Another Billionaire Makes a Break for It

Jeff Berwick

John Paulson of hedge fund Paulson & Co. is considering moving to Puerto Rico for the explicit purpose of eliminating taxes on $9.5 billion in gains he invested in his own hedge funds. Other wealthy Americans have already made this move, part of a growing trend toward escaping increasing levels of robbery by governments.

Increase taxation too much and everyone who can will flee, starting with those with the most to lose. And in a regressive tax system, the highest earners always have the most to lose. In the US, the federal rate on top earners is 39.6% on ordinary income. Longer-term capital gains are taxed up to 23.8%. In Puerto Rico, capital gains made after a move to the island are tax free. New residents also benefit from a new law that takes only 4% of business income earned in Puerto Rico. Dividends and interest from US companies are still taxed by the US feds at the federal rate.

New residents of Puerto Rico are even exempt from the local 10% capital gains tax, because the country is looking to attract investment. As Western nations with growing governments and liabilities look to increase taxes as a way of forestalling their inevitable collapse, individuals want to live where their capital will be treated better.

Soon this trickle of the wealthy to Latin America and other places will become a flood. As capital flees, governments will make it more difficult to leave. Expect currency controls and even restrictions on foreign travel. There are already plans to strip those fleeing taxes of US citizenship.

You don't have to be a billionaire, or even a millionaire, to be worried. Americans with assets of more than a few hundred thousand dollars should be thinking about a second passport now.

“The governments of the West could not make it any clearer. They are going to squeeze every penny they can out of their prey before the whole things comes tumbling down. Get your precious metals outside of the geographical region wherein an armed group of robbers claim to own you.”

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