Our News Bulletin Section On-Line:
Topics Include Banking Investments Interest Rates Small Business Free Zones - Taxes Incorporation Services Mutual Funds Offshore Life insurance Annuity Retirement Products  - Panama Dominican Republic Belize Agrentina Bahamas Chile Argentina Ecuador   Offshore Incorporations   Offshore Banking - Investments   Mutual Funds   International Business    Residency Services Citizenship
banking
                incorporation services
This site offers news articles and information pertaining to expatriation, offshore banking, offshore investments, residency in other jurisdictions, second citizenship and second passport matters.  Jurisdictions covered in our main section and our on-line newsletter sections include: Argentina, Bahamas, Belize, China, Dominican Republic, Ecuador, Nevis, Panama, United States and Uruguay.   Ascot Advisory assists with incorportion services, banking introduction services, free zone  license  assistance, residency and naturalization (second citizenship) in the Dominican Republic, Panama, Nevis and some of the other jurisdcitions mentioned above.
Telephone 
. 809-334-5387 or 809-756-1917
Email 
info@ascotadvisory.com
Sign up via the form below for our newsletter bulletins, which include current news and information of interest to our clients (and readers).   Note: We do not rent or sell our newsletter subscription list to anyone.
'news bulletin sign up' All of Newsletters from 2003 until current issues are available on-line.   If you missed an issue or simply want to read previous issues - including the very popular Readers Write In section .......Click Here
Complete Our On-Line Reply Form

CLICK HERE
WHERE CAN YOU AFFORD TO RETIRE TAX FREE?           WHY ARE SO MANY OF THE MIDDLE CLASS LEAVING THE US & EUROPE?

Our June 2005 Newsletter:
..
Dual Citizenship for Americans & New Expatriate Litmus Test Changes
Is there a Real Estate Bubble in the US and Europe?
John Schroder - Author of The Ascot Advisory News Letter Bulletin and Numerous Expatriate  Articles
Some Famous Quotes to Consider:
.
To say that any people are not fit for freedom, is to make poverty their choice, and to say they had rather be loaded with taxes than not. - Thomas Paine
.
The only freedom, which deserves the name, is that of pursuing our own good, in our own way, so long as we do not attempt to deprive others of theirs, or impede their efforts to obtain it. - John Stuart Mill
.
Change does not roll in on the wheels of inevitability, but comes through continuous struggle. And so we must straighten our backs and work for our freedom. A man can't ride you unless your back is bent. - Martin Luther King, Jr.
.
Institutions - government, churches, industries, and the like - have properly no other function than to contribute to human freedom; and in so far as they fail, on the whole, to perform this function, they are wrong and need reconstruction. - Charles Horton Cooley
.
.
OVERSEAS REAL ESTATE:  Possibly One of Best Tax-Haven or Wealth Transfer and Investment Ideas for 2005
.
As we progress into the 21st Century, one theme that seems to a common one among the so-called modern industrialized welfare states is a new aggressiveness towards worldwide taxation of citizens.  In the case of the US, it has been the situation for some time now that the US tax authorities claim the right to tax US Citizens on worldwide income regardless of where they are living and working.  They even go so far to claim the right to continue taxing a citizen after that citizen may have even renounced US citizenship (and procured another in the process presumably).  Death does not give you an escape, as the US claims the right to tax the estate of US citizens as well.  Europeans on the other hand have it a bit easier in that they can declare themselves legally non-resident in their former country (while retaining citizenship) and opt out of the tax system accordingly.  This stems from the idea or concept that if you NOT living there, then why should you continue to pay taxes for government services you are not using?  This at least is a fair and reasonable point of view.  However, with that said, we know that the European Union certainly has a Savings Tax Directive designed to collect interest from bank accounts across borders, that are owned by EU citizens.  So, even the EU is somewhat in this line of thinking, although certainly not as much so as the US.
.
In any event, many of these tax collection issues center around investment or banking accounts owned by citizens in another country.  However, it is very interesting to note that REAL ESTATE ownership is NOT reported, is NOT required to be reported, and is a non-taxable asset for Americans or Europeans in terms of any worldwide taxation reporting initiatives (unless you happen to have rental income and are a US citizen, in which case Uncle Sam claims the right to pick your pocket, which is another matter for another day).  So, for those people that very concerned about following the tax reporting regulations to the word, owning an asset such as real estate in another country may be the answer. 
.
