world that will cause individuals, the more productive elements of that society, to leave? What are the governmental policies that chase this valuable natural resource out of the country, and what are the policies that draw these individuals to that country?
So, my friends, hold on to your passports for the minute and let’s welcome David to the show. David, welcome to the show this morning.
David Lesperance: Nice to be here, Bob. It’s my pleasure.
Motivations for High-Net-Worth Migration [02:59]
Bob Zadek: Now, David, as I said in my introduction, your constituency are individuals—perhaps countries, but I suspect primarily individuals, that’s your practice, that’s your clientele—individuals who have simply found that the tax or political policies of one country are becoming more and more oppressive in the mind of your prospective client, and they seek advice on how to cure that problem. As I said in my opening, they don’t like the heat and they want to leave the kitchen. Now, what are the kinds of policies that you have observed or that cause individuals living in one jurisdiction to find a need to make this what appears to be a dramatic lifestyle change? After all, one doesn’t change your citizenship or your country of domicile overnight; it’s a pretty significant decision. What are the policies that you have observed, with examples, please, of countries that have said to these high-net-worth individuals, or individuals simply seeking to live in freedom, what are the policies that chase them out, and what are some examples of that?
David Lesperance: Well, that’s really looking at the history of immigration and what are the motivations that have caused humans to migrate throughout history. Sometimes they’re being driven out by an unfavorable political situation. Sometimes they feel that the fruits of their labor are being unfairly confiscated or outright confiscated. Sometimes it’s war, sometimes it’s love, sometimes it’s a sense of adventure or opportunity.
What’s really quite interesting is the United States, of course, for most of its history and continuing on, has been the recipient of immigrants who have decided that the deal that the United States offered was better than the deal that they had in the country in which they were immigrating from. But what is an increasing phenomena is especially amongst high-net-worth clients, high-net-worth individuals who are Americans, who are seeing greener pastures outside of the United States and who are leaving the United States in record numbers.
Those are both political policies and just circumstances that are occurring. So, for example, if you tax substantially, that means that that is not—the clients I have have enough money to maintain their lifestyle, whatever that is, from the austere to the ostentatious. They have enough money to leave their children, again, from enough to kind of go through college all the way through being taken care of. And they have money beyond that.
The Demonization of Wealth and Tax Policy [04:37]
David Lesperance: And it’s really, what is it, what are they going to have control over and above this? And one of the things I’ve particularly found in the last few years, especially when there was a discussion about wealth tax, was it was the control of this money and specifically their ability to engage in strategic philanthropy. So when you have the rhetoric, particularly that happened amongst the Democrats throughout the primaries and into the platform, where the rhetoric changed from “let’s get money for good things” to “let’s take money from bad people,” I saw a dramatic increase in the number of clients that were calling me.
Bob Zadek: That’s a very interesting distinction that I suspect many people who follow the political comings and goings in our country may not have focused on, and that is the demonization of wealth just because it exists. We recall that I think it was AOC or somebody—they tend to blur in my mind—but somebody spoke in public that billionaires ought to be illegal, that there was something inherently wrong with having that much money, however you may have acquired it. I think that’s the demonization of wealth that you are alluding to.
Now, you mentioned wealth tax. Perhaps spend a moment, if you will—everybody knows about income taxes, that’s a tax on your earnings. That’s quite different in feel and in policy from a wealth tax, although often that distinction might be blurred. Help us understand the difference between the two and the effect that each might have on your clientele.
David Lesperance: So I’m going to expand it slightly. Income tax is a tax on the current income that you make. Capital gains tax is when you purchase an asset, whether that’s a share or a property or a business, and that increases in value, and the value of the capital has increased, you have capital gains tax. A wealth tax says, whether you have assets which are increasing in value, stable, or dropping in value, we are just going to take a percentage of your assets annually off the table.
