Hiding Behind the Flag
GOP Assaults on Privacy
Drives More Wealth Offshore!

by John Gaver
May 18, 2003

"The Executive Orders, regulations, and laws enacted over the past year in the name of “anti-terrorism” constitute the greatest single governmental assault on personal and financial privacy in American history. But there are safe, legal...indeed, wise...steps you can take to grow your wealth and better protect your assets and privacy overseas and offshore."

So begins a recent promotion that I received, advertising an exclusive series of private seminars on international real estate, tax law, banking, and investment, aimed at the wealthy and very wealthy, featuring top flight specialists in each of those disciplines, even including a former US Republican Congressman. But, this particular promotion, from a group called Sovereign Society, is just one of many such promotions that I have received in recent months, from many different groups. All, it seems, have a similar message.

"Protect your assets and even yourself, offshore."

But, far from the content of the message being an omen, it is the increasing volume of such offers, in recent years, that raise several very serious questions. If so many companies are getting into this very specialized business, what does that say about how many of America's wealthy are leaving? What will happen to our tax base, as they leave? What will happen to the jobs that their wealth supported, after they and their investment capital are gone?

I could easily argue the unconstitutionality of several of the laws and regulations that will be discussed here, such as the USA Patriot Act (Public Law 107-56) and Homeland Security Act (HSA) (Public Law 107-296). But many highly qualified legal analysts have already proven that point much better than I could. Yet, many conservatives still seem indisposed to criticize the lawmakers who passed those laws and regulations, since those lawmakers are, for the most part, Republican. So, rather than rehash the unconstitutionality of these actions, I will concentrate on their outcome, in the hope that when conservatives and even liberals see how their own pocketbooks will be affected, they will wake up.

As you read the rest of this article, keep in mind that whether or not the threats to the wealthy that these laws and regulations present are real or perceived, is unimportant. The important and undeniable fact is that more and more of the wealthy are viewing these actions as a personal threat to their economic well-being and are reacting accordingly and nothing that you, I nor anyone else think about the constitutionality or unconstitutionality of those actions, is going to change that.

The growth of the offshore investment market is only the symptom of a much deeper and very insidious problem facing America. The problem is that increasingly, the wealthy perceive, whether correctly or incorrectly, that they are under attack by their own government and they are taking the only rational option left open to them. They are taking their wealth and leaving.

In fact, as a result of increasingly onerous legislation and regulation over the last 25 years, aimed at punishing and controlling wealth, the wealthy are now leaving the US at an alarming rate. According to an April 2, 2003 Financial Times article, approximately 250,000 Americans are leaving the US every year. Common sense tells us that few of that number are poor. This is a serious problem for all of us, since the people who are leaving are the people who pay almost all of the taxes. Just the top 1% of income earners or 1.3 million, paid over 37% of all taxes collected in 2000. At an expatriation rate of 250,000 per year, we could easily lose a third of our tax base in as little as 5 years.

(For more detail on the actual numbers and links to the actual statistics, see the Action America articles, The Economy Bomb - Ticking Down Faster and 1986-2004 IRS Collections Data by Income Group.)

Until President George H. Bush assumed office in 1988, the promotion of offshore investment strategies occupied a very small niche market. But, after the massive tax increase, passed by a Democrat Congress and signed into law by President Bush, that market began to grow, as wealthy Americans began to feel threatened by their own government. Although this only caused a nominal shift in investment strategies, at the time, it represented the beginning of a major trend.

Then, as a result of the Clinton administration's many attacks on wealth, the market for offshore investment advice grew dramatically throughout the 1990's. The wealthy no longer simply felt threatened. They were under constant and increasing assault by their own government. In 1996, a Republican Congress passed and President Clinton signed into law, the Health Insurance Portability & Accountability Act (26 USC 877(a)(1)), which, among other things, contained what was considered to be the most onerous provision of law in US history. It claims the right of the US government to tax former US citizens for ten years after they have renounced their US citizenship and are taxpaying citizens of another country, for no better reason than that they were wealthy before they left.

After watching the US government so blatantly ignore the Constitution and international law during the Clinton administration, most wealthy people thought that it couldn't get any worse and heartily welcomed the election of a Republican controlled government. But, nothing that went before could have prepared them for the massive assault on wealth and privacy, under the guise of patriotism, that has been perpetrated by, of all people, Republicans.