In fact, apart from the idea of moving funds offshore to buy real estate (which is perfectly legal to do, which also does NOT invoke any sort of tax liability to do so), there are also a number of social, economic and other benefits to consider as well. 
.
.
IS NOW THE TIME TO TAKE PROFITS AND GET OUT
OF US or EUROPEAN REAL ESTATE?

.
Renowned international investment analyst Marc Faber says the following: 
.
Since 2001, US homeowners have taken out much higher mortgage loans on their homes than the volume of mortgages required to finance new construction activity.  So whereas recently mortgage borrowings were running at an annual rate of almost $800 billion, the financing of new home construction only required mortgages of around $450 billion. In other words, homeowners extracted almost $300 billion a year from their homes, which they could then spend on consumer goods such as cars, appliances and other discretionary items.
.
However, it should be clear that consumption driven solely by asset inflation in residential real estate is not sustainable in the long run. One day, home prices will fail to rise, either because interest rates won't decline any more or because affordability for the new buyers who have declining real incomes will become an issue.  Possibly supplies will also exceed demand as home builders all want to take advantage of the appreciating housing markets across the country by building a large number of units in the hope to sell them later at inflated prices.  What we, therefore, find at the present time is that US inventories of new homes for sale are at a record because, in recent months, housing starts have been rising at a far higher rate than new home sales.
.
I concede that the recent renewed decline in interest rates could keep the housing market buoyant for some more time, but since housing prices have increased at a far higher rate than consumer prices in recent years, some kind of housing bubble is in the making and, by now, we should all know what eventually happens to bubbles!  I would also add that once home price appreciation slows down or interest rates rise - or a combination of both - refinancing activity will come to a halt. Since there has been a close correlation between the refinancing index and retail sales a significant slowdown or even decline in consumption is only a matter of time.
.
http://www.ameinfo.com/45122.html
.
Marc Faber also says:
.
The destruction of paper money as a store of value - the most important quality paper money should have - occurs only in one way and that is through increasing the quantity of paper money at a higher rate than real GDP growth.  At times this excessive money supply growth will lead to real wages rising strongly, such as in the 1960s, or to commodity and consumer prices soaring, such as in the 1970s. But, excessive money supply growth can also lead to the most dangerous form of inflation and this is asset inflation, which at times will boost equity prices to lofty levels (Kuwait in 1980, Japan in 1989, Taiwan in 1990, NASDAQ in 2000, etc) and on other occasions boost the value of real estate into cuckoo-land (Tokyo in 1990, Hong Kong in 1997, and now in the Anglo Saxon countries).
.
The reason asset inflation is so dangerous is that central bankers - usually unemployable in any other capacity - not even as waiters - only pay attention to consumer price inflation. Therefore, when consumer prices do not rise much, for example because of international competition (as is now the case), they print money like water.  Needless to say that if the Fed engages one more time in 'printing money' the decline of the US dollar will lead to soaring import prices, accelerating consumer price inflation and higher interest rates. Hardly a favorable environment for the highly priced and highly leveraged US stock and real estate markets!
.
http://www.ameinfo.com/59970.html
.
.
TAX ISSUES IN THE NEWS:
.
.
CENTER FOR FREEDOM AND PROSPERITY FOUNDATION STUDY DOCUMENTS BENEFITS OF AMERICANS WORKING OVERSEAS
 - May 25, 2005
.
The Center for Freedom and Prosperity Foundation today released a study, entitled Territorial Taxation for Overseas Americans: Section 911 Should Be Unlimited, Not Curtailed.  The paper explains that Americans living and working overseas are at a competitive disadvantage with workers from other nations since they are taxed twice on their income.  The United States is the only industrialized nation that taxes labor income outside its borders.
.
Veronique de Rugy of the American Enterprise Institute said, Even though I am a French citizen living and working in the United States, the French government does not double-tax me on my American income. This is the right tax policy, so it is rather ironic that the United States has a more oppressive approach than the tax-loving French.
..
