Senate Approves Soviet-Style Exit Tax

The Senate voted unanimously Thursday for an old Democrat proposal -- an exit tax on those who renounce US citizenship. This is supposedly an offset for the tax reductions for service personnel contained in the Armed Forces Tax Fairness Act of 2003. This is one of those fake budget deals where a tax cut has to be offset by a tax increase or a spending cut to "pay" for the tax cut (even though a tax cut is largely costless).

The bill would declare expatriation a taxable event and assume all your property was sold on the day before expatriation. You would then owe taxes on the "sale". There is a $600K exemption and some exemptions for minors and dual-national-at-birth-non-US-residents who renounce.

The House version of the bill lacks the exit tax provision so it's off to Conference.

See my Official Taxpatriates Page for more information on this topic and a list of those who have renounced recently.

TruthAboutWar.org (a libertarian site) has been publishing misleading claims about the US supplying Saddam with chemical and biological WMDs. This is strange complaint since libertarians presumably favor free trade in chemical and biological materials and precursor technologies as well as private possession of same. The claims (which have appeared elsewhere) are misleading because tight restrictions on the distribution of such materials were not put into place until the end of the 1980s. Additionally, anyone who knows anything about Iraq's order of battle knows that he got most of his weapons from the Soviet Union.

Here is a letter to the editor from today's WSJ that is too important to hide:

From the Wall Street Journal Letters to the Editor Page 26 March 2003 [Subscription Required]

Those Iraqi Weapons Are Not U.S.-Made

In regard to Robert L. Bartley's Thinking Things Over column and the editorial-page commentary by Gary Milhollin and Kelly Motz, both published March 24, referencing U.S. exports to Iraq that were approved by the Commerce Department during the 1980s:

Before readers assume there was some hidden agenda at Commerce to promote commercial sales to Iraq at the expense of U.S. security, the following additional points not mentioned in either article ought to be considered:

• It was the explicit policy of the U.S. government from the mid-1980s until the Iraq trade embargo in August 1990 that any Commerce Department approval of a commercial export to Iraq occur only with the prior consent of the Defense Department to ensure there would be no military benefit from the sale; certain commercial sales, but no weapon sales, were approved;

• Some of the items referenced as "approved by Commerce" in the Milhollin/Motz article were in fact not approved by Commerce because they required no approval for export to Iraq or any other country for that matter -- they were not on the control list at the time. Those agencies responsible in the U.S. government for defining the technologies that have weapons uses didn't include many biotech and chemical items in their assessments until 1989. Items on the control list that were "approvable" at the time were a matter of public record;

• Although not widely publicized, Commerce withheld export approval of many items destined to Iraq even though Defense had okayed the sales and there was scant legal basis at the time to deny the transactions. The combination of technology and end users didn't pass the "I want to sleep tonight" test. In some cases, Commerce officials telephoned U.S. executives to dissuade them from shipping and encouraged them to withdraw their export applications -- which worked more often than not, even though the reasons were often classified and couldn't be revealed to the exporter;

• Commerce was (and still is) an advocate in Washington for establishing U.S. and multilateral controls by key exporting nations on sensitive chemicals, biotech products and commercial products with nuclear weapons or missile applications. U.S.-led efforts were largely successful in the late 1980s and 1990s in getting other countries to agree to common restricted lists of these items. (Cooperation on implementation has not always been uniform, however.);

• Finally, in coordination with other agencies, Commerce issued regulations in early 1991 creating the legal authority to deny any U.S. export, even pencils and paper clips, if the destination was related to weapons of mass destruction, not just in the Persian Gulf region, but also in a number of areas around the world. Moreover, this authority has been used in real time by Commerce Department officials to interdict shipments that were already in progress but had not reached their final destination.

The weapons of the Iraqi military shown now on television are not U.S.-made, and any "blame America" suggestions don't have a basis in fact.

With 20-20 hindsight, we can all wish there had been a multilateral commercial trade embargo against Iraq long before 1990, so as to remove any doubt that a U.S.-made product might even tangentially contribute to keeping Saddam in power one second longer.

We can wish that U.S. intelligence assets were targeted to a greater extent on the Persian Gulf region in addition to the Soviet Union during the 1980s, so that the U.S. and other countries might have known more and acted sooner against the Iraqi regime.

But these issues were hashed out during the first Gulf War and are largely old news.

We can also wish the lessons from pre-1990 trade with Iraq would be learned and applied by the U.S. government to other countries with dubious leadership. In fact they were, more than 10 years ago, in export regulations issued by the Department of Commerce. Somehow, this is still news.

James M. LeMunyon
Oak Hill, Va.

(Mr. LeMunyon was the deputy assistant secretary for export administration at the Commerce Department from 1989-1993.)

Updated March 26, 2003