A recent article in the Boston Globe (a response to the Romney tax disclosures) notes that:
“In fact, nearly half of US taxpayers will probably pay no taxes at all for 2011, including 24,000 in the top 1 percent of incomes, according to the Tax Policy Center, a think tank in Washington. Some low-income families even get back more than they pay because of the Earned Income Tax Credit and other programs.”
And if they do pay full tax, what is the top tax rate in the United States?
“Congress decreed a decade ago that the wealthiest Americans pay a top income tax rate of 35 percent. But as Romney shows, hardly anyone – even billionaires and multimillionaires – pay anywhere close to that.”
Yes, you read right! Many U.S. residents pay no income taxes (and little in sales taxes – see below). Yet, the IRS is hunting U.S. citizens living outside the United States to hit them with massive penalties for not filing FBARs that they didn’t know about! An income tax rate of 35% is nowhere near the top rate in Canada. It is closer to 50% and it kicks in at a lower amount of income. But, that’s just the income taxes. There are other taxes.
In addition, Canada and most European countries have huge VAT (value added taxes). In Canada, this is know as the HST. Sales taxes are the only way to ensure that either everybody pays taxes, or taxes are paid for every person. Although most U.S. states have sales taxes, there is no U.S. Federal Sales tax. Furthermore, the states that do levy sales taxes, do not have a rate that approaches the 13% in Canada (and higher in Europe where it tends to be hidden in the price).
Yet, by God the American Public, or a large part of it, is convinced that U.S citizens living outside the United States are tax cheats.
If I didn’t know better, I might think that the IRS thinks it is the job of U.S. citizens living abroad to pay the bills of those U.S. citizens at home who don’t pay taxes. The IRS has enlisted Mr. FBAR as a tool to drain the retirement accounts of U.S. citizens abroad.
There was an interesting comment on a post yesterday – “All Gov calls renunciants tax cheats” – to the effect that:
I think the real tax cheats are the almost 50% of Americans living in the US who don’t pay any taxes yet use the services. There are too many ordinary Americans down there who through all their deductions end up paying no tax, and most of these people are not rich. You can’t run a country that way.
In Canada everybody pays taxes no matter how little they make.
If Americans living in the US want to see a tax cheat, half of them just need to look in the mirror.
What about you? When you look in the mirror, do you see a “tax cheat”?
Excellent post. I’m so linking this on facebook!
When I look in the mirror I see a tax slave and so does every other Canadian but we don’t mind because we like it here!
I would not want to live in the US no matter how low their tax rates are or how many tax breaks they get.
Canada is our home and we plan to live here forever. Now if we could just get the Americans to leave us alone (I’m married to one of those accidental Americans).
Great – maybe you could leave the facebook link in the comments here? Or maybe not?
Perhaps somebody who really knows how to use Facebook could harness the power.
As Phil Hodgen has pointed out the issue is not the taxes per se, the issue is the treatment by the U.S. government of its citizens abroad. This includes the threats of penalties for things you couldn’t even imagine existed. The U.S. is one very strange place.
Yes, and a great deal of noise is made about wealthy Americans “who pay less taxes” than middle class American citizens. Warren Buffet is often cited as “paying less taxes than his secretary.” But the comentators frequently overlook, or incorrectly state, is that they pay a lower tax rate than many lower income workers. High income citizens in fact geenerate most of the US personal income tax reveues. Even Fox News newscasters fail many times to differentiate between the difference between higher taxes and higher tax rates.
I’d trade places with Warren Buffet’s secretary any day. She makes like $200K a year! Obama forgot to mention that when he was parading her during his State of the Union speech.
In fact it is only the wealthy who pay tax in America. I was revolted by Obama’s State of the Union Address. The question is was running through my mind was this:
Does this guy really believe the stuff he is saying?
Yes, it’s time for tax reform in the U.S. But Tax Reform that ensures that every living, breathing person in that country pays taxes – not just the upper middle class (who are the ones who really get screwed) and the wealthy.
The way to do this is shift the taxation to consumption taxes. Everybody consumes. Therefore everybody will pay taxes.
It is time for a national VAT in the U.S.
Furthermore, this BS about Warren Buffet paying low taxes is just that – BS. Dividends come from income that has already been taxed at the corporate level. With U.S. corporate taxes as high as they are: make no mistake that money is being taxed.
Democracy in America is a process where you use the political process to get somebody else to pay your bills. Everybody in the U.S. should be paying tax.
Here it is – the full text of the “Declaration of Class Warfare” Speech:
Not sure if I feel comfortable putting my personal Facebook link here, but I think it would be very useful to have a Facebook page just for the blog. It could be like a simple news feed where new posts appear on the page and people can click the links to go to the blog. What do you all think? I suppose I am somewhat technologically literate, so I can research how to do this if enough people, and of course Petros, thinks it’s a good idea to start this up.
Well, anything that helps to get the word out is a great thing – talk to Petros – it is his blog.
When I look in the mirror I see a person that has aged about 5 or10 years since this all begin, I definetly do not see a tax cheat, because I am not. It is such a sad thing what they are doing to us, it is really so unfair. It makes me so angry when I hear US news reports calling us TAX CHEATS.
Happy to Live in Canada for the rest of my life..I don’t know why the US thinks its the most wonderful place on Earth.. Just wishful thinking on there part I guess.
American Citizens Abroad are on Facebook.
@ zucherro, renounce: the blog is a group blog, and I am your humble servant, in the sense that I lead by doing a lot–not all–of grunt workof maintaining this site.
So what I suggest is that if someone wants to start a Facebook page and maintain, I’d be ecstatic. Zucchero, I’d be happy for you to handle it if that’s what you want to do. I don’t think anyone else would mind. WordPress also allows us to do automatic feeds, so when the time comes, let me know what to do. But personally, I don’t have time to set up or maintain a Facebook or Twitter account.