And one of the big things that has been a driver—and it will depend greatly on what happens in Georgia, control of the Senate, how much President-elect Biden chooses to use executive power—but one of the platforms of the Democratic Party is to increase capital gains tax, long-term capital gains tax, which at our federal rate right now is 23.5%, up to the ordinary tax rate, which is 39%. Well, if you are a Silicon Valley founder or somebody else who has a major liquidity event and a capital gain, that’s quite a leap. And so that’s one of the things that has really been driving the threat of a wealth tax, which was not adopted in the platform, but the increase in capital gains to ordinary is definitely been one of the drivers, not only for clients to give themselves the insurance policy or the ability to leave, but actually clients who are joining or packing the parachute and jumping out of the U.S. plane to more favorable destinations.
The Impact of the 1% on the 99% [08:50]
Bob Zadek: It’s very important that I make this “don’t touch your dial” announcement—if there are such things as dials anymore. Don’t touch your dial because you fear this show is directed at, and the audience is expected to be, high-net-worth individuals. The real point of the show, and I will remind us of this throughout the show, is not that this is a “how-to-do-it” kit for high-net-worth individuals, although this certainly will be valuable information in this show, but rather, and the point of David’s book and what I have learned from David is, non-high-net-worth individuals, the middle class, cares profoundly about the subject matter of this show. Because as high-net-worth individuals depart—and we have seen it happen at the state level, the same thing that David deals with on a global basis, we see happen in the United States as individuals change their residence from one state to another, which is happening, we call it “foot voting”—but we middle-class people care profoundly because of the negative effects on the country or the state which is losing high-net-worth individuals. We are all affected.
So David, tell us about what you have observed. It’s kind of obvious, but your insights are highly valuable to us. Tell us what the danger is to the state adopting a short-sighted “tax the rich, soak the rich” policy. What happens to those middle-class people, most of the country, who are left behind as the high-net-worth individuals leave?
David Lesperance: Well, the answer to this question was actually what drove me to my co-author, who’s a London School of Economics professor emeritus, and we ended up writing the book The Flight of the Golden Geese, the subtitle of which is How the Actions of the 1% Affect the Other 99%.
Now, the U.S. revenue model—that’s money coming into the government for them to spend on all of the things that the U.S. government does—is to an extraordinary extent in G20 countries dependent upon personal income. And that is because there is no value-added tax, which is prevalent in most other countries; there just isn’t a VAT. Therefore, the United States has an extraordinary dependence upon personal income for a large percentage of—and depending on how you calculate that and whether you include the personal contributions—that can be anywhere from 40% to 70% of the total revenue that comes into the government comes from individuals.
Now, whether you think it fair or not—let’s avoid that discussion for a moment—the fact remains that a progressive tax system revenue model is extraordinarily over-dependent on a tiny number of taxpayers. We’ll call them the “Golden Geese.” For in the United States’ case, 40% of that total personal tax revenue. So A, you’re too reliant on personal income tax; B, you’re too reliant on a very small number of taxpayers to contribute a lion’s share of that. Which means, let’s examine those Golden Geese. Those Golden Geese are the ones that, because of globalization, because of mobility, are the ones that are least sticky. They can reproduce, maintain their business and personal lifestyle in a variety of places.
And if you have a tiny number of them leave, it has an extraordinary asymmetric negative impact on your revenue. That’s money that is not going to be there for the middle class, for all of the other functions that the U.S. government spends its money on. So as you say, “well, let’s keep taxing the rich more and more and more,” and you ignore how the rich feel about it, at some point they are going to say, “Fine, I personally don’t feel that this is fair anymore, and I am, because I have the ability both in my business and I have the ability to hire people like me and other advisors, to leave the U.S. tax system.” Now, they will pay their bill on the way out the door for what they’ve owed up to that point, but after that, not only are you not going to get the windfall of those additional taxes, you’re going to lose a substantial tax that you were receiving annually from these people.
So “tax the rich,” it’s not only “will we get as much as they proclaim,” it’s actually “will we see a drop,” which is mathematically quite logical. And the reality is there’s a record number of people leaving the United States. There is a—to Emmanuel Saez and Gabriel Zucman from Berkeley or Stanford, they are protégés of Thomas Piketty, the French economist, and they wrote in the Wall Street Journal, “Well, you know, it’s very difficult to leave the United States.” And so they just dismissed that that was a possibility, which they acknowledge was the reason why wealth taxes in places like France failed, was because taxpayers just said, “Okay, well, I’m going to move to another one of the 26 countries I can move to as an EU country citizen.” “Oh, Americans can’t do that.” Really? I’ve been helping Americans do that for over three decades, and record numbers of them are doing that. So if you’re going to push a wealth tax, please be factually correct in and don’t incorrectly state that the people that you are relying on to contribute this revenue, and who you’ve been over-dependent upon for existing revenue sources, can’t just pick up and leave. Because they can and they do.