The United States is among the tiny handful of nations that imposes double-taxation on the labor income that individuals earn in other nations - even if the U.S. citizen is a full-time resident of the foreign jurisdiction. Yet since the "foreign-source" income of U.S. citizens already is subject to all applicable taxes that exist in other jurisdictions, an additional layer of U.S. tax is double-taxation - thus violating one of the most important principles of good tax policy. Almost every other country in the world taxes only income earned inside national borders - the common-sense principle of "territorial taxation." American legislators have tried to mitigate the adverse impact of worldwide taxation by allowing workers to protect annual earnings up to $80,000 from double-taxation. This policy, known as the Section 911 exclusion, is a small step in the right direction. Ideally, the U.S. government should not be taxing any income earned abroad - just as foreign governments should not be taxing any income earned in America. If policy makers created a level playing field by making Section 911 universal, more Americans could find jobs in the global economy, U.S. companies would become more internationally competitive, and U.S. exports would substantially increase.
.
http://www.freedomandprosperity.org/press/p05-25-05/p05-25-05.shtml
.
Link to full paper:
.
http://www.freedomandprosperity.org/Papers/section911/section911.shtml
.
EDITORS NOTES:  Do not count on it.  They need and want the Dough-Rae-Me, YOUR Dough-Rae-Me to be exact, regardless where you are living and earn it.  However, I offer Kudos to the Center for Freedom and Prosperity for addressing the topic.  Speaking of which, take a look at the following.
.
.
THE RETURN OF THE SITH (US Citizens Read This)
.
If you think the latest Star Wars film is the only thing that is new playing in 2005, think again.  The US State Department has recently made some quiet changes to policy pertaining to US Citizens that wish to expatriate (and how it relates to a litmus test for taxation claim issues) - and they seeming made these changes in early 2005, but have made it retroactive to 1995.  Here is the new and revised information on the US State Department Web Site:
.
LOSS OF NATIONALITY AND TAXATION
.
P.L. 104-191 contains changes in the taxation of U.S. citizens who renounce or otherwise lose U.S. citizenship. In general, any person who lost U.S. citizenship within 10 years immediately preceding the close of the taxable year, whose principle purpose in losing citizenship was to avoid taxation, will be subject to continued taxation. For the purposes of this statute, persons are presumed to have a principle purpose of avoiding taxation if 1) their average annual net income tax for a five year period before the date of loss of citizenship is greater than $100,000, or 2) their net worth on the date of the loss of U.S. nationality is $500,000 or more (subject to cost of living adjustments). The effective date of the law is retroactive to February 6, 1995. Copies of approved Certificates of Loss of Nationality are provided by the Department of State to the Internal Revenue Service pursuant to P.L. 104-191. Questions regarding United States taxation consequences upon loss of U.S. nationality, should be addressed to the U.S. Internal Revenue Service.
.
http://travel.state.gov/law/citizenship/citizenship_778.html
.
EDITORS NOTES:  Note that the changes made involves average annual income of US$100,000 (this is brand new and NOT mentioned previously).  The previous litmus test to determine if one was presumed to be renouncing citizenship for tax benefits ONLY involved net worth of US$500,000.  However, this amount is claimed to be NOW subject to cost of living, or in other words is NOW indexed to inflation (also something new which was NOT mentioned before).  In effect, they claim the right to continue taxing you even AFTER you may have renounced citizenship if THEY presume you are doing so for tax benefits.  How do they presume? By the amount of money you have or annual income.  Ironically enough, should you happen to have anywhere from US$250,000 to US$499,999 - you can buy a nice home for cash and live off the interest tax free in a number of other countries.  Expatriation is not just for Millionaires any more.  But, it is still very interesting that they keep changing the definitions, both unannounced and retroactive to the last ten years.  How does someone do that?  How does someone or a government agency make a new law or regulation and then say the law is retroactive to ten years ago?  If you know a new law or regulation is put into place today (or effective some date in the near future) then of course it is reasonable to assume that you are aware of the law and thus in violation if you do not comply - starting with today going forward.  But how is it possible you are held liable or accountable for some law or regulation that did not exist before, simply because someone TODAY says so (and claims it is now applicable to the previous ten years)?  Sounds like a concept direct from the Twilight Zone or Back to The Future.
.
.
ABOUT SECOND PASSPORTS or DUAL CITIZENSHIP: 
.
.
DUAL NATIONALITY is permitted for US Citizens and Should a US Citizen acquire a second citizenship, this does not mean they will loose US Citizenship by doing so.  Here is what the US State Department has to say about DUAL NATIONALITY:
.
