

Will "White Flight" Strike the U.S.? - DanielBMarkham
http://www.whattofix.com/blog/archives/2010/04/will-white-flig.php

======
patio11
Jurisdictions actively competing for internal migration is one of the
healthiest features of the American political system, and with the rise of
globalism and the Internet I see this trend only increasing.

I'm not big on the framing of this particular post, but the prefecture I live
in had a declared policy of encouraging "immigration by desirable foreigners"
(their phrasing, not mine) a few years ago -- educated professionals and
business owners, principally. This prefecture was hardly a revolutionary
trendsetter in that regard.

Although I know more of my fair share of expats based out of cheap countries
in Southeast Asia due to the circles I run in, note that this is totally not
limited to the choice of "first world country with mediocre services and
crushing tax load" versus "third world country where you're on your own."
America/Japan/Canada/UK/etc can compete for mobile individuals just like
California and Kansas compete for them.

~~~
xiaoma
Unfortunately, it isn't exactly a fair competition for overseas Americans due
to the long reach of US financial laws. Aside from having to file taxes to
both the country of residence _and_ the US, there are a number of financial
reporting rules about even fairly modest sums of money (>$10k) in foreign bank
accounts. Most troubling is that the failure to keep up with the ever-changing
accounting regulations results in draconian penalties which are often more
than the person's entire net worth.

I find the threat of being completely wiped out financially or even being put
in prison simply for not keeping track of whether a paycheck has put my bank
account over $10k or not far more worrying than owing a bit of money in taxes.

This gives Americans a modest disincentive to move abroad and compete with the
people from Japan/Canada/UK etc... who don't face those dangers.

~~~
patio11
Xiaoma is referring to a Treasury Regulation which requires you to file a one-
page form with two numbers on it (nuisance scales linearly with accounts
controlled). The penalty for forgetting to file it if you're a paycheck over
$10,000 is that a bureaucrat will be very cross with you, if they notice.

<http://www.irs.ustreas.gov/pub/irs-pdf/f90221.pdf>

Relatedly, the IRS' response to minor issues with tax returns is to send you a
bill.

~~~
xiaoma
I have been told by an accountant that failure to file while abroad, even if
nothing is owed, carries a $100,000 penalty.

Criminal penalties are also possible, and more likely than in the past.

------
nsfmc
Firstly, "white flight" is not due to "people [moving] out of the city because
the burden it is placing on them does not match the value of the services they
are receiving." The most correct explanation is that "it's complicated" and
has to do with issues of class, mobility and race, but has little to do with
the city "failing to provide" in fact, the reason white flight exists is
because it is possible to engage the city without actually living in the city.
A good example of this is detroit in the past hundred or so years.

I love that this article is essentially predicated on the idea that you should
retain an american salary and live in a depressed economy where that is
disproportionately large in relation to the average. This sort of white flight
_actively diminishes_ the tax base and local revenue in a negative feedback
cycle more significantly than the increasing population of "poorer people."

I mean, if you want to leave the country, by all means, but don't expect it to
take care of you once you're gone.

I'm reminded me of the closing paragraphs of a recent [NYT poll][survey] on
the Tea Party movement:

> _...nearly three-quarters of those who favor smaller government said they
> would prefer it even if it meant spending on domestic programs would be
> cut._

> _But in follow-up interviews, Tea Party supporters said they did not want to
> cut Medicare or Social Security — the biggest domestic programs, suggesting
> instead a focus on “waste.”_

> _Some defended being on Social Security while fighting big government by
> saying that since they had paid into the system, they deserved the
> benefits._

> _Others could not explain the contradiction._

> _“That’s a conundrum, isn’t it?” asked Jodine White, 62, of Rocklin, Calif.
> “I don’t know what to say. Maybe I don’t want smaller government. I guess I
> want smaller government and my Social Security.” She added, “I didn’t look
> at it from the perspective of losing things I need. I think I’ve changed my
> mind.”_

[survey]: <http://www.nytimes.com/2010/04/15/us/politics/15poll.html>

~~~
DanielBMarkham
I'm not replying to all the mis-characterizations of my article -- aside from
saying I'm not racist nor planning on moving out of the country any time soon.
But I found your observations very interesting.

It IS complicated, and (I think) still a matter of debate why people actually
leave a city. I don't claim to know the answer, I was just wondering if those
generally-agreed-upon trends would amount to the same kind of exodus seen in
the cities over the past few decades.

Particularly I liked this phrase you used:

 _because it is possible to engage the city without actually living in the
city_

This would seem to be the basis for cities like Washington, D.C. threatening
to tax commuters for "allowing" them to come to work in the city. Perhaps also
this is the basis for the U.S. continuing to tax citizens even if they don't
live in the U.S. or ever visit.

