The author is arguing that the rate at which it was increasing (18x between 2008 and 2015) and the persistence of the trend (every year for the past three years) as well as that the most major contributing factor (tax law) is unlikely to change made this newsworthy, not the proportion of the population.
Edit: And I don't find it to be a moving counter argument. Additionally, I'm not sure its a good apples-to-apples comparison as the phenomenon seems to be prevalent among US ex-patriots, rather than the entire population.
Edit2: It turns out that it's hard to know how many americans live overseas[0], but it seems like 6.8 million might be a good guess. 4.2k / 6.8m is still only about .0006% though.
Yes, as absolute numbers. But how many of those are "high net worth" individuals, who may (or may not) contribute considerably more in taxes each year than the average tax payer? I believe, "Is there an exodus of people with access to large amounts of capital", is the real question with various long-term implications.
It's also worth noting that more and more American students are moving to Europe for free university and staying for the jobs. It wouldn't surprise me at all if this demographic begins to explain the increase in the US exodus, at least partially. Student debt can be a scary thing.
In looking at recent history, it's well worth remembering all of the Americans who emigrated to Canada and Europe to avoid the Vietnam draft. Many stayed.
It's very unlikely that the uptick in expatriation is due to a recent increase in the number of US students enrolled overseas. It takes 6-8 years of residency to get German citizenship, and while I don't know the details for Germany, in Sweden that excludes residency as a student.
> It takes 6-8 years of residency to get German citizenship
That doesn't sound any slower than the US - it'll probably take me around 8 years of post-student residency to become a US citizen (3 on H1-B, then 5 on a green card - and bear in mind it's much faster for me than for someone born in India or China, who face massively backlogged green card quotas).
A lot of people fixate on citizenship, but permanent residency is 99% as good as citizenship. Ask any green card holder, they'll tell you the real challenge is getting the green card. The subsequent 5 year wait for US citizenship is gravy by comparison.
We're talking about expatriation. It's difficult to live as a stateless person. You really want to have citizenship in another country before giving up US citizenship.
While permanent residency might be a possible substitute, the lack of any citizenship will likely make it more difficult to travel to another country, and there may be legal problems should you have a child as a stateless mother.
True, assuming you're not a dual citizen to start off. Some of the Americans moving to Europe might already have a European citizenship by descent (although not necessarily of the country they end up settling in).
Oh, I see! I read "begins to explain the increase in the US exodus" and interpreted it as "exodus from US citizenship"/expatriation not "exodus from US residency"/emigration.
"who may (or may not) contribute considerably more in taxes each year than the average tax payer?"
Likely not. If they're so angry at paying taxes to the country that helped them build their wealth, they're likely already employing several other ways to cheat on taxes.
No number of "refuseniks" is negligible for a country whose political system has inculcated its citizens -- perhaps more successfully than any on Earth[1] -- that theirs is not just the "best" country in the world, but, in polite terms, the Best Motherfucken Country In The Whole Goddamn World (further expletives deleted) -- such that while OK, they might want to go live somewhere for a while (or even permanently) -- no one in their right mind would even think of revoking their permanent Right of Return to this, the Greatest, Freest, Proudest Nation The World Has Ever Seen, Known or Dreamt Of.
[1] For any length of time; so not comparing to, say, the National Socialist bubble in Germany, 1933-1945.
"tired of dealing with complicated tax paperwork headache" really? This your spin on the only other country besides Ethopia which does double taxation on its citizens? Shame on CNN
If you read the article, one of the main reason for switching isn't tax return complexity, but because oversea banks ditch US clients out of fear of US fines. It's difficult in these days and age to live in a country without access to banking.
By the way if you click on the link to the story about US citizens being ditched by banks, there is a guy complaining of having been ditched by Barclays. That bank just got a new CEO who happens to be american and who was based in the US. I would be curious to know if a branch manager told him to fuck off too...
FWIW, the American Citizens Abroad have a short list of places to file complaints about being ditched by a bank. Not sure if it actually does anything but a lot of times these government committees and groups are pretty insulated from the real world and actually don't get the feedback about policies they are tasked with implementing.