Strategic Philanthropy vs. Government Control [13:53]
Bob Zadek: Now, one thing that’s really important for our listeners to bear in mind and promise never to forget is that high-net-worth individuals—that is, individuals who both enjoy high income and accumulated high wealth, assets that they own as opposed to earnings—a lot of those high-net-worth individuals will give substantial portions of their money to charities and organizations that they favor. Now, for sure, they pick the organizations, but they accomplish voluntarily what we call in economics “wealth transfers.” There are profound wealth transfers going on, but they are voluntary. So in fact, there is a continual transfer of wealth from high-net-worth individuals who have more than enough, passed down to their charities, whatever they may be.
And we have very high-net-worth individuals such as Bill and Melinda Gates, who always—they get a lot of publicity, and it’s deserved—they have formed foundations and they give away buckets and buckets and buckets of money in the Gates Foundation case for world health. So that’s nothing other than a wealth transfer, but it is voluntary. But the fight when we hear folks such as Elizabeth Warren and others who want to “soak the rich,” “the rich have too much money,” really the fight is not about should there be a wealth transfer—that’s going on, Bill and Melinda Gates demonstrate that—but it’s who decides who gets the money. Whether it’s going to be the person who earned it, Bill Gates, or whether it’s going to be the governments where decisions are made through the political process, not through a process based upon need or efficiency.
So let’s bear in mind this is not about whether high-net-worth individuals get to keep the money so they can live an even more opulent lifestyle, although for sure there is a good deal of that, but well beyond that, there are wealth transfers going on all the time. Now, give us some examples, David, of the kind of assignments you are given. Give us, if you will—it can be hypothetical or it can be a real-life example—of a country or an individual, what are the circumstances of the typical client? What causes them to call you, and what’s in your toolbox? This will tell us all who don’t live in your world to understand how it actually works when somebody does what to me strikes me as being an overwhelmingly significant decision to sort of change your residence and indeed change the passport that you carry. So give us one example, or perhaps more than one, of the kinds of assignments you are given by your clients and how you go about deciding to help them leave and where to go.
David Lesperance: Bob, I’m first going to tell—this is a true story. I was once upgraded on a flight from Europe back to the United States, and a gentleman sat next to me who was very nice, who had also been upgraded. And I noticed he had a Timex watch on his wrist, about $70. And back in the day when I was a little more fit and doing things like the Escape from Alcatraz triathlon, I said, “Oh, I use that same watch.” And he proceeded to tell me about how he loves this watch because he doesn’t need to deal with hotel alarms and things. And we got to talking, and he seemed very, very passionate about strategic philanthropy. But a non-descript gentleman, dressed comfortably, cheap watch, etc., said, “Oh, I would never pay for this flight, but if they’re going to upgrade me, I don’t have a problem with it.”
Well, later on, and he took my card, he was kind of interested in what I did. Later on, he called me up and he said, “Oh, I’m sorry, I think you must have grabbed a book when we were gathering all our stuff, and a family member gave it to me. Can you please send it to me?” And so I looked and I found the book, and he gave me his address and his name. And I only knew him as Chuck, and he was a fellow named Chuck Feeney. And Chuck Feeney was one of the founders of the Duty Free. And there’s a book called The Billionaire Who Wasn’t. And Chuck Feeney, obviously Duty Free was developed to deal specifically with arbitraging taxes, but he at a very early age gave away all of his money and then directed the spending of that money. And in particular, because he was of Irish descent, he had an enormous impact on Ireland, a game-changing impact, which if that money had gone into tax revenue, would have been gone in a half a day. Whereas this was somebody who decided that—and he just finished, he’s still alive, he’s just finished through the Atlantic Philanthropies giving away the last of his money. And he was secret for a long time and then came out and said, you know, he wanted to have other people do this.