Question: does the internet allow us to "engage" the rest of the world to the
extent necessary to make this geographic proximity less important than it was
20 years ago?

And for those who wondered, I can't remember all the countries this startup
was dealing with. Their business model was providing an internet portal for
Americans looking to retire/live overseas and get the most out of their
remaining savings and income. Costa Rica comes to mind. As does Chile and
Brazil. If I remember correctly, one of the services they provided was a
annual survey of countries and how friendly they were to American ex-pats.
Also lots of advertising from resort and retirement communities from all over
the world, along with real-estate listings, business opportunities, etc. It
looked like a cool idea, but I didn't really think about the larger trends it
was based on until reading the ex-pat tax article on HN a few days back.

~~~
edster
Detroit (like many big cities) already taxes commuters. If you work in the
city, you pay 1.5% income tax to the city. In the extreme case of Detroit, a
huge percentage of the city tax revenues come from people who have no ability
to be represented in the city. (The whole taxation without representation
thing)

As Detroit learned, thinking that people will continue to engage the city
without living there is only true to a point. In this area, business has moved
to Troy and Southfield and Novi. Most people I know go into the actual city of
Detroit a couple of times a year, mostly to go to a ball game or casino.
People don't go there to shop or socialize.

------
JeffJenkins
The tax situation only affects people living outside of the US, and possibly
needing to renounce your citizenship is an incentive to not leave the country.
The US is also one of the least taxed countries, despite rhetoric suggesting
otherwise.

The people who are "better off" are by far the most comfortable here and least
likely to be feeling the impact of the increased cost of living. They're also
the least likely to actually need the government services which aren't
working.

Lastly, as you hinted at near the end, the fundamental difference between
moving to the suburbs and moving to another region (domestically or
internationally) is that you are going to be far away from friends and family
as well as developing whole new routines. In the suburbs you can just drive
into the city if you had been doing something there regularly.

------
dhh
Which South American country exactly would you move to that is both better
governed and less taxed? I don't think the author has visited many SA
countries.

That's not to say that there are no reasons to move to South America, just
that you don't go there for the model governance, wonderful taxation scheme,
or regime/economic stability.

~~~
maw
Chile and Uruguay are supposedly well-governed. I'm not sure about taxation in
either.

Despite that, I agree with you: there's a lot to recommend Latin America (I've
lived in Mexico for almost six years), but generally you don't include model
governance or well-run taxation among those reasons. I haven't been here long
enough to comment on regime or economic stability.

------
Quarrelsome
Sorry but I call "old man argument". It's the same argument that my dad makes.
"Things are bad, it's better abroad" which more or less leads to his "the
world is going to end" diatribe.

I think this "white flight" premise is a lot more to do with the older
generation who among other things earn more money and thus pay more tax and
more easily fall into "the country's gone to pot" way on thinking. In the UK
You certainly saw a number of people nearing retirement age move to the
continent (Spain mostly) on the back-end of the housing boom.

I don't think "the current situation" has changed one iota, its only that
you've aged and now see things differently. I would suggest you help out the
younger generation by staying and helping them pay the tax bill and possibly
generating some jobs for them.

Also the US has lotsa undeveloped land. So idk what you're talking about
there.....

~~~
CWuestefeld
There's a kernel of truth in your argument. At least some of the effect is
changing perception. But some is changing realities as well.

My investment advisor tells me that with the GWB tax cuts expiring, scheduled
increases in capital gains taxes, and the government's refusal to address the
AMT problem, that my tax situation is changing drastically enough that I need
to change my investment strategy.

I'm paying into Social Security to give my grandparents more money than they
ever paid in, and covering the shortfall created by my parents' generation
running up huge deficits and borrowing the money from SS.

On the other side, you're asking me to help out the younger generation pay
their tax bills.

And stuck in the middle, I find that any responsible behavior on my part is
answered by looting the savings from my frugality to give to reward the
profligate. I'm paying down my mortgage as fast as I can, while underwriting
the costs for those who bought McMansions and can't afford them. Those of us
who bought economical cars are paying part of the costs for fuel hogs to trade
in for better mileage.

I'm quite certain that after all the savings I've done for old age, the long
term care insurance I've paid 5-digits into, etc., the government is going to
see that I have too many privileges (that I've worked for, and lived frugally
to amass) and take away more of what I've had to give to the wasteful.

Every day I see another version of the ant-and-grasshopper story. I don't
think you can blame me for frustration.

And you really ought to worry about the moral hazard it's causing. I fear that
it leads to a feedback cycle, where the problem gets worse and worse.

~~~
Quarrelsome
I'm not asking you to pay their tax bills. I'm asking you not to leave the
younger generation in the lurch. All over the world the baby boomers are
stumbling into retirement. In a lot of countries this poses a serious problem
as this:

* represents a significant voting block

* makes large demands on healthcare

* makes large demands on pensions

And this is on top of the huge deficits that most western countries currently
have.