There's no double-taxation, since you can 100% deduct any foreign taxes paid. I paid no U.S. tax in the years I lived in Denmark for this reason; I wasn't double-taxed. Since the U.S. has one of the lower federal tax rates of developed countries, and expats don't have to pay state or local taxes, really only people who live in tax havens end up having to pay U.S. taxes (by raw number, I would guess the largest number are expat oil-company employees living in one of the low-tax gulf states). So it mainly boils down to a tax headache, which is significant. I didn't pay any U.S. tax, but I had to file a whole bunch of documents.
I'm not an ex pat, but I have dual citizenship. I've never lived or earned money in the US but I still have to offer my income and declare my bank balances to the IRS every year - the principle is enough to make me want to return my passport, never mind the paperwork.
Are you thinking of the Foreign Earned Income Exclusion? That one lets you exclude foreign income up to $100k from even being computed for U.S. income purposes. But the Foreign Tax Credit, which lets you take a 1-for-1 credit of foreign taxes actually paid against U.S. taxes owed, has no maximum. The distinction only really matters if you're in a country which has lower taxes than your U.S. federal tax rate. If, like me, you're in a country with higher taxes, the Foreign Tax Credit completely wipes out your U.S. tax liability with no maximum.
Ah, right. See, it's not all that simple, and like you write elsewhere, you need a competent accountant.
For instance, part of the US-Italy tax treaty says that as a US person working as an independent contractor in Italy, I needed to pay into Social Security rather than the Italian equivalent. I'm not sure I would have figured that one out on my own.
Same here. My US accountant told me about the paperwork I needed to get to tell the IRS that I was covered under the US/Sweden totalization agreement for Social Security.
> The agreement with Italy represents a departure from other U.S. agreements in that it does not include a detached-worker rule. As in other agreements, its basic coverage criterion is the territoriality rule. Coverage for expatriate workers, however, is based principally on the worker's nationality. If a U.S. citizen who is employed or self-employed in Italy would be covered by U.S. Social Security absent the agreement, he or she will remain covered under the U.S. program and be exempt from Italian coverage and contributions.
You're wrong, and while it might seem harsh, I'm going to have to say you just don't know what you're talking about.
My non working US wife has completely jeopardised my family's financial well being, purely through being american. She has been out of the country for 10 years, and she would be expected to pay 125% of our life savings as for over 5 years our joint bank account held the deposit for our house? She has no income, and didn't file. No FBAR -> 25% of the balance in fines per year for 5 years == 125%.
An incredible number of american's come out of the woodwork saying "there is no problem", because it wasn't hard for them. You don't prove a negative result with one data point!
Yes, not filing an FBAR is a major pitfall, in part because it's not that well known among the general public. But I don't see how this is a response to my comment. I was simply pointing out that there's no double-taxation on income. A fine for failing to declare a foreign bank account is an entirely different question than double-taxation.
Renouncing your U.S. citizenship for tax reasons technically makes you ineligible to enter the United States for any other reason. It is potentially a cause for denial on any class of visa.
I wonder how many of these ex-pats realize that they may never be able to visit again...
Note to self: if I renounce my US citizenship, do NOT check the box saying "I'm doing this for tax reasons".
Seriously, this is apparently real law, but according to a "citation needed" bit in wikipedia, has never been enforced.
> The 1996 law included a provision to bar entry to any individual "who officially renounces United States citizenship and who is determined by the Attorney General to have renounced United States citizenship for the purpose of avoiding taxation by the United States."[47] There is no known case of this provision, known as the Reed Amendment, having ever been enforced.[citation needed]
Is it a cause for denial in and of itself, or does it just mean that you apply for a visa like other nationals of the country in which you reside? And how do they know you renounced "for tax reasons"?
I don't understand one thing about us tax law. US corporations avoid paying taxes by using forieng subsidiaries where as Americans are still taxed despite the fact that they are not even living in the US.
This article is posted every single year without fail[1], the number of people giving up passports is absolutely inconsequential. This number is further minimized since the US has one of the lowest tax rates to begin with, so the vast majority of dual-citizens owe 0 in additional tax.
In 2015, they completed the phase-in of new reporting requirements for ex-pats. Some of which are quite onerous.
Among other things, you will need special banking services in your new home country, because foreign banks do not necessarily make FACTA reports for all accounts. Some won't even open accounts for Americans.
I think $2,350 is the least of anyone's concern when renouncing their citizenship, particularly if they're wealthy. There are massive exit taxes if you follow the letter of the law.
