Digest: Why the Rich Are Abandoning America

Welcome to your weekly digest…my breakdown of the things we’re thinking about and talking about in the Global Intelligence world. 

First up this week, the number of people giving up U.S. citizenship is rising. 

In the latest installment of “Yikes! Get Me Out of Here!” the U.S. Federal Register has listed 819 Americans who voluntarily gave up their U.S. citizenship in the third quarter of last year, the most recent data. 

Added to the first half of the year, some 2,872 former Americans turned in their passports for good and renounced their allegiance to Uncle Sam. That’s more in nine months that occurred in all of 2021. 

Thing is, because there’s a 12- to 18-month delay in reporting, this batch of expatriates are those who actually renounced their citizenship during the first three quarters of 2021…and since then “our office has almost tripled the number of individuals” seeking to renounce their citizenship, according to one U.S. international tax and immigration attorney.  

Based on surnames, one plausible explanation for some of the renunciations is simply that people are returning to their homeland and do not want the baggage of Uncle Sam following them—since Americans are responsible for paying taxes on global income, even if they never set foot in the U.S. 

Along those lines, it’s also clear that many high-net-worth Americans are renouncing citizenship to avoid Uncle Sam’s long reach. (Along with Eritrea, the U.S. is the only other nation in the world that taxes income based on citizenship rather than where a citizen earns that money.) 

Still others are giving up their U.S. passport because they’re fed up with what they see as a long and irreversible decline in social and political life. That’s not terribly hard to understand. Crime and gun violence are escalating. Political violence is escalating. And politics has devolved into a soft civil war in which common ground is rarely achievable. 

So, they’re out. And other countries are eager to welcome them with open arms. 

More than 16,000 Americans have decamped to Mexico (not all of them have renounced citizenship). Americans are also headed to the U.K., Canada, Australia, and locations across Europe and Latin America.  

Portugal has seen the largest jump in Americans taking up residency with an increase of 122% between 2019 and 2021. It’s also worth noting that Americans are now among the largest population picking up a Portuguese Golden Visa, which offers residency in exchange for buying a house or investing in a business locally. 

My bet: This is a long-tailed trend. We will never see hundreds of thousands or millions of Americans renouncing citizenship, but we are going to see thousands turn into the low tens of thousands of Americans renouncing citizenship because they’re just fed up. 

Now personally, I would never advise giving up U.S. citizenship. As an expat, I have to deal with the hassles of paying U.S. taxes while living overseas, but honestly it’s not that bad. Sure, you have to file, but you can exclude most of your earned income. 

What I do understand, however, is wanting to have a second citizenship.  

A second citizenship, and the second passport that comes with it, is an invaluable tool, opening all sorts of doors for you in areas like travel freedom, investment opportunity, privacy and security, and more. And they are easier to get than many people might imagine.  

In fact, as many as 40% of Americans are eligible for a second passport by ancestry alone. Something worth looking into, if you haven’t already done so. (For the complete guide to second passports, check out The Passport Book by attorney and former U.S. Congressman Robert Bauman.) 

*** 

Next up…Joe Burrow is buying up this asset and you should too. 

Burrow, as I’m sure many of you are aware, is the Bengals quarterback. Later today, he’s scheduled to face the Ravens as he tries to take Cincinnati back to the Superbowl.  

But just as interesting to me are Burrow’s investment goals… 

Burrow recently teamed up with the likes of Celtics forward Blake Griffin, Blue Jays pitcher Kevin Gausman, and several other professional athletes to purchase a farm in Iowa. The farm spans 104 acres and produces corn and soy. 

The athletes contributed to a $5 million fund that was used to purchase the farm. The fund was set up by Patricof Co., a private investment platform for professional athletes. The group is reportedly planning to buy four more farms…and it’s not hard to figure out why.  

Over the past two decades, farmland has been quietly outperforming the S&P 500 in terms of 

average annual returns. And the farmland investment in the Global Intelligence Portfolio is up significantly since we added it last year. (Parenthetically I will note that Joey B. led my alma mater, Louisiana State University, to college football’s national championship in 2015, so clearly his LSU smarts are showing in his investment portfolio.) 

*** 

Finally this week, Uncle Sam’s borrowing costs are rising significantly… 

For some time, I’ve been warning that the rapid hikes in interest rates by the Federal Reserve would push America’s debt repayment costs to uncomfortable levels. 

Well, in December, the federal government ran an $85 billion deficit, up from a $21 billion deficit in December 2021, according to Treasury Department data. 

A big factor in this was debt repayment. 

The Treasury has spent an extra $57 billion, a 37% increase, this fiscal year on servicing the deficit compared to the same period in the last fiscal year. The U.S. deficit now stands at $31.4 trillion.  

The U.S. is living beyond its means, and now higher interest rates are adding to the hefty debt burden. The Fed has to know this. And my bet is that we are very near the end of the rate-hike craziness…otherwise Uncle Sam is screwed. 

That brings us to the end of this week’s digest. Many thanks for being a subscriber. And if you have any feedback or questions, reach out through the contact form on the Global Intelligence website. 

Enjoy the rest of your Sunday.