Capital is mobile. That is the reality every serious financial centre must remember. People vote with their feet when a state becomes too expensive, too hostile or too unpredictable. Investors do the same thing with their resources.
Americans are watching this phenomenon unfold in real time. Internal Revenue Service (IRS) migration data show taxpayers – and the adjusted gross income they generate – moving across state lines. The Tax Foundation has reported California and New York have suffered the largest net losses of adjusted gross income from domestic migration. Those dollars did not disappear. That wealth moved to places where capital, investment and success are treated more favourably.
California offers the clearest warning. The state has built a political culture that too often treats success as something to be taxed, regulated and redistributed. It has the nation’s highest top marginal income-tax rate and relies heavily on a small number of high-income taxpayers to support its budget. California’s own Legislative Analyst’s Office has acknowledged that the state continues to lose wealth to other states, with domestic outmigration remaining well above historical norms. When government repeatedly asks productive citizens to surrender more of what they earn and build, those citizens eventually ask a simple question: Why stay?
New York tells a similar story. It ranks last in the Tax Foundation’s 2026 State Tax Competitiveness Index. The state closely tracks the departure of high-income taxpayers, including those earning more than $1 million annually. Meanwhile, New York City has continued to target property owners, including a now-enacted pied-à-terre tax on luxury second homes. When ownership itself becomes a political target, people respond predictably: They sell property, change residency and move their capital elsewhere.
The lesson is straightforward. Wealth does not remain where it is punished. It migrates to jurisdictions that understand the importance of welcoming investment, rewarding enterprise and providing certainty. Governments may wish otherwise, but capital always has options.
That reality should command the attention of policymakers in Liechtenstein. The principality is among the wealthiest nations in the world on a per-capita basis and has long built its financial-centre reputation on stability, legal certainty and long-term wealth preservation. Liechtenstein proudly promotes itself as a jurisdiction guided by the principle of “thinking in generations”. It is a compelling promise – but also a fragile one.
Historically, Liechtenstein offered a distinctive bargain: Respect for private capital, predictable rules, discreet professionalism and confidence that legal structures would function as intended. For globally mobile families, those attributes often matter more than tax rates alone. Yet, only one generation removed from its efforts to escape international banking blacklists, signs of strain are emerging. Critics argue that its courts are increasingly failing to protect wealth creators, that its banking sector has been used by individuals subject to US sanctions and that authorities have yet to develop a clear strategy for addressing hundreds of “zombie trusts” containing billions of dollars in frozen Russian assets.
This is where Luxembourg – where I had the privilege of serving as US ambassador during the latter half of President Donald Trump’s first term – becomes more than a useful comparison. It becomes a serious alternative.
Luxembourg has spent decades building one of the world’s most sophisticated financial ecosystems. It combines scale, institutional maturity and regulatory credibility. Today, it is the world’s largest cross-border investment fund centre, the second-largest investment fund centre overall and Europe’s undisputed leader. Luxembourg-domiciled funds are distributed in 80 countries, giving the country a reach that far exceeds its size.
Taxes can be calculated. Compliance costs can be modelled. What capital cannot easily quantify is a culture that begins to take wealth for granted – or governments that seek to manage it rather than protect the conditions that create it. Once entrepreneurs and investors conclude that a jurisdiction has shifted from stewardship to suspicion – or worse, to incompetence – confidence erodes rapidly.
California and New York should serve as cautionary tales. Their experience shows that successful people and capital will tolerate only so much punitive policy and bureaucratic dysfunction before seeking better opportunities elsewhere.
Liechtenstein should not test whether the same principle applies in Europe.
It does.