It's reported every year because the number is growing rapidly and it's a recent phenomena. Who are these people? Is the US losing exceptionally accomplished citizens for tax reasons? I'd like to know because if so then it isn't inconsequential. Sorry if it bothers you that this prompts people to be critical of these tax and seizure laws, but I'd rather know what's going on than be ignorant because reporting it discomfits you.
"Growing rapidly" is very easy when it's a very small number. I actually deal in this area for a living, and I have significantly more individual clients coming into the US then leaving (100+ vs none over the past 3 years), so I say to those who want out: good riddance.
There are still fairly few expats who go to the trouble to renounce their citizenship... so "good riddance" to them?
It's perhaps worth pointing out that these are people who've already left, some of them decades earlier, who hung onto their US citizenship possibly because it's been easier than the alternatives (I can tell you getting citizenship in, e.g., France, is non-trivial, particularly if you're not married to a citizen, but even so if you are).
But now, for this little slice of expats, keeping US citizenship has become the more onerous option, and so they have a pragmatic reason to drop their old citizenship in a country they no longer inhabit, anyway. What's to get worked up about, really?
The vast majority of dual-citizens owe 0 in additional tax.
That's not the point. It's about all the paperwork you have to do. I live in the US, but I am not sure I would want to become a US citizen for this reason.
I'm curious -- is there actual paperwork, or is it possible to do it electronically? If yes, why aren't there programs that do it for you? Would like to hear comments from a US expat.
I wonder if there's an opportunity in simplifying this. I'm guessing most expats would rather pay, say $50 for a company to do this paperwork on their behalf? Or do H&R / Intuit have that market cornered as well?
It's electronic, and you can use programs, but they tend not to be really targeted at this fairly small segment. So they're tedious to use and prone to letting you make mistakes. I personally used a CPA when I was an expat, partly because I know one who is familiar with this kind of paperwork (his own daughter is an expat, and he does her taxes, so he has some personal interest in it). He charged me about $200/yr. Considering I'd pay like $80 for the super-deluxe version of TurboTax, plus probably some hours to figure out how to do everything correctly, I considered the $200 well worth it.
Although annoying, it's also way down the list of annoyances and expenses involved in being an expat. I don't think "regular" expats like me are renouncing their citizenship over the hassle/expense of paying a CPA $200, especially because renouncing your citizenship is also a considerable hassle (and reduces your future employment options). I'm almost certain this is mainly much wealthier people.
I'm almost certain this is mainly much wealthier people.
I would say it's most likely people who don't have strong ties to America like people born in the US to foreign parents who moved back to their home countries.
There could be some of those, but at least in my circles, the people falling in that category are interested in keeping their U.S. citizenship to keep a future employment door open. Especially in tech, the possibility of being able to work in Silicon Valley (or start a business there) without dealing with H1B sponsorship has some value, even if you have no immediate plans to exercise it.
I do know a few Denmark-U.S. dual citizens (by birth, never lived in the U.S.) who renounced their U.S. citizenship, but that was because of Danish rather than American laws. Until September 2015, Denmark had a public policy against dual citizenship, which among other things required children who were born as dual citizens to choose one when they turned 21, and renounce the other one. Since that requirement was just abolished, I would guess renunciations of U.S. (and Canadian) citizenship by Danes are now going to drop.
It's quite a bit more hassle than normal American tax paperwork.
Every foreign bank account or financial instrument over some trivial amount ($500?) must be reported. Foreign banks must report your holdings and gains using forms more burdensome than the usual American ones. Good luck owning a company: if Americans have controlling interest in a foreign corporation, their books must be open to the US or the corporation's income will be included in your own. The last time I saw one, the form to describe your foreign corporate holdings had a Paperwork Reduction Act notice declaring it expects it will take 2 weeks to fill out.
I think the absolute simplest case would be a 1040 (not 1040-EZ), along with the extra form for the FEIE. The FEIE has a 'bona fide resident' determination section which is up for interpretation. Two examples are given in the instructions, but the IRS will not tell you if you count as a bona-fide resident in advance (I have tried to get a determination here, and they just won't make one). There is, thankfully, a 330/365 days out of the country exclusion; just carefully fill out the form that lists all of your travel days to any country for the year.
If you live abroad, your 16 year old kid is responsible for serious fines if they don't do this for their first McJob (in theory; I've never heard of it prosecuted that way).
