Are Golden Geese like John Paulson leaving the US?

Reader comment on: John Paulson's Tax Move

Submitted by DavidSLesperance (Poland), Mar 19, 2013 08:01

It is now reported that John Paulson has said that he is not planning to change his tax residence to PR, but it is worth looking at the ramifications if someone like him did actually move.

Whether you think it fair or not, a natural outcome of a "progressive" (i.e. accelerated) tax system is that the top 1% of tax payers contribute over a third of all tax revenues collected. This means that there is a tremendous overdependence on a small number of people for a HUGE portion of tax revenues. Therefore it is worth looking more closely at this group of "Golden Geese".

Contrary to Occupy Wall Street rhetoric, this group is hardly homogeneous. Remember that both Michael Moore and the head of Goldman Sachs are not only in the top 1% but most certainly part of the top 0.1%. They are certainly not alike in political outlook, attitude towards taxation or methods of accumulating wealth. About the only real common factor is that as a result of globalization, the Golden Geese are no longer bound to the tax home of their birth to make and maintain their wealth. In business terms, the Golden Geese are not "sticky".

Combine overdependence with lack of stickiness and you have a recipe for financial disaster. To put this in better perspective, it is worth noting that the top 400 taxpayers in the US in 2008 (the last year I have done the calculations) contributed 1.9% of ALL OF THE US TAX REVENUE COLLECTED. In 2007, it was 2.05%. Assuming that with increased concentrations of wealth that this number is stable (probably increasing), this means that if even 1/4 of these taxpayers (Note: Paulson is certainly one of them) leave the US tax system, this will have a drop of 0.5% in all future US tax revenues. This would make the sequester cuts look like a rounding error.

Is this group leaving? Unfortunately the measuring methods are retrospective and so you don't know they are gone, until long after their departure. However, given that Paulson was supposed to be the 11th (not the first) US taxpayer to move to PR AND that US expatriations (where the taxpayer leaves the US system completely) have been increasing dramatically and expodentially in the last few years, one would be foolish to ignore this trend.

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