The concept of dual nationality means that a person is a citizen of two countries at the same time. Each country has its own citizenship laws based on its own policy. Persons may have dual nationality by automatic operation of different laws rather than by choice. For example, a child born in a foreign country to U.S. citizen parents may be both a U.S. citizen and a citizen of the country of birth.  A U.S. citizen may acquire foreign citizenship by marriage, or a person naturalized as a U.S. citizen may not lose the citizenship of the country of birth.  U.S. law does not mention dual nationality or require a person to choose one citizenship or another. Also, a person who is automatically granted another citizenship does not risk losing U.S. citizenship. However, a person who acquires a foreign citizenship by applying for it may lose U.S. citizenship. In order to lose U.S. citizenship, the law requires that the person must apply for the foreign citizenship voluntarily, by free choice, and with the intention to give up U.S. citizenship.  Intent can be shown by the person's statements or conduct. The U.S. Government recognizes that dual nationality exists but does not encourage it as a matter of policy because of the problems it may cause. Claims of other countries on dual national U.S. citizens may conflict with U.S. law, and dual nationality may limit U.S. Government efforts to assist citizens abroad. The country where a dual national is located generally has a stronger claim to that person's allegiance.
.
However, dual nationals owe allegiance to both the United States and the foreign country. They are required to obey the laws of both countries. Either country has the right to enforce its laws, particularly if the person later travels there. Most U.S. citizens, including dual nationals, must use a U.S. passport to enter and leave the United States. Dual nationals may also be required by the foreign country to use its passport to enter and leave that country. Use of the foreign passport does not endanger U.S. citizenship. Most countries permit a person to renounce or otherwise lose citizenship.  Information on losing foreign citizenship can be obtained from the foreign country's embassy and consulates in the United States. Americans can renounce U.S. citizenship in the proper form at U.S. embassies and consulates abroad.
.
http://travel.state.gov/travel/cis_pa_tw/cis/cis_1753.html
.
EDITORS NOTES:  Many US Citizens are under the impression that Dual Citizenship is somehow illegal, or not permitted.  Also, some think that by acquiring a second nationality (second passport) that this in some way automatically jeopardizes current US citizenship.  NOT TRUE.  You must formally declare desire to renounce, and in fact this is to their benefit (so they can continue to lay claim to tax you forever regardless of where you are living in the future, claiming you did not formally renounce or did not indicate desire to do so).  Do you think it is that easy to leave or that they want to let you go?  You are an income producing taxable asset and not a human being (at least so the thinking would seem to be).
.
.
EUROPEAN TAXATION ISSUES IN THE NEWS:
.
.
TAX EVADERS KEEP STEP AHEAD OF THE EU - By Tom Wright, International Herald Tribune, WEDNESDAY, MAY 25, 2005
.
After more than a decade of haggling, the European Union is now just one month away from starting its biggest, coordinated assault on tax evasion: a new law aimed at uncovering - and taxing - interest earned on the hundreds of billions in savings stashed by EU citizens outside their home countries.  Yet the windfall of new revenue that some cash-strapped countries, led by Germany and France, had been hoping for is unlikely to materialize, according to bankers in Switzerland and other tax havens.  Not only are historic low interest rates keeping the potential pot to be taxed low, but many investors are restructuring their deposits to legally avoid paying anything, bankers say.  Others have already moved their money even farther afield - to places like Singapore - where it can remain hidden from tax collectors at home.  We should certainly not expect to see any kind of fiscal miracle, said Urs Roth, chief executive of the Swiss Bankers Association in Basel.  Most European nations have been trying for years to recoup some of the lost revenue - estimated at millions or billions of euros over the years - on interest earned by their citizens in tax havens like Switzerland and Luxembourg.
.
http://www.iht.com/articles/2005/05/24/business/tax.php#
.
EDITORS NOTE:  Hong Kong has recently seen an 80 percent increase in banking deposits within the last 18 months.  Is ASIA becoming the new tax haven for both Americans and Europeans?  How ironic - The Communist Chinese are becoming a world economic power and NOW new safe tax haven for citizens fleeing the high tax capitalist western democracies.  Anyone interested in a cup of Oolong Tea?
.
.
READERS WRITE IN:
.
John - Your comments in the May newsletter about Puerto Rico could leave readers with the impression that there is no income tax, which is not true.  As a resident of the US Virgin Islands, I file an annual 1040, which is identical to the IRS 1040 in every way.  The taxes paid stay with the Virgin Islands government rather that being forwarded to the IRS, which is probably the point you were making.  Puerto Rico has the same system.
.