This was all a few years ago; some details may be inaccurate. But it's a serious amount of work, and it's enough hassle that a lot of foreign banks and financial institutions simply won't do business with Americans (which is yet another hassle).
Note, there may be, and likely are, additional forms to be filed, but these are the ones that I recall for reporting foreign assets.
And, by the way, the whole system is bullshit. To give another example of how this hurts Americans abroad, the lack of banks willing to work with Americans means that some places it's technically illegal to obtain an apartment lease, though some sort of side deal can normally be worked out. For example, in Norway, the deposit money for an apartment must be held in a joint interest bearing account between the landlord and the tenant. This protects both parties and is generally a good idea. However, if a bank won't work with an American, these accounts become impossible. Yes, both parties can just ignore the law and that often happens, but it's another example of how these kind of banking and reporting laws hurt Americans in less known ways.
You absolutely need a competent accountant for this, as they have to deal with your foreign income and figure out the US taxes. This involves a lot of complications and tricky stuff. First and foremost, when your earnings statements and tax documentation are all in Japanese or Russian or Italian or something, either you translate all of it yourself, or you find someone qualified to do your US taxes who can read it.
This cost me $300 last year when I spent the entire year in Italy and did not have much US income, plus a half a day to go see the accountant and make sure everything was squared away correctly.
Not worth giving up my citizenship for, but a big PITA nonetheless. The US is the only country in the world to do this BS.
It's an exceptionally narrow topic that gets an outsized focus, maybe because it highlights a wider narrative? Otherwise I'm at a loss why anyone would care.
I think it's relevant to the HN crowd because many of us are dual citizens/permanent residents/work visa holders or aspire to live in a country outside the U.S.
Given the huge amount of interest the digital nomad community generates on HN, the link is clear to me.
> US has one of the lowest tax rates to begin with
What are you basing that on? Hong Kong and Singapore (where Eduardo Saverin became a citizen to avoid paying 1 Billion USD in taxes from his Facebook windfall) have taxes in the %11 range.
>...the number of people giving up passports is absolutely inconsequential. This number is further minimized since the US has one of the lowest tax rates to begin with, so the vast majority of dual-citizens owe 0 in additional tax.
Right... so these two points might be related, as the people renouncing might be the people who do owe additional tax. Personally, I would feel a bit put out if I'd permanently moved to another country and had Uncle Sam looking to take a piece of my income.
> Persons who wish to renounce U.S. citizenship should be aware of the fact that renunciation of U.S. citizenship may have no effect whatsoever on his or her U.S. tax or military service obligations (contact the Internal Revenue Service or U.S. Selective Service for more information). In addition, the act of renouncing U.S. citizenship does not allow persons to avoid possible prosecution for crimes which they may have committed in the United States, or escape the repayment of financial obligations previously incurred in the United States or incurred as United States citizens abroad.
As far as I'm concerned, when you renounce your citizenship you no longer have the obligation to pay (new) US taxes regardless of what the US government thinks.
Even under US law after ten years you no longer have to pay income taxes.
>And said 10 years would apply even without expatriation, so expatriating doesn't change anything their either.
I don't believe that's true. There are plenty of news articles about people who are filing twenty or thirty years after leaving the US. Some of them dual citizens who'd never actually been here.
The law also doesn't care what you think in this matter. That's the sticky point.
Your last comment is a non sequitur. You originally wrote "the people renouncing might be the people who do owe additional tax". My comments are all about that conjecture.
The people who continue to file income tax statements even decades after living in the US are not in the category of "people renouncing" or "owe additional tax".
>The law also doesn't care what you think in this matter. That's the sticky point.
US law is irrelevant. US law only applies in the US, whatever Congress thinks. If I'm not in the US and I'm not a US citizen, the US government can pound sand.
I'm always curious why Americans expect the US to have jurisdiction everywhere on the planet and yet don't expect other countries to make laws affecting them.
>Your last comment is a non sequitur. You originally wrote "the people renouncing might be the people who do owe additional tax". My comments are all about that conjecture.
Yes, people who owe additional tax. That's what I was talking about. People who are expected to pay taxes to the US government even though they don't live in the US and haven't for many years.
What is it you're talking about?