And this was the inspiration for the Giving Pledge, which Warren Buffett and Bill Gates and Mark Zuckerberg and many others have signed on to, which is to volunteer to give away a large portion of their wealth. And it’s interesting that that got a lot more support than the so-called Buffett Rule, which was an increase in current taxation ever got, because it was really talking about a control over strategic philanthropy. My clients have no problem paying for services that they use or could have used but chose not to and paying for some others, but there’s a limit. At some point they say, “I’m going to look at this as charity,” and quite frankly, if you look coldly at government activities and you want to deal with a particular social ill, let’s say early childhood education, it’s not a terribly effective or efficient manner in which to deal with that societal ill. So they decide whatever it is that they’re passionate about to really focus on that and really have a dramatic impact. Again, if you look at Bill and Melinda Gates, one couple had more impact on the eradication of malaria in a decade and a half than all the previous world governments had had since they discovered that a mosquito was a vector for malaria a hundred years before. So that shows how effective and efficient—and they were just using a portion of their wealth.
The Tax Planning Toolbox: Prevention, Insurance, and Escape [18:48]
David Lesperance: So when clients call me, it’s because they have a particular concern. I use the analogy—and my apologies to your California listeners who may actually be experiencing this—it’s a bit like being in a wildfire zone. Now, that wildfire may be a threat to your strategic philanthropy, it may be a concern about the divisiveness of the current society or worries about civil unrest, or a earthquake or hurricane, whatever that is, the combination is unique for everybody. So if you’re facing a wildfire situation, logically the first thing you do is engage in fire prevention. Those are domestic solutions. So you may—if you’re worried, for example, about a wealth tax coming in in California, you may move to Texas. If you’re worried about the gift and estate tax exemption dropping, you may do a gift before that does drop. You may do a state freeze. There’s a number of different fire prevention techniques.
What you also do is get fire insurance. And in the case of the United States, because it’s unique amongst developed nations—in fact, it’s unique except for the small country of Eritrea—in taxing based on citizenship, you need to have an alternative citizenship. And if clients want or listeners want more details, I encourage them to contact me. I can send them detailed white papers and interviews that kind of go through this in greater detail. But the insurance is an alternative citizenship and an alternative residence.
And we also map out a fire escape plan. Now, while I mentioned that there are record numbers of people who are using the insurance policy and the fire escape plan and leaving, I would say that for every one that is actually leaving, ten other families are getting what we call a backup plan—getting that fire prevention, fire insurance, and fire escape plan. And it’s really one of the things when you develop these types of plans is it has to not only make financial sense and deal with the concerns that you have, but it also has to be livable. I like using the analogy of it’s got to sell at the boardroom table and at the breakfast table. And so one of the things that’s common is I’ll have somebody call me and they’ve just been sued or just been audited and they say, “Well, you know, move me somewhere where there’s no lawyers and no tax system.” I said, “Well, no problem, we’ll move you to Pitcairn Island, where the Bounty mutineers landed, but pack a gun.” “Why?” “Well, within six months you’re either going to want to kill yourself or your family’s going to want to kill you.” “Oh, no, no, no, I want this and this and this.” So it’s how do we organize and arbitrage all the possibilities to have a controlled tax situation and have a lifestyle which is at least as good as you have right now and quite frankly could be even better at a lower cost, sufficient for you should you determine that the fire is getting a little closer, that it is viable for you to use your insurance policies and a viable escape plan.
Political Climate and the Impact of COVID-19 [22:15]
Bob Zadek: How many of the individuals who consider this—I suspect I know the answer, but I’d like to hear it from you—how many are making this move primarily as wealth preservation, and how many are making the move because of political climate? Now, it’s hard to imagine somebody leaving the United States because they don’t feel free enough. It’s hard to imagine a place on earth where one can feel more free, even though there may be in the long run an erosion of personal freedom here in the U.S., but it is not that dramatic. Are there many people who will leave primarily for a more free political climate, and indeed are there places that, based upon your clientele’s calls to you, they have found places that the political climate is more to their liking as opposed to economic considerations?