Thank you for sharing this information – I knew that the US had low tax rates, but I had no idea about the appallingly low number that actually pay tax. The fact that most millionaires are paying under 20% is, frankly, a joke. I also have little sympathy for those paying just 9% on a salary of 65,000 dollars as the article mentioned.
Where I live in Belgium the effective tax rate is supposedly the highest in the world and arch up to 65%. Our VAT is something like 20% on all purchased goods as well. But you know what? Services in Belgium are top notch: we have one of the best health care systems in the world and, why, we don’t waste our money on things that aren’t necessary, like a humongous army for instance..
I do not understand how the 1% can get away with paying nothing. This speaks to a tax code full of holes and in crisis. But how on earth are 50% not paying anything at all? I know that something like 30 million in the US are in living in poverty (which is a number that the US should be disgraced by), but how on earth are half of the people there paying absolutely nothing?
No wonder the streets there are falling apart and government services are sub-par. I bet that the US could quickly fit its defecit if it god rid of all extraterritorial bases, cut the military down to a 100,000 strong border patrol force, raised VAT to 20% and implemented a 50% normal tax rate like most other industrialised countries. Oh, and through in an NHS system as well, since that will probably cut down the US spending on healthcare, which is also humongous even though it is a private network…
I don’t have a clue how such a large number are not paying tax. But, this is not the first time I have seen this. I suspect that the reason is that there are so many U.S. citizens living in poverty. If you use a tax system that is really just an income tax system it just guarantees that a large number will not pay tax. Also, income is much easier to hide (I would think) than spending.
I am convinced that for a tax system to be rational that everybody must pay. This an be accomplished only with a VAT.
It is time for the U.S. to join the world (in many respects).
Also, (this is unrelated) I remember you once commented about the James Bond bad guy with the white cat:
Here you go:
@Don Pomodoro: “I do not understand how the 1% can get away with paying nothing.”
They’re not paying nothing. They’re paying a lot. 38% of federal income taxes, in fact. Now, we could argue the relative merits of that, and talk about state taxes, sales taxes, fica and so on, and the tax US tax code is indeed almost 100% holes and special carve outs. But… no disrespect, but if you think this so conveniently vilified 1% pays nothing then I’m afraid you’ve fallen for the spin put out by left-leaning media and demagoguing politicians. Spin designed precisely to implant this very idea.
I don’t make any distinction between a 1% or a 99% – These are foreign concepts to me from Anglo-Saxon countries. I was merely quoting how the article grouped the tax payers. I believe that everyone should be paying the same amount on tax no matter how much they are making. I have just as little sympathy for the millionaire who pays nothing as for the person earning just 10,000 dollars, since somebody earning even minimum wage is PAYING tax in Belgium. Here is some information on how our system works in English from Expatica:
“. The basic exemption for fiscal year 2012 (revenue of 2011) is 6,570 EUR regardless of marital status with further exemptions for dependent children and a spouse. For 2011, marginal income tax starts at 25%, rises to 30% over EUR 8,070, 40% over EUR 11,480, 45% over 19,130 EUR with a top limit of 50% for incomes above EUR 35,060.
Residents also pay communal and regional taxes at rates between 0% and 8.5% of the total income tax payable. The most common rate is 6%. ”
Sorry about the 65% number in my last post – That was meant to be 56% – Still the highest rate in Europe.
Love that video – Thank you! That toilet seat opening scene is so epic even without any context or idea about what is going on lol! He is how I personify the IRS in my head.
“The state is the great fiction by which everybody seeks to live at the expense of everybody else.”
– Frederic Bastiat
New article out of the UK
A major problem with FATCA is it assumes a UK financial institution would be willing or able to levy a tax on behalf of a foreign government.
The source said HM Treasury will not allow any legislation which undermines the UK’s own national sovereignty and tax framework.
Submissions from the banks and the UK authorities have put Congress under pressure and it has toned down its original FATCA proposals, but sources suggest they will not be relaxed much further before the final paper is published in the summer. This is largely a political issue, the party in power, the Democrats, would not want to be seen as a friend to tax evaders.
Well, that is some good news about FATCA for once. I can’t believe that the IRS STILL hasn’t issued the guidelines for this yet though. Bit hard to implement FATCA at a bank if you don’t know what to expect.
Stil, I imagine that one advantage of this taking forever is that you can renounce now and still have a bank account that isn’t forcibly closed by the time that your CLN comes!
“A democratic government is the only one in which those who vote for a tax can escape the obligation to pay it.”
– Alexis de Tocqueville
Our salvation may come in the fact that America is actually a tax haven!
Foreigners deposit billions of dollars in US banks and the fight has just begin. American banks don’t want to report information about these tax evaders to the IRS because the US reaps a huge benefit by being a tax haven.
Foreign banks are not going to report information to their governments if US banks won’t do the same by reporting to the IRS.
The lobbyists are hard at work to prevent capital flight out of the US banks. Fun times!
Obama Administration Supports Rogue IRS Regulation in Order to Please Europeans, even though It Will Undermine American Banks and Hurt the U.S. Economy
Funny how Americans react when their banks are subjected to the same things foreign banks are.
Right on point! thnx
Well yes, a lot of homelanders are quite hypocritical about this issue. But Dan Mitchell and the Center for Freedom and Prosperity have been speaking out against FATCA for some time & deserve credit for their principled stance:
You’re right Eric. The the Center for Freedom and Prosperity do deserve alot of credit for speaking out against FATCA even when it was unpopular to do so. I hope they succeed in their mission. Maybe one day this will all just be a nightmare we can forget.