>The people who continue to file income tax statements even decades after living in the US are not in the category of "people renouncing" or "owe additional tax".
Yes, those are the people. Who else would you expect was doing this?
If you don't expatriate and live overseas then the US laws are equally irrelevant, regarding any previously owed taxes.
That's my point. Expatriation doesn't change anything concerning taxes you already owe.
> Who else would you expect was doing this?
Hmm. Perhaps I have confused your meaning.
I thought this whole time you mean people who owe taxes, don't want to pay taxes, and expatriate to try to avoid paying those taxes.
Do you mean people who will in the future need to pay taxes, and expatriate in order to avoid future obligations?
If so, then I was confused because these people don't yet owe anything.
FWIW, I file US taxes every year, having lived in Sweden for nearly 10 years. I've only once owed any taxes. The Foreign Earned Income Exclusion is, after all, $100,800 . Since that's well above the average income, I expect that many people who expatriate won't ever owe any future taxes.
>Hmm. Perhaps I have confused your meaning.
I thought this whole time you mean people who owe taxes, don't want to pay taxes, and expatriate to try to avoid paying those taxes.
>Do you mean people who will in the future need to pay taxes, and expatriate in order to avoid future obligations?
Yes, I mean the latter. If you rack of legal debts (of any sort) as a citizen, IMO you should pay. Part of the naturalization process in most countries is a check to see that you're not some kind of criminal and that you've tied up all the financial loose ends in the country of your birth. My problem is that Congress assumes jurisdiction over your actions and finances if you were ever a citizen.
It used to be widely recognized in international law that the laws of a country only applied on the soil of that country and on ships traveling in international waters under that country's flag. If you traveled to a different country you were under the jurisdiction of that country's laws. So as a citizen of the US, if I moved to Germany, say, even though I was a US citizen I could do things that are illegal in the US as long as they're legal in Germany. And I couldn't do things that were illegal in Germany even if they're legal in the US.
This all seems like common sense.
But it's changed in recent decades, as countries are punishing citizens for things they do elsewhere, e.g. Swedes, who are breaking Swedish law if they patronize a prostitute even in another country where it's perfectly legal. I think this kind of overlapping jurisdiction is a terrible idea, but whatever.
The idea you fall under a country's law even if you become a citizen of another country and renounce the citizenship of your birth is a bridge too far. As far as I know most countries won't extradite a citizen (even a naturalized citizen) for that sort of thing.
The US government presumes to tax your (new) income for ten years after you've renounced your citizenship, even if you had no outstanding tax debt at the time of renunciation. There's also a one-time 40% tax on assets held in the US, which I find less objectionable but still pretty damn objectionable.
I'm curious to know what you thought I meant by "(new)" in this sentence: "As far as I'm concerned, when you renounce your citizenship you no longer have the obligation to pay (new) US taxes regardless of what the US government thinks."
The conjecture by CNN that it is primarily about taxes is not only unfounded but absurd.
Far more Americans immigrate to feel freer, safer, better protected, for a higher quality of life or for a richer culture. Anecdotally, I alone know four Americans who permanently immigrated to Europe. None for tax reasons.
People renouncing citizenship don't do so simply because they've made a life for themselves in Europe or somewhere similar (be it temporarily or semi-permanent or permanent). Being a dual citizen has many advantages. (Not the least of which is allowing the US constitution to actually apply to you as you enter the country)
People renounce their citizenship when retaining it becomes more effort than the benefit received. For instance, I'm dual Italian-Canadian, and I have no qualms about retaining my Italian passport indefinitely, even though my father was Italian and I only lived in the country for a year.
Now, should the Italian government decide they needed monthly bank statements from my Canadian accounts like the US does, making my life a nightmare of paperwork every year, I might reconsider.
I'd say it's conjecture that "far more Americans immigrate to feel freer, safer, better protected".
Where's that source? Where are they going that's "freer" and "safer". I'm not saying there aren't areas that are more free, however the hell you define that. There might even be safer places, although that's a ridiculous generalization of the United States. It's all relative to your race, religion, location, economic situation. That sounds absurd.
Every American I know who has lived in Holland says they felt freer. That's all I can offer on that. In Montana, you can't smoke a joint in a cafe, can't sun bathe naked on the beach, can't drink a beer walking in the park and, regarding safety, you'd be unwise to be a gay couple holding hands in town, have cancer and loose your job etc.