EDITORS REPLY:  You are one hundred and one percent correct.  Puerto Ricans do pay income taxes to the local Puerto Rican government, but they do not pay US Federal Government income tax.  The same is true with residents of Guam, and other US possessions or territories (that are not states).  For this reason, can you imagine what their taxes would be if they did have to pay US Federal government income tax on TOP of what they already do pay, should they become a state?  For this reason, I think most Puerto Ricans would want to see Puerto Rico remain a commonwealth.
.
.
ANOTHER READER WRITES:
.
John - I think you did an ok job of explaining the extradition issue in the newsletter, but I think you left a few loose ends.  For example, extradition is not always over criminal issues. From personal contacts I know of a man that was extradited from New Zealand for a child support issue and that was before the recent felony laws regarding unpaid support. It was purely a domestic relations issue that he was extradited for at that time.  As you well know, some governments are sticking their noses very deeply into what were once personal and private matters these days. Be it children's care and discipline or what group you support that tomorrow becomes a dissenting voice, etc. etc.  The number of hapless people that find themselves in some kind of "trouble" is amazing. However with over 1700 possible felony offenses in the US and an IRS code of over 20.000 pages (not including letter law), the chance to stumble afoul and thus keep the legal professions machinery greased is very high.  Not to mention the fact that what is a "crime" or "offense" or even a "civil case action" in one place is NOT in another place.
.
You are VERY correct to point out that asking about extradition, or anything of that nature is a big No-No with any government official.  It is also a major No-No to make such inquiries to lawyers or for that matter anyone you do not personally know well.
By asking the "wrong" questions, or not wording them very carefully, I found out the hard way in one particular offshore jurisdiction. I did get my answers, but I raised so much suspicion, I was virtually blacklisted from the place.
.
EDITORS REPLY:  Well, I would say you are quite correct in that there are a number of, shall we say, sensitive topics or issues of late.  One involves anything to do with illegal drugs or drug trafficking.  Another has to do with custody matters and related child support matters, and yet another probably some major crime such as Homicide or Bank Robbery.  On the second item, some divorced or separated parents have absconded with their own children whereby they were charged with kidnapping, and in such cases deported.  I am not familiar with the case you mentioned in New Zealand, but I would have to guess there is more than then you know or were told (although perhaps not).
.
My suggestion and train of thought is, always leave on GOOD TERMS.  Do not violate the law where you were living and certainly do not do so in your new country.  This includes tax matters as well, although I have never heard of extradition for back due child support or tax issues, but I suppose anything is possible.  Many of these countries (high tax welfare states) are so broke, perhaps they will start kidnapping former citizens that have decided to expatriate, although I do not see the benefit to incarcerate even more people.  The US already has more people behind bars (in jail) as a percentage of population than EVERY other western democracy. 
.
However, I would also say know the law, especially in your new country.  It is very true that the laws may be quite different in the new country than what they were in the previous.  If you read the US State Department comments, you will notice they say that they discourage Dual Citizenship because it may cause a legal conflict, which is correct.  What they do NOT say however is for whom there might be a conflict (for them or for you).  Also, living in a new country as a tourist (especially illegally) provides no legal benefit, as you are still the so-called property of the previous country of citizenship in such a case.  However, should you become a legal resident of your new country and even better, a citizen, then you do have legal rights and legal recourse via the local court system (all assuming it is not a criminal issue both nations recognize as being criminal).  Many, many people insist on breaking the law in their new country by staying there illegally (without properly applying for legal residency, and eventual naturalization later on should they so choose).  In other words, living as what amounts to a tourist that has over stayed their tourist visa or tourist card.  This is not the answer and quite frankly, you are violating the law in the new country, so in such a case one cannot expect any sympathy accordingly.  But, if you are not a criminal and do not arrive with any negative baggage, and you do all things correctly or legally in the new country of residence, then you should not be paranoid about being kidnapped (by a foreign government anyway).
.
In regards to taxation issues, I would say that most governments are not going to buy into the concept that you owe taxes in perpetuity to the previous government simply because you have decided to relocate (and especially if you left on good terms, or left paid up to date as it were as well).  In fact, this is a US idea, and not one held by European nations (although the EU does want to chase taxes inside the EU and some other chosen locales, such as Switzerland and Aruba).  We already see the tit for tat arguments going on today, whereby many in the US do NOT want to turn over foreign owned account information to the Europeans (or whom ever) yet they want the Europeans to turn over information about Americans that might be banking in the EU.  There is quite a bit of hypocrisy to it all, and there are often deeper issues of sovereignty involved also.  So, stay tuned for more as the circus rolls out new center ring acts in this regard. 
