Irs Tax Reform
Source: Office of the Taxpayer Advocate.

No one likes paying taxes, and nearly everyone takes whatever steps they can to reduce their tax burden. Yet as an increasing tide of corporations and individual Americans use more aggressive strategies to reduce or eliminate their U.S. tax liability, many people now believe that America's tax system is in danger of dysfunction. In particular, three alarming trends have raised the question of the best way to get American taxpayers to shoulder their burden rather than seeking lower-cost alternatives. Below, you'll learn more about three ways tax dollars are disappearing from America's coffers, as well as the consequences for you as a taxpayer and an investor.

1. More companies are moving their corporate headquarters overseas
The most visible sign of tax dollars fleeing America is well-known U.S. corporations merging with international companies. These business combinations give U.S. companies the option of shifting their headquarters to the international target company's tax home, and buyers are increasingly taking advantage of that opportunity, leading to what's known as a tax inversion.

The underlying economics couldn't be simpler: America's top corporate tax rate of 35% is well above what even most developed countries charge their businesses, so the incentive to shift a company's tax home to a more favorable location abroad is huge. There have been attempts to discourage tax inversions by requiring the target company to be a certain minimum size. However, this has only led to higher-profile deals, such as Burger King's (NYSE:BKW) acquisition of Canada's Tim Hortons (NYSE:THI) and the failed attempt by Pfizer (NYSE:PFE) to buy out U.K. drugmaker AstraZeneca (NYSE:AZN).

Public outcry has led many companies to think twice before taking advantage of tax-inversion provisions, with Walgreen (NASDAQ:WBA) choosing not to do so despite its planned buyout of Swiss partner Alliance Boots. Nevertheless, billions in lost taxes show the competitive disadvantage of U.S. corporate tax policy compared to the rest of the world.

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Source: Phillip Ingham via Flickr.

2. Many multinationals keep their foreign profits offshore
Even among companies that choose to keep their corporate headquarters in the U.S., other tax-avoiding strategies have been around a lot longer. Tech companies from Apple (NASDAQ:AAPL) on down keep billions of dollars in cash on the balance sheets of foreign subsidiaries, and rather than repatriating that money and having to pay income tax on it, they've largely held that money overseas.

Current tax law makes these moves entirely legal, and in the past, the U.S. has had to resort to temporary tax cuts to give companies an incentive to repatriate their overseas profits. A decade ago, a tax holiday led to dozens of companies taking action to bring money back into the U.S., but now many policymakers prefer the idea of broader-based corporate tax reform rather than another short-term stopgap measures like tax holidays.

Tax John Morgan Flickr
Source: John Morgan via Flickr.

3. More Americans are giving up their citizenship
For companies, changing headquarters and tax homes or shifting money from one pocket to another doesn't have big ramifications for their operations. But increasingly, individual American citizens have taken the much more dramatic step of giving up their citizenship, emigrating, and reaping the benefits of lower taxes abroad.

The move gained notoriety in the run-up to Facebook's (NASDAQ:FB) IPO, as co-founder Eduardo Saverin emigrated to Singapore immediately before Facebook went public. Although Saverin's spokesman said that taxes weren't a motivating factor, the move allowed Saverin to lock in the amount of tax owed at the time he gave up his citizenship, avoiding tens of millions of dollars of additional capital-gains tax he would have owed based on Facebook's rise in value since 2012.

In 2013, almost 3,000 Americans gave up their citizenship -- more than triple the number in 2012. Although other factors like financial restrictions on foreign bank accounts for U.S. citizens also played a hand in the decisions, Americans willing to live abroad can often enjoy substantial tax savings from doing so.

America relies on tax revenue to fund the government's operations, and with projections for continued deficits in the future, anything that jeopardizes the amount the U.S. collects in tax is bad has massive implications for the nation's economic health. By staying aware of these threats, you can let your elected officials know what's important to you and how they can take action to keep your own taxes where they ought to be.

Dan Caplinger owns shares of Apple. The Motley Fool recommends Apple, Burger King Worldwide, and Facebook. The Motley Fool owns shares of Apple and Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.