But feeling free and safe is subjective and the number leaving is not large. But it is vastly larger than those leaving for tax reasons is my point.
>In Montana, you can't smoke a joint in a cafe, can't sun bathe naked on the beach, can't drink a beer walking in the park and, regarding safety, you'd be unwise to be a gay couple holding hands in town etc.
We don't really have much beachfront property in Montana, though I've seen plenty of naked folks in the rivers.
Montanans are intensely private people and proud of it. I have never heard my gay friends mention being unwelcome, though I'll certainly not speak for them here. I've never been stopped drinking beer in a park, though yes it isn't legal in my town (although not true of all towns in Montana like Butte). Sorry that you can't smoke a joint in a cafe right now, however you can pretty much smoke it anywhere else in public so long as you don't bother others.
I'm guessing Americans that moved to Holland are probably pretty happy there. That says absolutely nothing about the United States.
>I'm guessing Americans that moved to Holland are probably pretty happy there. That says absolutely nothing about the United States.
True and I personally would recommend everyone who can, try to live in both places as each suits different temperaments.
And I do not mean to denigrate Montana particularly which surely has virtues. But at the risk of being provocative I would cite this billboard near Malad city which simply would not exist in Europe. http://i.imgur.com/MDSWg.jpg
I'm happy for you that speech is legislated so carefully in Europe, if that's something you value. What's the point you're making? Should I bring up how nice it must feel to be a muslim in Serbia in the 90s? Of course not.
This could be read either way, so it's hardly provocative: I matter to him because god doesn't matter to him. So the answer is yes. The only provocative thing here is the inability of the creators to make their point to anyone but the stupidest of idiots.
That's pretty shocking even for America. Malad City is pretty remote (population around 2000), but I've never seen a more literal example of "clinging to guns and religion."
The homicide rate is higher than Europe, if that's really the gold standard for you. As you know, the US is a pretty big place. We don't get a lot of murders out here in Montana.
Healthcare's a pain, sure.
Still there's no evidence that any meaningful amount of people are leaving for the bastion of freedom that is Europe, which I find laughable. Ask an Arab around Paris how safe they feel.
Here we go again with trying to make the number seem bigger.
It's 3 murders per 100,000 people. No, that isn't a lot to me. I'm completely fine and feel safe knowing I have a 0.000036 percent chance of being murdered next year.
Without an answer, I'll go back to your "Ask an Arab around Paris how safe they feel".
The 2012 homicide rate in Paris is 1.8 / 100,000, according to the "Homicide counts and rates in the most populous city, time series 2005-2012" spreadsheet available from linked from http://www.unodc.org/gsh/en/data.html . The total count was 41, so an overall population of 2.2 million.
To confirm, https://en.wikipedia.org/wiki/Demographics_of_Paris says "The city of Paris (also called the Commune or Department of Paris) had a population of 2,241,346 people within its administrative city limits as of January 1, 2014".
It's hard to know the ethic breakdown of everyone who was murdered. That last URL says there are 436,576 immigrants in the city of Paris. I'll assume 2/3rds of those are Arabs, based on the '2011 Census Paris Region; Country/territory of birth' chart from that page, and assume that there are no non-Arab homicides. This is, of course, going to give a very high number compared to the actual number:
That gives a homicide rate of 41 / (436576*2/3) = 14/100,000, compared to Montana's 3.6.
This absurd number is still less than 4x of homicide rate in Montana.
Under your logic, an Arab in Paris should not feel unsafe due to threat of being murdered.
Why should we think that Montana is safer for you than Paris is for an Arab?
No, my implication was not to connect Montana and a Parisian of Arab descent. The implication is that safety is a feeling and relative. There's context to it, your upbringing, your race, your economic status, the amount of attention your mother gave you, whatever.
I'm not interested in coming to some conclusion that X is safer than Y. So far you're the only one I've seen struggling to understand this.
I spent most of the past 15 years in Europe, and only recently came back to the US. I probably would have been fine staying over there, but never felt particularly inclined to give up my US citizenship just because I was happy living there.
I'll speak up since I'm an American living over seas and I feel like several of the comments currently ranking highly on the page either miss the point or make factually inaccurate statements. Note that if they miss the point, it's very unlikely that they choose to miss the point. More likely they have been misinformed by poorly constructed articles like this one.