I envisage the new generation having to pay for a lot of the costs of the baby
boomers while also representing a smaller voting block. This is made even
worse in countries with less land (Japan and most of Western Europe) as this
generation is already struggling to get onto the property ladder. These being
the people that don't have enough money to afford an "investment advisor".

What makes this state of affairs even worse is that the older generation who
did well are starting to move abroad thereby denying the country of their tax.
Of those that remain a significant proportion are anti-immigration.

This leads me wonder how the pyramid schemes that are pensions and healthcare
are actually going to be affordable when the pyramid becomes inverted and the
voting block are anti-immigration.

~~~
CWuestefeld
While you recognize that so much of this is a pyramid scheme, it seems to me
that you're saying I've got to keep paying just so that the pyramid can keep
going. Is there ever a point where it's OK to say "this is wrong, we must
stop"?

You're also assuming an extremely high degree of responsibility for neighbors.
Now, I'm not going to go religiously Ayn Rand on you. I acknowledge that
society is interdependent, and I couldn't have achieved as much as I have
without neighbors that work together.

But I think you're going too far. There are things I'd like to do in my life,
and for those that are most important, I'm consciously laying things out in a
way that should allow me to get there. This isn't without some pain. There are
plenty of things lower on my priority list that I must forgo in order to get
to the high-priority ones.

I don't have an iPhone, I don't have an LCD TV, let alone HD. My wife and I
each have a car: mine is 8 years old with 108,000 miles; hers is 7 with
130,000 miles. We rarely eat out. We don't have fancy furniture: much of it is
from WalMart, as is much of my clothing. We use credit cards for convenience,
and have never run a balance on them. This is not an extravagant lifestyle,
this is thrift.

Yet I see every day people living extravagantly: leasing cars and turning them
over every 2-3 years; huge houses, refinanced at 45 years old so they'll be
paying until they're 75; cigarettes and expensive drinks; $900 purses and
fancy shoes.

The result is that I have more assets. Yet I constantly hear complaints about
how unfair it is that people have more in the bank, and those "lucky" few
should have to shoulder the burdens that frequently result from the profligacy
of the indebted.

So I make myself suffer to save. And it seems that I'm to be made to suffer
later, too, as my savings are looted. But on the other side of the screen,
those living high on the hog will, by virtue of their very wastefulness, get a
claim on proceeds of my frugality, allowing them to continue their party.

How do you expect me to feel that I owe this to them?

You say that I should help the younger generation by helping them shoulder
some of the tax burden. But isn't paying the debts of the grasshopper creating
moral hazard, doing harm to the younger generation by showing them that the
path to happiness is finding an ant to carry them along?

~~~
Quarrelsome
Yes it is a pyramid scheme. Yes we can stop it and yes that would cause people
to die (earlier) and/or suffer. Personally i'm not willing to make that
choice.

I apologise that you've taken this personally, I just wished to point out that
the tax burden does appear to fall on the younger generation. Especially if
the older ones are shipping out due to "tax reasons".

Please appreciate that i'm from the UK so my perspective in regards to the
welfare state is a favourable one since it was built on the wishes of those
that took part in WW2, a brighter tomorrow if you will....

I also find it unfortunate that you decide to debate this around those who are
wasteful. There are many people who have had crap, unfortunate lives that
require our help. A balanced discussion of any welfare state requires us to
acknowledge all of these types of people, both the wasteful and the needy.
Would you rather ignore the needy at the benefit of giving the wasteful what
they deserve (nothing)?

~~~
CWuestefeld
_I also find it unfortunate that you decide to debate this around those who
are wasteful. ...Would you rather ignore the needy at the benefit of giving
the wasteful what they deserve (nothing)?_

Well, of course that's because it's easiest to argue against the wasteful :)
For those that are truly victims of circumstance, the argument requires quite
a bit more finessed debate, and obviously I'm better at the fiery rhetoric.

I think that the best work concerning liberty and social justice is that of
Rawls (<http://en.wikipedia.org/wiki/John_Rawls> ) and the reply by Nozick
(<http://en.wikipedia.org/wiki/Robert_Nozick> ). Your mileage may vary, I
guess, because the topic is still argued, but I think that Nozick has the
better argument. From a quick search, this
(<http://www.echeat.com/essay.php?t=28773> ) appears a decent essay on the
debate.

Rawls wants us to create a fairer world today by taking from the fortunate to
help the unlucky. But Nozick shows us that this interferes with the "natural"
way that people will distribute money, allocating it to those who give to him
the greatest benefit. Interpreting this through Hayek, we can see that
diverting wealth away from those who would be delivering the greatest returns
will, over time, hobble all of society. Without the work of those who would be
creating more wealth, the entirety of society is destined to poverty relative
to what could have been.

Framed in this comparison, it looks to me like the disadvantaged aren't worse
off in the big picture; it's not that anything is being taken from them, but
that they're not benefiting as much from progress as the rest.

------
patrickgzill
IMHO: yes.

Just like the Jews dispersed after the destruction of the Second Temple, there
will be an American disapora.

And that monthly rate to live somewhere else is closer to $4k per month than
$10K per month, depending on how much you want to travel, etc. even while
living overseas.