.
.
ANOTHER READER WRITES:
.
John - If the US government and social security is "banckrupt" (your spelling) - the Dominican Republic is what then---- an economic model of prosperity that we should study and copy?  Moody's gives the Dominican Republic a rating of B3, an improvement from "negative" to stable.    That's why they pay 24% interest, because investors have no confidence in it.   At the same time US government debt is paying 4% on 10-year bonds, and has a rating of AAA.  When you look in the dictionary for how to spell "banckrupt" - maybe re-read what the definition of that word is.  The social security system will never bankrupt, because it is a pay-as-you-go system.  Which means, the rules of it can be changed so that it does not need to bankrupt.  Retirees may get less than they expected, and workers may have to pay more in, but that is not the same thing as bankrupt.    Just about every country has some form of social security.  When you started writing your column, you actually had some interesting and useful things to say.  Now it seems to have degenerated into your personal soapbox to bash and ridicule the United States.    But hey, the Dominican Republic really has got its act together.  Without the money flowing in from the good old USA, the DR would dry up and die.
.
EDITORS REPLY:  Well, first and foremost, thank you for your letter and your comments.  In regards to spelling, I know the word bankrupt was misspelled on purpose as poetic license.  I have also seen the word America spelled Amerika on purpose, but that is another matter.  Some people got or understood the underlying reference, where as obviously some people did not.  With regards to being critical or bashing any country simply for the sake of doing so, this is not the intent.  My goal really is to motivate critical thought, questions, and perhaps even motivate people also to seek out information through their own research and reading (and come to their own conclusions even if different from my own).  I do try to provide news, information, and yes even commentary on issues that I think are of interest and important.  Does this mean then that the newsletter is nothing more than a personal soapbox?  Perhaps, but it is also a soapbox for people like yourself, whereby I gladly re-print letters even if they are in contradiction to what I, or others might have to say.  You claim that you liked some things I had to say previously, but when it comes to comments that are critical towards the US, then this is a form of degeneration?  I have been critical of many things and many countries (or policies) in the past.  Why is it acceptable to be critical of everyone or everywhere else, except the US?    
.
Asking why or how did something happen, or arrive to an unfavorable point is not indicative of anti-patriotism.  This however is one of the problems in the US today, whereby citizens are convinced if they are critical and attempt to hold politicians accountable for actions (or lack of), that this is somehow tantamount to treason.  You may think it is fine for a government to confiscate personal assets of citizens (such as former US President Roosevelt confiscating personal gold holdings of citizens during the depression).  You may think it is fine for a government to do a number of things.  You may also think it is fine for personal and civil liberties to be taken away.  I do not, and I in fact think about all these issues, and I would hope you do also.  This is the point. 
.
But it is still worthwhile to point out, a person, company or entity is bankrupt when there are more liabilities than assets, more debts than income - and generally does not have the financial capacity to meet obligations with the funds on hand.  I wager to say, if Social Security were a private pension program administered by an insurance company, such an insurance company would be deemed insolvent (perhaps insolvent is a better word than bankrupt).  Personally, I think the social welfare state and all that goes with it has been one of the largest frauds ever concocted and promoted to the general public.  A legalized government operated Ponzi scheme that has now run its course (the original Ponzi scheme was a pay as you go program also, that is until there was no one left to pay in, leaving everyone else out to dry).  The only difference between the Ponzi program and Social Security is, the government, as usual, can simply go back and choke the population with even more taxes.  Yes, it is not broke in the traditional sense and the checks keep coming - but do you want to end up turning over 60 percent, 70 percent, 90 percent of your income to make it so?  What kind of financial future are our children and grandchildren going to have, choked with these increased taxes or social contributions?   It is not their fault.  What about the US politicians?  They have a separate pension system (funded with tax payer money) that is quite solvent.  Why do they NOT talk about cutting back their pension benefits?  Why do they not merge that money into the Social Security System and put themselves in the same boat as the other general population of citizens? 
.
