Forbes Article, March 30th 2009


When Capital Finds No Place to Hide

William Baldwin, 03.11.09, 06:00 PM EDT
Forbes Magazine dated March 30, 2009

More From William Baldwin

The crowds are milling outside the gates and the tax collector is sharpening his knives. Where's a poor billionaire to go?

There was a brief period, beginning in the Reagan Administration, when the U.S. was something of a tax haven. It got its taxes low enough that a prosperous entrepreneur who had other reasons for coming might voluntarily subject himself to the jurisdiction of the IRS. Rupert Murdoch comes to mind.

That era is over. The Obama Administration is fighting a war on capital. Rich people are going to be punished. The migration out will begin with New York and California, fiscal hellholes that will be pilfering the bank accounts of any wealthy person foolish enough to stick around.

Switzerland used to attract flight capital. No more. Its banks, now on the ropes, are squealing to tax inspectors. The next oligarch that gets on Putin's bad side probably won't head to Zug.

Ireland was for a while a growth tiger on the strength of low income tax rates and a willingness to take in tax exiles from other lands. It picked up some wealthy Americans, notably including a Campbell's Soup heir. But it would be a bad choice for relocation now. Its economy is tanking. Down the line, that means a tax grab on anybody who is still solvent.

Maybe island nations are due for a resurgence as havens for capital. Cyprus has attracted some capitalists from high-tax jurisdictions in Europe, but it has also attracted some shady characters. Ex-billie Robert Allen Stanford has given the Caribbean a bad name.

Check out Fiji. It is not the most politically stable of jurisdictions, but nowadays the coups are friendly, The billionaire who founded Red Bull has an island there (the one that once belonged to Malcolm Forbes). The actor Mel Gibson has some acreage on Fiji, too. It might be a safe haven someday when California starts looking like the set of a MadMax movie. A U.S. expat now living in Fiji tells me that the citizens there don't mind interlopers, so long as they bring jobs.

You don't have to lose sleep over the world's dwindling population of billionaires. (The tabulation, overseen by Luisa Kroll, Matthew Miller and Tatiana Serafin.) But their migrations are a harbinger of bigger capital movements. If billionaires are on the run now, millionaires will be tomorrow.

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