David Lesperance: Yes, so one of the things is a lot of my clients have come to realize that yes, they can vote, and yes, they can have freedoms to do various things in numerous countries. And whatever is important to them is having freedom of speech, freedom of religion, mobility, property rights. There are a number of countries which have that. The political—a lot of my clients on both sides of the aisle are saying, “In reality, I get to vote every two or four years,” you were talking about state and federal elections, “and does my vote really have as much of an impact? So can I organize my life so that I can choose the regimes, the jurisdictions which have a minimum impact on my life, a minimum negative impact, but have all of the qualities for lifestyle for myself and my family?”
And so certainly one of the big things that has come up, particularly over the last six, seven years, has been a concern across all parts of the aisle. I have clients who are Trumpers, I have clients who are Lincoln Project, I have clients who love Biden, I have clients who say, “Well, I guess it’s got to be Biden.” To one, for example, very wealthy Black entrepreneur that I have, and he said, “I’m not worried about taxes or any of those things. I am just worried about my grandchild coming around the corner and getting between a Proud Boy and a Black Lives Matter person and being killed. And I just don’t want to be in that type of environment. So I’m not leaving today, but if things pick up in the future, I want to have the ability to kind of get them out.”
And one of the things that’s an interesting side effect of COVID is that people have discovered that they’re a little freer of location than they were before. If your child is going to Texas A&M and they’re dialing in, they can dial in just as easily from Toronto or Barcelona as they can from Austin. And so it’s that freedom from location that people are starting to say, “Hmm, okay, where else could I produce this lifestyle? Where else could I continue to do what I need to do to make or to maintain my wealth?”
Advice for the Biden Administration [26:28]
Bob Zadek: Since your book makes it so clear—the subtitle, as you have advised us, is How the 1% Matter to the 99%—it is so clear as a matter of economics and, dare I say, common sense, that of course the wealth producers to some degree carry a disproportionate economic burden on society. It seems so obvious. Do you have any thoughts, since you kind of benefit from short-sighted governmental policies, how do governments not get it? It’s so obvious. And what accounts for governments adopting what is kind of a suicide pact in a way and adopting policies that send all the 1%ers to some global Galt’s Gulch?
David Lesperance: It’s interesting, some countries do get it, and some countries are specifically designed policies that are attracted to bring in the Golden Geese. And what tends to happen is they design policies to try to bring in foreign Golden Geese, while they will put more pressure on—I hesitate to use the word “abuse,” but they will put a greater tax burden on their domestic Golden Geese because they’re hoping that life inertia will keep them from leaving.
And when you’re in a situation where you don’t like the current situation, there’s a wonderful economist named Albert Hirschman who wrote a book called Exit, Voice, Loyalty. So if you don’t like the situation, you have three choices: Exit (you can leave), Voice (you can lobby, you can talk to the manager and try to get it changed), or Loyalty (you can just suck it up and stay there). And so jurisdictions, for example, if you wonder why all these wealthy people move to Switzerland, it’s because Switzerland figured out long ago that if they attract wealthy people to Switzerland, they spend money in restaurants, they keep properties, they hire Swiss, they’re also job creators, they bring in capital, they keep those industries, particularly the financial industry, going.
And so what Switzerland did is say, “We’re going to have something called a lump sum,” where depending on what part of Switzerland you’re in—and they actually compete within all the cantons, which are kind of the small counties within Switzerland—and so if you want to live in Geneva, for example, which is a more developed as opposed to one of the smaller mountain cantons, you will pay approximately $180,000 U.S. tax a year. Whether you make a dollar or a billion, that’s how much you pay. Now, the marginal cost of having that taxpayer in Switzerland is minimal. It’s not like they pave another mile worth of road or hire another policeman, but the benefit is substantial. So they actually—and $180,000 will pay for all the government services for themselves and they figure about ten other Swiss. So it’s a very good deal.
But what they’ve done is they’ve done a lump sum. Now, if you’re a billionaire, you’re spending $180,000 a year on accountants just to deal with tax compliance, whereas if you—nobody actually writes the check these days, we send bank transfers—but if it’s simply you’re writing a check every year and it’s predictable and you know exactly what it is. Well, interestingly, the canton of Zurich, the leftist group got together about nine years ago and they passed—they got enough votes to pass a referendum so that Switzerland doesn’t have lump sum, or what’s called a forfait fiscal system anymore. And they passed it in Zurich. So Zurich doesn’t have the lump sum. And the leftists thought, “Well, everybody else will join us.” Nobody else did because they realized all the wealthy people in Zurich just moved up the road to Zug. So Zurich suffered as a result. Well, now they’re talking about having another referendum to bring it back again so they can be within competition.