~~~
pw0ncakes
I can't believe someone would compare our supposedly high taxes to a
historical atrocity. There is no comparison between paying a few percent more
in taxes, for causes that benefit the common good, and having your country
conquered. None whatsoever.

~~~
spking
"...paying a few percent more in taxes, for causes that benefit the common
good..."

That's a very broad generalization and an extremely debatable statement.

1\. "Paying a few percent more in taxes" When you factor in the whole of the
tax burden the average working American pays (Federal, state, local, special
district) it adds up to about 50% of personal income. This is not just income
tax, but sales, Medicare, SS, Unemployment, gas, property tax, special
assessments, DMV, etc.

2\. "Causes that benefit the common good" Unfortunately, the vast majority of
our tax dollars goes to servicing the interest on the national debt and our
vast military machine. See: <http://www.warresisters.org/pages/piechart.htm>

~~~
pw0ncakes
We pay a shitload in taxes in this country. I'd love to see the amount go
down, and I agree that a lot of that money is wasted due to fiscal
mismanagement and military buildup.

I'd also like to see universal health care and higher education, along with a
reasonable social safety net. These are worth spending tax money on, even
though they're expensive (in the short term). I care about these more than
about the specific percentage we pay in taxes. 50% for a successful, great
society would be a bargain; 10% taxation for no social benefits at all is
unbearable.

------
rfreytag
Leaving now before you know what a new administration might bring seems hasty.
I am seeing hopeful signs of improvement in the US economic structure (Glass-
Steagall anyone?).

Perhaps domination of the economy by the finance sector and its zero-sum
approach to wealth creation will diminish in favor of new value-creating
enterprises in other sectors. Statistics showing lots of new businesses would
be a very good sign.

------
pw0ncakes
This is ludicrous. We don't see Swedes and Finns leaving their countries over
taxes. They take pride in their welfare states and relative lack of poverty.

The counterargument is that "we're different". Sure: we're a lot more nomadic.
It's not unusual for an American to live 1000 miles away from where he was
born, and for a lot of us, living overseas is attractive, but I still don't
see this as a mass threat.

Besides, if conservative whiners want to leave the country in droves, I'm fine
with that. We'll do fine without them. After blocking universal healthcare in
'48 (Southern racists didn't want to desegregate the hospitals) and bringing
us Nixon's ridiculous drug war, the utter failures of Reaganomics, and a crass
consumer culture, I'm surprised we haven't kicked them out yet.

~~~
anamax
> We don't see Swedes and Finns leaving their countries over taxes.

The Swedes and Finns still in Sweden and Finland are descended from folks who
didn't move to the US because they were unhappy about something.

Americans, for the most part, descended from folks who left somewhere because
they were unhappy about something.

Which reminds me, as Mankiw showed, the per-capita tax burden in dollars in
the US is fairly close to that of European countries. However, it's a smaller
fraction of GDP because the US per-capita GDP is higher. In other words,
Americans pay about the same and have more.

It's unclear why changing to pay the same and have less is a good thing.

And, since we're already paying the same and getting less, the whole "but look
at what they get for their taxes" argument fails.

<http://gregmankiw.blogspot.com/2010/03/taxes-per-person.html>

<http://www.themoneyillusion.com/?p=4626>

------
maukdaddy
Why is this inflammatory, tea party crap being voted up?!

~~~
astrodust
I have to agree that this does seem rather Libertarian and/or political if not
simply misguided.

------
meowmix
> ...I wonder if the country as a whole will suffer a kind of "White Flight",
> where the better off people move out of the city...

Congratulations on subtly associating "white" with "better off"

~~~
starkfist
He didn't coin the phrase. This phenomena has been called "white flight" in
the media for decades.

<http://en.wikipedia.org/wiki/White_flight>

~~~
meowmix
Oh I know. I used to live in Baltimore, I'm quite familiar with the concept.

Edit: My original point was more to demonstrate that it's easy to use an
outdated term ("white flight") and continue to use it to promote the idea that
white = wealth.

~~~
mnemonicsloth
How is the term outdated? Last I checked, economic parity between black and
white Americans was a ways off yet.

I'm sure you have the best of intentions, but from here it looks like you're
objecting to a pithy truth that you don't want stated.

Which is a worse signal to send, for people concerned about racial inequality
in the US -- Thought Police, or Vocabulary Prudes?

