Patriotism! Super Rich Renounce US Citizenship to Make Tax Evasion Easier (And Other Ways the Wealthy Cut Ties to Country)
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Back in 1863, in the middle of the Civil War, a short story took the American reading public by storm. Edward Everett Hale’s “The Man Without a Country” told the tale of a poor treasonous soul sentenced to spend the rest of his life endlessly sailing the seven seas, in perpetual exile, as a prisoner aboard Navy warships.
How sad, sighed 19th-century Americans.
How quaint, muse many of our 21st-century super rich. These awesomely affluent simply do not see statelessness as a penalty. They see statelessness as a goal.
And the ranks of our contemporary “men without a country” are increasing. The number of Americans who’ve formally renounced their U.S. citizenship has jumped by over seven-fold, from 235 in 2008 to 1,780 last year.
The spark for this surge in statelessness? Since 2008, U.S. tax officials have been endeavoring to clamp down more firmly on overseas tax evasion. Swiss private banks, for instance, have come under new pressure to divulge data on the millions wealthy Americans have stuffed in secret accounts.
That pressure has some of those wealthy irritated enough to renounce their ties to Uncle Sam. The cost to renounce: a $450 paperwork fee and an “exit tax” on unrealized capital gains for renouncers who hold assets worth over $2 million — or have paid over $151,000 to the IRS in any recent year.
But the affluent who’ve gone to the trouble of formally renouncing their citizenship make up just a tiny share of what the Financial Times has labeled the “stateless super rich.” These uber wealthy have no interest in the notoriety of renunciation. They just live their lives as if they had no nation to call their own.
The most celebrated of these casually stateless? That would have to be Nicolas Berggruen, a 52-year-old worth over $2.3 billion who has spent the last decade hopping the world from one five-star hotel to another.
The German-born Berggruen grew up in Paris and went to college in New York. He made a fortune in hedge funds and now hobnobs with world political leaders and Hollywood celebrities. Reporters have dubbed him the “homeless billionaire.”
Few stateless super rich follow Berggruen from hotel to hotel. Most all of the vagabonding wealthy have personal residences. Lots of them.
Typically, the Financial Times reported last month, a stateless super-rich household will have one or two properties in their “country of principal residence,” another in London, New York, or some other “global city,” a “holiday home” in a soothingly warm climate, and maybe still another in the Alps. They’ll shift their household, by season, from one to the other.
Among the super rich, this perpetual-motion existence has become almost de rigueur, notes Jeremy Davidson, a London property consultant who handles properties that cost at least £10 million, the equivalent of over $16 million.
“The more money you have,” explains Davidson, “the more rootless you become because everything is possible.”
In their chase after ever fresher possibility, the stateless super rich have created an entirely new real estate market category. Realtors generally define this new “super-prime” category as the top 5 percent of properties in the global urban hotspots the world’s deepest pockets most enjoy frequenting.
Price counts as no object in “super-prime” real estate. The rich see, the rich like, the rich refuse to take “no” for an answer. They merely up their offers, until they get legal title to the prime properties they most covet.
Such “super-prime” bidding wars have kept the price of luxury real estate soaring at the same time the more ordinary global housing market is still reeling. So far this year in Manhattan, four luxury co-op apartments have sold for over $30 million each, a total, notes Crain’s New York Business, that matches the combined sales at that level over the previous three years.