Correcting Myths About Wealth and Taxation [35:19]
David Lesperance: So one of the problems is there is a very large disconnect between—I would say very few people, you constantly hear “all the rich never pay any taxes.” Well, I mean, I’m quoting IRS statistics. They pay 40%. And “oh no, they don’t pay anything. Jeff Bezos doesn’t pay anything. Amazon doesn’t pay anything.” No, Apple doesn’t pay anything. No, they’re the largest taxpayer in the United States. You may want them to pay more, but you know, to say that they don’t pay anything… And the other one that constantly gets trotted out is Warren Buffett’s secretary pays more tax than Warren Buffett.
So I’m going to impose on your listeners one equation: X * Y = Z. X is taxable income, Y is rate, Z is dollars paid. What you want to do, of course, is maximize your dollars paid. So X, which is let’s say Warren Buffett’s secretary makes $100,000 a year, pays I don’t know what the combined state and federal, but let’s say it’s 40%, and that will net $40,000 for the U.S. coffers. Warren Buffett may have $10 million in capital gain in a year. His rate is lower, 23.5%, but that’s still $2.3 million. If you’re a government who’s trying to maximize your revenue, maximize your Z, would you rather have $40,000 or $2.3 million?
And that’s the hard truth. And what has resulted is now, “Oh, capital gains tax, that’s unfair. We’re going to increase the capital gains tax,” which is the Democratic platform, long-term federal tax rates from 23.5% to 39%. Well, Bob, I hate to disappoint those who thought like Gabriel Zucman, but I have a number of clients who will be expatriating after January 1st and before the inauguration for the sole purpose of avoiding paying tens of millions of dollars in capital gains tax as a result of that policy. And not only will they not pay that additional capital gains, all of those people and their future tax revenue and the jobs they created—major companies with lots of employment—will no longer be in the U.S.
COVID-19 as a Migration Accelerator [39:00]
Bob Zadek: I was smiling when you told us—when you just spoke—because you mentioned about inertia. Governments try to be savvy about inertia and knowing even if their tax policies are likely to chase people out, often the people stay anyway simply because of inertia. And what caused me to smile when you mentioned that is you always can tell if you were eavesdropping on my phone calls when I’m talking to another libertarian buddy, and I live in California, because somewhere along the line in that conversation you would overhear me saying, “I know, I know, but the weather’s great.” And you know exactly I am talking to a libertarian who has probably asked me, “How can you live in that state?” And you’ve just heard my response. So I live in a world of inertia. I am living in a state where from a standpoint of relationship between the citizen and the government, it makes no sense to live here. But David, the weather’s great. So I personally experience inertia all the time, and I don’t rethink it for a second. And I often observe that California, Gavin Newsom and his crowd up in Sacramento, have probably have the perfect tax rate because they’re sucking every bit of marrow out of my bones, but yet I’m still here. Which means they must have nailed it exactly right. They are getting more than they deserve, but yet I still stay here. So I personally experience inertia all the time.
Now, David, what have you observed? Are there global trends—we only have about two minutes, David—just briefly, have you seen any increase in calls from prospective new clients simply as a result of the election, or do people tend to wait and see? We have about 30 seconds before we have to close.
David Lesperance: I just finished listening to a podcast by the NYU marketing professor Scott Galloway, who’s very popular these days and he just wrote a new book, and he talks about accelerators and COVID being an accelerator. So, for example, the movement from people from bricks-and-mortar retail to online purchasing and the resulting increase in Amazon’s activities and stock and percentage of total sales has dramatically increased because of COVID. The same—that COVID is also overcoming life inertia. New York City, possibly soon to be joined by San Francisco, but right now New York City has the highest combined tax rate, that Y in my equation, of any location in North America because they have the federal tax and New York State tax and a New York City surtax. Well, when COVID hit, all of a sudden lots of people went to Palm Beach or went up to the Hamptons and they stayed there. And they discovered, “Gee, I can—I’ve overcome life inertia. I was forced out, but I’ve learned to overcome life inertia, so I may not be hurrying back.” You have Governor Cuomo saying, “I’ll make you dinner,” and Bill de Blasio saying, “And I’ll tax you some more.” Well, there’s not—there still isn’t that migration back in because people have learned that, gee, there are other places.
