Freedom Isn’t Free

Over in the Netherlands, the country’s new minority government has proudly presented a 67-page coalition agreement with promises of “a new course” and “real breakthroughs” for the country.

“This is the moment when we start working on progress,” incoming Dutch prime minister, 38-year-old Rob Jetten of the socially liberal D66 party said. “It is high time that politicians take responsibility.”

So far, so noble. But then…

Among the plans is a “freedom contribution”—an additional annual income tax of about €184 per citizen. Funds needed, the government say, to spend on defense.

So, Dutch tax payers will collectively be stumping up €3 billion a year and Dutch companies will also have to pay the freedom tax, further boosting the country’s war chest by €1.7 billion.

Ah, yes, meet the new boss. Same as the old boss.

As if that wasn’t enough, the Dutch House of Representatives have also pushed forward legislation set to impose a 36% capital gains tax on savings and most liquid investments, including cryptocurrencies, stocks, and bonds—even if the assets have not been sold.

The legislation still needs to be voted on by the Senate before it becomes law but should it pass it would not only tax unrealized gains on personal assets but also drastically slow compounding for investors, slashing at their wealth in both the short- and long-term.

Meanwhile, in California, the proposed 2026 Billionaire Tax Act would see Californian residents worth more than $1.1 billion pay a 5% tax on their total wealth. Presented as a one-time emergency tax, about 200 residents meet the criteria and some $100 billion is the expected revenue. Bernie Sanders kicked off the campaign.

The main backer of the billionaire tax is The Service Employees International Union-United Healthcare Workers West, a California health care workers’ union that negotiates pay, staffing, and safety for hospitals, clinics, and nursing homes. They want the cash to help cover education, food assistance, and health care programs in the state.

For sure a worthy cause but also undeniably a dangerous precedent.

If the government can find a way to tax private property on an ongoing basis then you’d have to be particularly trustworthy or especially foolish to think this would be a one-off or that they’d stop at billionaires…

Because it’s never enough. As much as they take, they could always spend or waste more… Let’s not forget the total U.S. federal debt has just sailed past the $38.5 trillion mark and the interest on that bill is running to about $92 million a month.

So, sure, the government might start taking a slice of the assets of California billionaires—and it might be hard to drum up much sympathy for them—but it’s where they go from there that most of us should be concerned about.

There’s about 900 billionaires in the U.S. and collectively they’re worth around $8 trillion… but there’s 24 million U.S. citizens with a net worth of more than $1 million… and they’re worth a collective $100 trillion…

Cha-ching.

That’s what the real money is… and sooner or later Uncle Sam or Uncle Bernie or someone somewhere is going to come looking for what they consider to be their share of your hard-earned money.

As Americans, we are among the most oppressed taxpayers in the world and no matter where you live or how long you live there you’ve still got to file with the IRS. I always pay what I owe—I have no interest in adding an orange jumpsuit to my closet—but not one cent more.

And while I would never advise someone to choose a place to live abroad based solely on the country’s approach to taxation (though I won’t be recommending the Netherlands any time soon) there are strategies that Americans overseas can use to minimize or even wipe out entirely their U.S. tax bill.

In these taxing times it’s certainly an option worth exploring.

Stay diversified,

Lief Simon
Editor, Offshore Living Letter