Perhaps better to put the same future payments into an annuity with a private insurance company instead (not a program still administered and controlled by the government bureaucrats or bureau-o-rats, misspelling intentional).  It is YOUR money.  You would then know where it is, and take it out when you wanted (although perhaps with some early withdrawal penalty, but at least you could touch it).  Plus, by law in the US, all life insurance companies must maintain 102 percent of liabilities in some form or hard or liquid assets.  Stated another way, any future life insurance payment obligations and annuity contracts held by policyholders are considered liabilities of the insurance company and MUST be secured financially by law in this way.  How is the government run social security program secured?  By the prospect that ever more unsuspecting people will be lured into the Ponzi program going forward.  What if they were not?   What if the people knew the truth and were given the option of gracefully exiting out? The CATO INSTITUTE has very interesting fact and figures about the US Social Security System, along with some comments and suggestions as well:
.
http://www.socialsecurity.org/pubs/articles/tanner-050201.html
.
Michael Tanner, Director of the Project on Social Security Choice at the Cato Institute says the following:
.
It is going to get much worse. In order to continuing funding retiree benefits, the payroll tax will have to be raised to more than 18 percent. That's nearly a 50 percent increase.  Let's look at that financial burden another way. The Social Security payroll tax is already 12.4 percent of wages, or one eighth of a worker's total annual wages. It is the biggest tax the average household must pay. Roughly 80 percent of American families pay more in Social Security taxes than they do in federal income taxes.
.
http://www.socialsecurity.org/pubs/articles/tanner-050114.html
.
.
Interestingly enough, the Dominican Republic instituted for the first time in its history, a Social Security program in 2002 - 2003.  However, of the 3 plus million people eligible to sign up (signing up is indicative of something that is voluntary) only about 1.7 million did so according to the earlier statistics (many very sorry that they did shortly thereafter, but that is another matter for another day).  In any event, many people did not want it.  In addition, there has been private retirement annuities offered by many of the local insurance companies for years now.  Plus, many adult children purchase rental real estate in the Dominican Republic to support parents in their old age.  Meaning, the kids get together and buy one or more apartments and the monthly rental income goes to the mother or parents.  What a concept this is - Private people that find private solutions in order to take care of private family welfare matters.  What do you think happened prior to 2002 in the Dominican Republic?  None of the elderly ate, or were cared for?  Do you think all of the elderly were homeless in the Dominican Republic considering NO such social security program existed before?  Do you think it is mandatory that any government set up a welfare state - least the local citizenry starve and perish otherwise?  Do you think Dominican children have NOT helped and supported their parents in old age, with their own private money (without being told to do so by some government bureaucrat)? How is it possible that in a supposed poor, uneducated Caribbean country - people have been able to take care of themselves for so long without any government assistance (as it exists in terms of welfare programs in North-America and Europe)?  What free money is flowing from the ole USA - that you speak of?  Where is it?  
.
However, you are certainly correct in that the social welfare state could never go broke in the sense that there are a number of options (none beneficial to the citizenry though).  One is to raise taxes as you suggest (take even more money away from the citizens to solve the problem the citizens themselves did not create).  Another is to cut benefits and extend the retirement age.  Another is to simply run the printing presses like mad and inflate the money supply (paying people with money that is worth less in the future than the value of money the citizens paid in at the time they did so).  This also is part and parcel to the problem in that fiscal accountability or restraint does not exist.  In other words, no fear of failure - exactly because it is always assumed the taxpayers will pony up even more money later on - and that the show will go on.
.
None of these options is in any way beneficial to the citizenry - and I do indeed need to question why and how did it get to such a point?  I also need to question how this will affect people of my own age now, and the future generations coming up right behind me.  You read a news story about University Students in Panama protesting so-called social security reforms recently.  One might ask, why would young people be so angry and concerned about something that would not apply to them until 40 years into the future?  Because, the reality is, it does affect them right now in terms of the tax payments and financial burden they are forced to bear for a Ponzi scheme they never asked for.
.
Hans-Hermann Hoppe has written:
.
Once the principle of government - judicial monopoly and the power to tax - is incorrectly accepted as just, any notion of restraining government power and safeguarding individual liberty and property is illusory.  Predictably, under monopolistic auspices the price of justice and protection will continually rise and the quality of justice and protection fall.  A tax-funded protection agency is a contradiction in terms, for it is an expropriating property protector that will inevitably lead to more taxes and less protection. (End of Hoppes Comments)
.