If you look, if your fear is COVID, for example, Canada’s looking very attractive. I’ve been bringing Americans to Canada as a tax haven for three decades. And everybody kind of shakes their head, “But isn’t Canada a high-tax jurisdiction?” Again, my equation X * Y = Z (or in Canada we say Zed). Well, Canada first off does not have an estate tax. It doesn’t have a gift tax. The capital gains and income tax rates are generally higher, but California and certainly New York has already surpassed it. But through legal pre-immigration tax planning, you can reduce or even eliminate X. Well, zero times even a 99% rate is still zero dollars paid. Oh, okay. And another major myth that clients—so there are lots of countries, okay, I can spend some time in Canada, I can spend some time in the UK, New Zealand has a record number of Americans that are applying for residence there, Europe, you live in a very nice environment, but that’s a very similar environment to a Mediterranean environment. There are lots of different places where with a combination of things… and people say, “Well, I want to own Apple stock.” Okay, well then you get online and you buy Apple, you don’t have to be an American taxpayer to do that.
So it’s again that ability to arbitrage. So to an incoming Biden administration, I would say be very careful about adding new taxes because that may be the straw that breaks the camel’s back, which has all of these other ten families that got backup plans to say, “Right, I’m out of here.” And one of the big myths is people say, “Well, I want to be able to come back to the United States.” That’s not a problem. In the 30 years and several hundred expatriations I’ve done, only twice have I had both a husband and a wife expatriate, and that had nothing to do with taxes, that was just purely a personal choice. So it’s generally one person, and that person can come in. The problem is not coming in; the problem is for them to control themselves so that they don’t spend too many days physically in the United States and re-acquire the tax status. So I like saying it’s almost like Homeland Security is saying “Come on in,” and the IRS is behind them whispering “And we hope you stay too long.” So again, getting proper advice, having a plan that is livable for all the family members that need to live it, and knowing that you’ve got the comfort of the insurance. And of course you hope for the best, but you plan for the worst.
Closing and Contact Information [41:57]
Bob Zadek: Have you noticed—we only have about two minutes, David—just briefly, have you seen any increase in calls from prospective new clients simply as a result of the election, or do people tend to wait and see? We have about 30 seconds before we have to close.
David Lesperance: The answer is I’ve never had as busy a month as I’ve had this past month. Clients are definitely concerned; they’re concerned about the control of the Senate, they’re concerned about the future from an administrative point of view. They now know the President-elect and Vice President-elect are going to be; they don’t know who is going to control the Senate. And those Georgia races aren’t going to be determined right away; those are going to be very close and there’s going to be recounts and it’ll be close to inauguration before you know. So clients, you don’t wait until your house is on fire before you get insurance. So that’s why clients are very busy calling me. I’ve never been busier in three decades than I have in the last month.
Bob Zadek: How do our listeners follow your writings and your blogs and your thoughts on what’s happening in the world?
David Lesperance: Well, along with going to your web page and seeing the spelling of my name, I’ll spell it for everybody: it is L-E-S-P-E-R-A-N-C-E. And if they go to lesperanceassociates.com (plural), that’ll be my website. There’s a blog section there, they can get white papers, they can contact me if they wanted to speak. There’s a large media section there with interviews, etc., and some case studies. I will also be speaking at a presentation in the first week in December—not this upcoming week, the following week—which will be talking exactly about this: Americans who are looking to expand both investment and alternative…
Bob Zadek: And David, I presume you also offer discount flights, I hope you do as part of your package. David, thank you so much for your thoughts and for spending an hour with us this morning. And by the way, my friends, David comes to us from Gdańsk, Poland this morning, or this afternoon in his case. So thank you so much, David.
David Lesperance: Thank you.
Bob Zadek: And to my friends out there, have a pleasant balance of the weekend.