By preceding their actions with lots of flag waving and anti-terrorism propaganda, a Republican controlled Congress and Whitehouse has, passed more wealth oppressive laws, regulations and executive orders than Clinton and the Democrats would have ever dared imagine, even in their wildest dreams. At least, that's the way that the wealthy, who are leaving, see it.

The almost benevolent sounding, USA Patriot Act, has received vociferous derision by Constitutionalists on both sides of the political aisle, for its virtual shredding of the Fourth Amendment. But, the more recent and equally benevolent sounding, Homeland Security Act, makes even the Patriot Act look almost benign, in comparison. But, regardless of what Constitutionalists think, the wealthy are experiencing, first hand, the oppressive product of those laws and they are defending themselves against these attacks in the only way left open to them.

Now don't get me wrong. The wealthy realize, as do most people, that both of those acts include some valuable provisions. But, in both cases, they perceive that the good is far outweighed by the bad. Our lawmakers loaded down those bills with massive attacks on wealth and personal privacy and hid them behind a few needed and very well publicized provisions and patriotic sounding names. After all, who could possibly vote against a bill named the "USA Patriot Act"? The list is actually quite short and includes few Republicans.

As an example of how our lawmakers are using the flag to cover their power grabs, consider that even though several government agencies have stated repeatedly, that the terrorists are not using our banking system to launder money, over a third (125 pages) of the 362 pages of the USA Patriot Act is concerned with nothing other than implementing anti-privacy controls on the US banking system - but it's "patriotic" - it says so in the name. HSA supporters tout the few lines that grant airline pilots the right to carry guns in the cockpit, while they avoid to even comment on the 17 pages of Title II and almost 40 pages of supporting text of the HSA, that creates the ominous Information Awareness Office, that will collect and catalog the most private information of all Americans. And to make matters worse, President Bush appointed Admiral John Poindexter, a man who has been convicted of lying to Congress, to head the development of that portentous office and its massive database.

Whether or not you personally agree with our assessment of those bills, the fact is, that more and more, the wealthy, who pay almost all of the taxes, do see those bills as threats to their livelihood and that and similar laws and regulations is what is driving their movement offshore and threatening to seriously diminish our tax and investment base.

And it's not just Congress. Keep in mind that the Bush administration helped author both of those bills and is currently working on a proposal to extend the Patriot Act, in what is being referred to as, Patriot II. One of the things that the administration admits that it wants to do, is eliminate the sunset provisions that Congress included in the original Patriot Act, over the administration's objection. In fact, the administration has already tried unsuccessfully, to add that provision to two other bills.

But, it goes far beyond even hiding behind the flag and the fear of terrorism. In 2002, President Bush used the media hype about the Enron scandal to justify signing Executive order 13271, Establishment of the Corporate Fraud Task Force, seen by many of the wealthy as a direct attack on wealth, since he went even further, in encouraging more than a dozen federal agencies to investigate Enron, at the height of the scandal, making a bad situation even worse. Indeed, current SEC and IRS regulations were more than sufficient to handle the situation and most analysts agree that had Bush allowed the only two responsible authorities, the SEC and IRS, to handle the situation normally, the guilty would still have been punished and Enron might have avoided bankruptcy, saving many jobs and stockholder dollars. But, this situation offered the opportunity to exert more control over wealth, so Enron was sacrificed. The wealthy, who are leaving, don't want to risk becoming the government's next sacrificial lamb.

And let us not forget that the Justice Department, who reports directly to Bush, has imprisoned a non-combatant US citizen for months, denying him access to a lawyer or indeed access to any of the legal protections guaranteed to US citizens, by the Constitution. How many times has the government been absolutely certain that they had the right man, only to learn that it was the wrong man, once the defendant was able to present his case in court and challenge their evidence with his own? Those protections are there for a reason. If they can hold even one US citizen incommunicado for months, with no access to the courts, then we are all at risk.

You may disagree with their interpretation of the threat. But, that's what the wealthy believe and that's why they are leaving and taking their wealth with them. Even if you assume that all of these laws and regulations are 100% Constitutional, they are still bad laws, because of the devastating effect that they will ultimately have on our economy. Even if they were passed with good intent, which is doubtful, the effect promises to be devastating, if not soon reversed.

