Many believe that we will see an increasing number of Baby Boomers who will be expatriating to countries that have lower-costs-of-living. The rationale is that such a migration will allow the Boomer generation to maintain their high living standards given their lack of savings. Given the national debt that the Boomer generation racked up, if this trend does come about it would represent the largest "dine and dash" the world has ever seen.

Our current tax laws make it very possible that this "dine and dash" could occur. In general our tax system imposes a tax on all us citizens and long-term residents regardless of where they reside. Section 877 provides that citizens who lose their citizenship will continue to be taxed as US citizens for a period of ten years, unless the loss of citizenship was not to avoid paying US taxes. A taxpayer is presumed to have a tax avoidance intention if (1) their annual five-year net income tax is greater than $100,000 or (2) their net worth at the time of the loss of citizenship is $500,000 or more. There are some exceptions to these rules, such as if the taxpayer submits a request to the IRS to determine whether there was a tax avoidance purpose and the taxpayer is a dual citizen, a long-term foreign resident, or is younger than 18 ½ at the time. Once the citizenship is lost, the person can generally return to the US so long as they can establish that they have a "tax home" or a "closer connection" to another country. Generally this involves a facts and circumstances analysis. The person will typically want to be in the US for a period of time less what the IRC defines as a "substantial presence." This includes being in the US for less than 183 days in a one-year period, to avoid claims that they are a long-term resident. Certain time in the US is not included in the 183-day period. For example, days spent in the US for a medical condition that arose while the person was in the US does not count.

After the ten-year period, the US expatriate may still be subject to US taxes due to engaging in a US trade or business. A US trade or business involves specific profit seeking activities consisting of regular, continuous, and considerable business activities in the US. Sporadic or isolated transactions are not considered to be a US trade or business. The rules are a little more complex (and the planning opportunities are greater) for business owners.

In addition the US expatriate may be subject to US taxes on US-source income. In general US-source income includes fixed determinable annual or periodic gains, profits and income. This includes gain on the sale of US real property, royalties, etc. Capital gains from the purchase and sale of personalty, interest on US bank accounts, and interest on publicly traded debt are specifically excluded. Other items of income are also exempt, including real estate tax payments by US tenants and gambling winnings.

So Boomers could easily expatriate to lower-cost of living countries and come back to the US for a portion of each year to visit family and friends and possibly to work in the US, or opt to work in the US via the internet. Boomers could structure their financial arrangements so that they have no or little US tax. In addition, Boomers could even return to the US if they were to need medical treatment. If the medical treatment resulted from a condition that arose when the Boomer was in the US then they could stay in the US for any period of time. It is conceivable that the medical condition could arise from the person's time in the US when he or she was a citizen. For example, the person who is suffering from heart disease or dementia could make the argument that the condition arose when they were citizens and living in the US. In some cases, non-citizen Boomers may be able to live in US nursing homes for the remainder of their last days or years without being subject to tax.

However, Boomers expatriating from the US might not be the end of the story. The only rule in the "dine and dash" is not to be the last one in the restaurant. An increase in the number of Boomers who expatriate from the US would be equivalent to their saying, "I'm going to go start the car; I'll meet you in the parking lot." Younger generations are not going to accept that. The reality is that younger generations are much more mobile than the Boomer generation. More younger people have college educations, are comfortable with international travel, speak foreign languages, and can work via the internet or in other countries. If there is a spike in the number of Boomers who expatriate from the US, there will also be a spike in the number of younger generations who expatriate from the US.

This downward spiral would be disastrous for the US. It would result in decline in the population that pays nearly all US tax revenues (and that adds the most economic value to our country) coupled with the increasing public expense required to care for the medical needs of the Boomer generation who opt to stay in the US or who return later. As a result, a greater national debt would be spread over a smaller tax base.

This leads me to wonder if we could take steps to better allocate the national debt among our citizens. For example, should the US government be able to hand US expatriates a bill for their percentage of the national debt that was incurred during their period of citizenship? Why not? They benefited from the debt. Why should citizens who continue to live in the US have to pay for the debt of expatriates - especially expatriates who cut and run with their assets?

If we go down this road, perhaps we should also allocate the debt among citizens who chose to stay in the US. Younger generations might be able to pay this debt by shouldering higher income taxes over their lifetimes. But at this point, for many Boomers such a tax would have to be an estate tax. Although this is not what the estate tax was initially intended for, perhaps allocating estate tax revenues to pay the national debt over time makes more sense than repealing the tax. If the estate tax is repealed there is little doubt that the Boomer generation will win out in the "dine and dash."