With a new administration in charge, the United States is rearing for an overhaul of policies left behind by former President Donald Trump. Notoriously known for his tax cuts, Trump was welcomed by America’s wealthy. However, with the economic fallout of COVID-19 felt on every corner of the nation, the newly appointed Biden administration has its work cut out.
One of the potential ways of supporting the economy that has sparked discussion recently is implementing a wealth tax.
During an interview with CNBC, Senator Elizabeth Warren said, “A two-cent wealth tax changes this country fundamentally because it means we say as a nation, we are going to invest in the next generation. We’re going to invest in creating opportunity not just for a handful at the top, we’re going to create opportunity for all of our kids,” she said. “That’s how we build a strong future in this country.”
What is Wealth Tax?
A wealth tax is imposed on assets owned by either an individual or a household. On the one hand, it can be helpful to the economy and tackle wealth inequality with many believing that it is a progressive way of generating additional revenue. However, critics have also pointed out that it is quite difficult to enforce a wealth tax in practice and can lead to high rates of tax evasion.
What Countries Have a Wealth Tax?
Many countries that once had a wealth tax in place have now either repealed or adjusted it due to reasons spanning from administrative difficulties to undesired emigration. The only countries to still place a tax on wealthy individuals are Norway, Spain and Switzerland.
Are Americans Already Leaving?
Experts believe the same could happen in the United States if a wealth tax is introduced, and the possibility alone has already driven many of America’s wealthy abroad. While the Internal Revenue Service (IRS) still taxes Americans wherever they live, as the US is one of two countries that taxes non-resident citizens, many have decided to renounce their US citizenship.
Data from the US’ quarterly “Publication of Individuals, Who Have Chosen to Expatriate” report shows 660 individuals who have expatriated over the previous 12-18 months. While the number also includes long-term residents who have given up their green cards, it is still believed to be an all-time record high of renunciations.
If the wealth tax is introduced, that number will only continue to increase, potentially leading to a significant drain of wealth. However, it would also address the high discrepancy of wealth in the United States and tackle the rising unemployment rate, which has already reached unprecedented levels.
Citizenship by Investment
So, if America’s wealthy decide to leave, where will they go? There has been skyrocketing demand for the Caribbean in the last year as US citizens begin to seek alternative means to protect their wealth.
The Caribbean is renowned as being the region that pioneered the Citizenship by Investment Programme. First established in 1984 in St Kitts and Nevis, Citizenship by Investment has been pivotal in securing foreign direct investment for the nation while also offering investors an attractive route to life-long citizenship and the rights that come with that. The Caribbean is home to five Citizenship by Investment Programmes: St Kitts and Nevis, Dominica, Grenada, Antigua and Barbuda and St Lucia.
The process for acquiring citizenship follows a multi-tiered approach with a stringent vetting procedure. However, if an applicant is successful, they gain access to increased travel freedom to key business hubs, the right to live, work and study in the nation and the ability to pass citizenship down for generations to come.