Fubarrio Expat Trader

Sovereign Society Fanning the Paranoid Flames

I noticed today that the Sovereign Society has recently changed its tact with regard to selling expatriation services.

The Sovereign Society, for the uninitiated here, has made a business out of promoting the political belief that every person should be their own ’sovereign’ individual. Sovereign society, with their email newsletters — including the A-letter — brought the idea of personal sovereignty to the forefront of many a liberty-loving libertarian’s inbox.

In addition, as part of the Agora publishing group, they began selling conferences, get-togethers in far-flung, usually tropical, offshore locations, books on becoming a perpetual traveler, and expatriation, and services to help the budding sovereign man or woman take the plunge.

Recently, with the economic turmoil in the US, the polarizing political environment, the specter of rising taxes to pay for some of the obscene overspending of the last several decades, and a huge demographic bubble of baby boomers moving through the system like a pig in a python, many recent or near retirees are starting to move their money or themselves offshore.

Of course, one of the cruel jokes the US government plays on all those that are, ‘too clever by half’, is that they’ve already thought through the ramifications that a mass exodus would bring to the US. The results? Well, perhaps the most significant is that the US is one of the only countries in the world — I think the other is Libya, seriously — that taxes non-residents on worldwide income.

What does that mean?

That means, that if you are a US born citizen, no matter where you live, even in the extreme case of someone who leaves the US with no intention of ever returning, you owe the US government taxes and are expected to file a tax return annually. So much for the ‘land of the free’ huh?

What about the Foreign Earned Income Tax Credit?

Ok, truth be told, there is a break on the first 80,000 usd that you earn abroad. However, and this is the cruel part, it has to be earned from labor. You cannot apply capital gains or interest to this exemption. So, you see, the typical retiree, or even trader who did not arrange their affairs in a complicated mishmash of foreign offshore corporations, finds themselves paying taxes for a company whose services they are not receiving.

While it’s difficult for me to shed too many tears for the tax situation of too many baby boomers, this in particular is a raw deal, and it cuts across traditional generational or demographic boundaries.

So What About this 80k Tax Credit?

Truth be told, I believe it is a subsidy for the US (or foreign corporation) and used as a recruiting tool for getting expatriate workers to move themselves and/or their families overseas. In the countries with expatriates that I’ve lived in or visited, very few US expats have the freedom to own their own real estate and start their own businesses due to limitations placed on foreigners. With the advent of the Internet this is changing of course as more entrepreneurs and even employees move offshore, and coincidentally there were some rumblings about revoking this tax credit last year that had the expat community’s feathers ruffled.

Ok, So What Does this Have to Do with the Sovereign Society?

Well, like I was saying, they’ve moved into selling services to expat wanna-be’s. One of the things they began selling was a book called The Billionaire’s Loophole. From what I gather, the ‘loophole’ is basically that you can (and should if the financial situation makes sense) expatriate permanently, seek out a second passport or permanent residency somewhere, renounce your US citizenship, and then once renounced, apply for (and get) a certificate which formally renounces your citizenship, let’s you avoid US taxes, and apply for US Visas for whenever you want to visit the grandchildren.

A lot of people were intimidated by the process of doing this. So, the Sovereign Society went to great lengths to explain how simple, easy, and painless it was — including printing letters from readers and customers who explained in their own words how surprised they were at the ease with which they shed their US taxpayer chains. These were basically testimonials in the guise of long copy, but they were somewhat convincing nonetheless.

Unfortunately, the testimonials, along with the rebound in the stock market perhaps, has had the unwanted side effect of reducing the “urgency” of the matter, and removing the illusion of scarcity. So, what is a marketer to do? Well, of course, the answer is to introduce the element of scarcity.

The Sovereign Society’s newest email explains that the window is closing on those that want to expatriate. How do they know this? Well, they’re pointing out the fact that US State Department has started charging a 450 USD fee for expatriation.

While the US charging for fees for things that used to be free is no ‘revelation’, they further point out some subtle signals that may indicate that the consular offices of U.S. embassies that handle expatriations are increasingly overburdened.

While this too seems thin, there is further ‘evidence’ that suggests that some expats are experiencing delays in getting their “certificate of loss of nationality,” or CLN. The CLN, or course, allows you to get a Visa to enter the US after you’ve expatriated, and also allows you to avoid US taxation while residing outside of the US.

While the Sovereign Society likes to make hay out of these ’straws in the wind’, I’m more inclined to think that these are not really anything more than a demographic eventuality, and a bad economy, making it more affordable for expats of all colors to get out of Dodge.

However, the Sovereign Society and Agora publishing in general, never miss a good opportunity to fan the flames of paranoia among the libertarian sect. And, truth be told, if you ever sit around and have a few beers with the expat crowd, you’ll learn the embers are never really all that far from the surface.

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Tags: CLN, earned income tax credit, expats, second passports, sovereign society
Posted in second passports | 5 Comments »

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