I was born in the US but have been living and making most of my income over seas for five years. I'm actually relocating back to the US in two weeks (yey, welcome back :D). On the one hand I'm sad to leave the place that I currently live since, for me, it's better in nearly every way than most US cities. It's cleaner, I've lived well without a car, walked/cycled significantly more and I've visited nearly every crevice of this city and never felt unsafe due to a combination of cultural and legal differences. I pay slightly higher taxes than I would in the states. On the other hand, I'm very excited about having less paper work to do for a few years.
That's all context for my view:
For me, it's not about the amount of money I pay in taxes. I'd call myself upper middle class so far as income goes and I've not had to pay US tax for the past five years. I will have to this year because of some options that I exercises but generally I'm happy to pay US tax.
The burden, the thing that's made me consider renouncing, is the reporting. Let's start with the basics, I have to do my taxes in two places. This involves finding an accountant both in the US and over seas who is capable of doing taxes for someone who is a special type of tax resident. Every accountant will say that they are competent but I have found their claims mostly unfounded. One can pay someone who specializes but that always involves paying a significant premium.
In addition to doing taxes in two places I also have to fill out a separate form listing all assets worth > $10k and in which I have >= 50% ownership. This includes bank accounts, houses and any other investments. This is particularly onerous when one marries to a non-US resident. Suddenly the US government knows a lot about them. Do they have any bank accounts with more that $10k in them? Do they own any property? Any investments? Because if they do, by most countries standard you probably suddenly own 50% of it.
On top of all of that, as of 2015 I also have to ensure that my bank does a specific type of reporting. I'm lucky in that where I am Americans are numerous enough to make this worthwhile for the banks but this is not the case everywhere. Some banks in foreign countries have started refusing US customers.
Comparing the number of people renouncing citizenship to the total population of the US misses the point. It's better to compare against the number of americans living and working over seas. From a quick search around the internet the number of expats looks to be ~7M. It's still a very small fraction and not something that I expect law makers to pay attention to. The reason I think this comparison makes sense is because it is worthwhile to consider whether or not we want to keep connections to our diaspora. The issue from a governance perspective doesn't seem to be a loss of tax revenue but instead a non-reversible export of talent. In a flat world I have doubts about the US's ability to maintain expertise in all of the area that will fuel future economies. That being the case, I think it would be good for the US to make it simple and straightforward for Americans to go to other places where they can become experts and return home for further work.
I don't expect the US's policy to change. In fact, if the number of people renouncing continues growing more rapid I wouldn't be surprised to see the US use more aggressive rent seeking measures. This seems obvious given recent additions to the reporting requirements placed on expats and higher fees associated with renouncing.
"But it's illegal to give up U.S. status to dodge paying a tax bill -- and doing so doesn't mean authorities won't come looking for back taxes." .. how exactly would that be pursued?
META: can someone please explain HN's upvote algorithm ?New account, 3 points and frontpage. Earlier one of HN staff said that accounts that posted high-ranking content got upvoted faster. Now I'm wondering if the upvotes are weighted by who gives them?
I'm looking at moving to the US in the near future, and some of the implications of the tax system are pretty startling.
For example, I have contributed to a small retirement plan which grows tax free here in the UK, and the US/UK tax treaty ensures that it will continue to grow tax-free once I've moved. So far, so good. However, there is a body of professional opinion stating that such plans count as a "foreign grantor trust" under US law, which has specific reporting requirements that the plan itself is required to comply with, and I am penalised if it fails to do so. The penalty scale starts at $10,000 and goes up from there.
Of course, this body of opinion is being pushed by tax advisors who have a vested interest in both making things as complicated as possible, and who are inclined to a conservative view of the law given their responsibilities to their clients. The IRS hasn't clearly stated one way or another whether UK pension plans are subject to this reporting -- but have specifically exempted the Canadian equivalent.
This is just one frustration of several: becoming a US resident will force me to close some of my financial accounts with institutions which want to avoid FATCA hassles, I'll be limited in which investment choices I can make, and when I eventually take my pension benefits the US will claim tax on the tax-free lump the UK provides if I'm still a resident or have taken citizenship.
For those who have emigrated permanently -- or who acquired US citizenship at birth without ever living there -- I can well understand why even those without significant income or assets would want to renounce their citizenship.