In any event, I do not think there is any perfect economic model or perfect country to be found anywhere (all have their plusses and minuses).  When you choose another country to consider, it is the case of finding someplace that is better in the respects that are important to you personally - as an individual.  However, I would say that countries that do not have choking taxation rates and over extended social welfare programs, generally have the environment for more liberty, and more disposable income or personal economic freedom in regards to the local citizens.  I have said in the past that a country like the Dominican Republic is more Libertarian by accident rather than by design, YET it is more Lbertarian regardless (culture plays a large roll in this also).  Socialists discredit such countries, citing the issues or so-called issues of poverty, lack of social welfare, lack of special interest protections, etc.  But, it is very ironic that even with the high taxes, and endless amount of special interest legislation that there still are quite a large number of poor people in the so-named modern industrialized nations too.  Today (2005) in the US, an incredible 25 percent of the adult working population is deemed to be working poor, or one paycheck away from poverty.  That is a whole lot of people to take care of.  A whole lot of people that want the check they were promised.  Are you willing to give up half of your salary, or half of your own future social security checks, in order to help them out?  If you are, then I applaud you.  However, I believe that charity begins at home.  In addition, we ALL trudge off to work in order to provide a comfortable life and secure financial future for ourselves, and our families.  Is this not true?  I do not want to be a burden on society or make someone else suffer financially or economically in order to support me - and vice versa.  
.
So, what is the cultural or psychological mindset difference with the citizens of the Dominican Republic, Brazil, Argentina, Thailand, etc?  From what I have observed, it is that the people want to give the politicians as little money as possible to minimize the damage (both to their own pocketbooks and in terms of corruption and wasteful government spending).  The more you give them, the more they spend and waste.  The less money they have (government), the less damage they can cause.  Plus, how much is really enough?  So, in short, in such places, it can be said the PEOPLE have the money and not the government.  Which is one possible explanation as to why government bond or credit ratings may be poor.  When the government has it all, and controls all aspects of ones economic and civil life, the result is usually disastrous for the citizens.  Better for the government to be near broke and the citizenry wealthy, rather than the other way around.  But hey, some people like socialism, and they like the fact the government takes almost all of their money and tells them what to do, when to retire, how to raise their kids, and so on.  It can be a whole lot of fun living in a capitalistic socialist democracy - if you are the one on the receiving end.  It is when you are the one doing all the paying, that things get a bit uncomfortable.  On that note, this is where the real social divisions and tensions will be in the near term - those getting a check, and those still paying (and paying even more very soon I might add).  This is not just a US problem by the way.  Japan, Canada and the European Union nations are all in the same quagmire, with Japan worse off than the rest.
.
Just as an economic footnote, about 85 percent of the tourism to the Dominican Republic is from European countries or from countries other than the US.  In addition, this applies to roughly the same percentage of foreign investment into the Dominican Republic as well.  What good old money flowing from the US are we talking about?  Are You talking about the Dominicans that work for minimum wage (or less) - that do jobs most Americans would not even consider, that send US$100 back home to their families every month?  Or are you under the impression that the Dominican Republic is getting some sort of large foreign aid payments?  US foreign aid is a very, very small percentage of the Federal Government budget.  Check it out - the information is on-line from the US Congressional Budget office. 
.
The US needs emerging markets, such as the DR, really more than the other way around  This is why US business is spending millions to promote CAFTA and similar so-called free trade agreements.  But, if you want to believe that CAFTA is about helping all the so-called down trodden countries of the world, or that all these nations even want CAFTA - then be my guest.  I have noticed, by the way, that all the protests against CAFTA in Nicaragua, Guatemala, Costa Rica and the Dominican Republic were NOT shown on US television news programs. 
.
Is the Dominican Republic (and some other countries) the ideal role model for the future?  The answer is probably not - as no perfect model really exists.  But, quite frankly where they might be headed, and other countries such as Brazil (or have the potential to go) in comparison to where the US is headed (and has the potential to go given what is happening today) - I would say the DR has more of the fundamentals in place for a much more positive forecast going forward.  In the least, the country as an aggregate does not have the same kinds of problems - and the people are not living on overextended borrowed money.  The people in these countries may be poorer than you, but their personal assets or wealth is not propped up with loans or debt.  Which is to say, most people in the Dominican Republic own their own homes outright and live by paying cash for most things they buy.  Here end-eth the sermon, or soapbox (as the case may be).
.
For more economic and political soap (more thought provoking and interesting articles from various authors), please feel free to visit the Mises.org and Marc Faber website page below:
.       
http://www.mises.org/articles.aspx
.
http://www.gloomboomdoom.com/
.