IPS report documents missing millions as Massachusetts state legislature fails to act on Boston’s luxury transfer tax.
From Manhattan to Monaco, the world’s super rich are fashioning themselves into a new global tribe of footloose and stateless. The rest of us get to gawk — and foot the ultimate bill.
By Sam Pizzigati
Back in 1863, in the middle of the Civil War, a short story took the American reading public by storm. Edward Everett Hale’s “The Man Without a Country” told the tale of a poor treasonous soul sentenced to spend the rest of his life endlessly sailing the seven seas, in perpetual exile, as a prisoner aboard Navy warships.[pullquote]The number of Americans who’ve formally renounced their U.S. citizenship has jumped by over seven-fold.[/pullquote]
How sad, sighed 19th-century Americans.
How quaint, muse many of our 21st-century super rich. These awesomely affluent simply do not see statelessness as a penalty. They see statelessness as a goal.
And the ranks of our contemporary “men without a country” are increasing. The number of Americans who’ve formally renounced their U.S. citizenship has jumped by over seven-fold, from 235 in 2008 to 1,780 last year.
The spark for this surge in statelessness? Since 2008, U.S. tax officials have been endeavoring to clamp down more firmly on overseas tax evasion. Swiss private banks, for instance, have come under new pressure to divulge data on the millions wealthy Americans have stuffed in secret accounts.
That pressure has some of those wealthy irritated enough to renounce their ties to Uncle Sam. The cost to renounce: a $450 paperwork fee and an “exit tax” on unrealized capital gains for renouncers who hold assets worth over $2 million — or have paid over $151,000 to the IRS in any recent year.
But the affluent who’ve gone to the trouble of formally renouncing their citizenship make up just a tiny share of what the Financial Times has labeled the “stateless super rich.” These uber wealthy have no interest in the notoriety of renunciation. They just live their lives as if they had no nation to call their own. [pullquote]Most uber wealthy have no interest in the notoriety of renunciation. [/pullquote]
The most celebrated of these casually stateless? That would have to be Nicolas Berggruen, a 52-year-old worth over $2.3 billion who has spent the last decade hopping the world from one five-star hotel to another.
The German-born Berggruen grew up in Paris and went to college in New York. He made a fortune in hedge funds and now hobnobs with world political leaders and Hollywood celebrities. Reporters have dubbed him the “homeless billionaire.”
Few stateless super rich follow Berggruen from hotel to hotel. Most all of the vagabonding wealthy have personal residences. Lots of them.
Typically, the Financial Times reported last month, a stateless super-rich household will have one or two properties in their “country of principal residence,” another in London, New York, or some other “global city,” a “holiday home” in a soothingly warm climate, and maybe still another in the Alps. They’ll shift their household, by season, from one to the other.
Among the super rich, this perpetual-motion existence has become almost de rigueur, notes Jeremy Davidson, a London property consultant who handles properties that cost at least £10 million, the equivalent of over $16 million. [pullquote]Price counts as no object in ‘super-prime’ real estate. [/pullquote]
“The more money you have,” explains Davidson, “the more rootless you become because everything is possible.”
In their chase after ever fresher possibility, the stateless super rich have created an entirely new real estate market category. Realtors generally define this new “super-prime” category as the top 5 percent of properties in the global urban hotspots the world’s deepest pockets most enjoy frequenting.
Price counts as no object in “super-prime” real estate. The rich see, the rich like, the rich refuse to take “no” for an answer. They merely up their offers, until they get legal title to the prime properties they most covet.
Such “super-prime” bidding wars have kept the price of luxury real estate soaring at the same time the more ordinary global housing market is still reeling. So far this year in Manhattan, four luxury co-op apartments have sold for over $30 million each, a total, notes Crain’s New York Business, that matches the combined sales at that level over the previous three years.
Just how many potential stateless super rich are currently roaming the world? Late last year, the Singapore-based Wealth-X consulting firm put the overall number of global ultra wealthy worth at least $500 million at about 4,650. These super rich together hold an estimated $6.25 trillion in assets.
That’s more than enough, note urban planners, to create havoc in the hotspots where the stateless super rich most often gather. Their gathering, a veritable gentrification on steroids, tends to supersize prices for all sorts of local products and services — and price out local residents.
The massive mansions and apartments pf the stateless super rich also exacerbate local housing shortages — and constitute as assault on any healthy sense of urban community. These super-rich properties sit idle most of the year. The resulting emptiness, notes Columbia University sociologist Saskia Sassen, sucks the neighborhood vitality out of great urban centers.
The super rich don’t notice. Or care. They have no interest in putting down roots. During their brief seasonal sojourns, they live in isolation from the greater community around them. They venture out into local public life only long enough to corrupt it with trinkets for local pols who promise to keep tax rates toothless.
The stateless protagonist in the classic short story Edward Everett Hale penned nearly 150 years ago ends up desperately yearning to rejoin the society he so treasonously spurned. Today’s stateless super rich don’t figure to display any similar yearning. They’re having too grand a time. At our expense.
Sam Pizzigati, the co-editor of Inequality.Org, also edits Too Much, the online weekly on excess and inequality published by the Washington, D.C.-based Institute for Policy Studies. Read the current issue or sign up here to receive Too Much in your email inbox.