Lawmakers on both sides of the aisle are attempting to hide the greatest single governmental assault on personal and financial privacy in American history, behind the flag of patriotism and the fear of terrorism. But, the only people who seem to be fooled by this sham are the poor and middle class people, who will be hurt when the wealthy, who are not fooled, are gone. If only that top earning 1% of taxpayers leaves, that will amount to the loss of over a third of our tax base and require a greater than 55% tax increase to make up the difference. But, our lawmakers don't care. They'll have more power.

It's interesting to note that as I was writing this article, I received a call from the RNC, asking for my continued support of the GOP, as I have done in the past. When I told them that I could no longer support the party in general and was lending my financial support only to specific candidates, who had not voted for or signed the Patriot Act or HSA, they tried to interpret my position as a "single issue" stance and warned of the consequences.

My response was that it's more than just one issue. It starts with the Constitution, which spans every issue. But even if you ignore the Constitution, as our lawmakers have, it's still more than one issue. It's unprecedented attacks on wealth and privacy, increasing federalism, the imprisonment of a US citizen, who has been denied access to an attorney for months, a serious threat to our economy in the form of lost tax base, as the wealthy leave and a party leadership that has forgotten why they were sent to Washington, in the first place.

I asked the young man on the other end of the phone line if he could deny any of those things. And, I must admit that I felt a little sorry for him at that moment. After all, I've been that guy in the past. But fortunately, I didn't have to defend the indefensible, when I was soliciting for the old GOP. If I had, I would have probably done exactly what he did - stammer around and finally say, "Well, you have a point there". Don't let anyone sell you on it being a single issue.

It's time for a thorough House cleaning (and Senate Cleaning). In fact, since Bush helped author those bills and executive orders and directly controls the Justice Department, who illegally held a non-combatant US citizen incommunicado for months, we should start at the top.

Granted, Bush has done an excellent job in dealing with Afghanistan and Iraq and we do need tax cuts. But, if we allow Bush and the current set of lawmakers, on both sides of the aisle, to continue to shred the Constitution and Bill of Rights, in the false name of patriotism, then the terrorists have won. Bush and those other lawmakers will have done what thousands of terrorists in hundreds of airplanes could have never done. They will, in their quest for more control over wealth that they haven't earned, destroy our economy and render meaningless what makes the United States the greatest nation ever to grace the Earth - our Constitution.

Since the Patriot Act and HSA Hall of Shame is so long, the following table simply shows how few of our elected officials had the courage to vote against those bills, or in the case of Democrats, just voted against them because they were supported by the Republican Whitehouse. The number on the left is the number of NAY votes. The number on the right is the number Not Voting. To see the details of each vote and determine if your Representative or one of your Senators voted for the bill, click on the underlined link to the appropriate chamber, to the left of each vote total.

USA Patriot Act NAY Votes / Not Voting
	Republican	Democrat	Independent
US Senate	0 / 0	1 / 1	0 / 0
US House	3 / 5	62 / 4	1 / 0

Homeland Security Act NAY Votes / Not Voting
	Republican	Democrat	Independent
US Senate	0 / 1	8 / 0	1 / 0
US House	10 / 4	120 / 2	2 / 0

If your Congressman or one of your Senators, Republican or Democrat, voted for either of those acts, then we urge you to run against them in the next primary or at least support their primary opponent, even if it means crossing party lines to do so. If you are of a different party, then make sure that they have an opponent in the general election, even if it has to be you. If the offending official gets through the primary, then give serious consideration to each of their general election opponents, regardless of party.

Whatever the case, it's critical that we replace the majority of the entrenched elected officials of both parties, even if it means that a few seats or even the Presidency should change hands for a few years. We must have new blood in Washington D.C. soon. In the end, we will have a more responsive and responsible government. Otherwise, the governmental attacks on wealth and privacy will continue and the wealthy will continue to leave at ever increasing rates, until our tax and investment bases are so diminished that a fiscal disaster can no longer be avoided.

Sure, it's about the Constitution. But, it's also about the fiscal survival of the United States.

See related articles and supporting documents:

The Economy Bomb - Ticking Down Faster
The Privacy Factor
US Taxpatriates List
1986-2004 IRS Collections Data by Income Category
Health Insurance Portability & Accountability Act of 1996 (26 USC 877(a)(1))
Immigration and Nationality Act of 1996 (8 USC 1182(a)(10)(E))

See Expatriate sites:

The Sovereign Society
Escape Artist
Expat World
Second Passports