What’s he going to do to finance this? http://edition.cnn.com/2012/02/22/politics/obama-payroll-tax/index.html?hpt=hp_t3
Maybe try to do it on the backs of compliant US Persons Abroad by removing the Foreign Earned Income Exclusion: http://www.aca.ch/joomla/index.php?option=com_content&task=view&id=507&Itemid=46 and make it even harder (epecially in the case of compliant minnows) for families to pay their bills and exercise equal economic oppourtunity.
Friends at Isaac Brock (and anyone else who is concerned): please write to Tierney [Mass.] and the bill’s cosponsors (Steve Cohen [D-TN9], Keith Ellison [D-MN5], Raul Grijalva [D-AZ7], Jesse Jackson [D-IL2], Betty McCollum [D-MN4]) to tell them to remove this paragraph from the bill H.R.2495 Section 402. Please also write to your Congresspeople in any home state you might have (as well as the DC commissioner to Congress) and tell them to do the same. You may also want to write the two Senators for your state and tell them to block the bill if it comes to Senate for approval in its current state or containing any language that would remove the FEIE. Discussion and links to Congress follow:
If you can’t vote for any reason (no home state or renunciation/relinquishment but still attacked by IRS as a “US Person”, and/or don’t have a home state, you might want to write the entire delegation (Senate / House) for any state(s) you like and/or feel a connection with. In such a case you might want to emphasize that you are not counted in the Census in contravention of Article 1 Section 2 USConst, and hence deprived of full representation in Congress.
To find the email and street addresses for members of Congress, you can use these links:
House: https://writerep.house.gov/writerep/welcome.shtml
Senate : http://www.senate.gov/general/contact_information/senators_cfm.cfm
House Washington DC Rep, E. Holmes Norton https://forms.house.gov/norton/webforms/issue_subscribe.htm (her site claimes that her services are for “constituents from the District of Columbia only and will not accept messages from locations outside our area” ). However, as Internal Revenue Code 26USC (§ 7701) (39) treats United States persons abroad as residents of Washington D.C., I would begin any communication to her with a phrase like “I am indeed your constituent because [cite above statute]) For more discussion of the IRS “fictive DC residence” please see Petros’ article at: http://isaacbrocksociety.com/2012/01/03/do-united-states-persons-differ-substantially-from-residents-of-washington-d-c/
Every little bit helps.
Reblogged this on Stop Unconstitutional Double Taxation.
Ok, this is the scariest thing I’ve read in over a year. What is going on with this bill H.R. 2495? Is this actually progressing through the US Congress and does it have a chance of getting support from both of the parties? “Attacking US expats overseas” seems to be one of the few issues that they both agree on, so this is terrifying.
http://en.wikipedia.org/wiki/Income_tax_in_the_United_States#Year_2012_income_brackets_and_tax_rates
I was shocked to look at this chart and see that this could mean that most people in European countries would be subject to taxation on the lowest incomes?! In Belgium we have an absolute exemption of around 6400 Euros, but the US starts taxing at 0 at a rate of 10%?
Good luck if you live in a third world or developing country (or somewhere like Russia with its flat 13% tax rate). This will strangle charity work overseas and make US citizens very expensive to place if they are literally paying out of their meagre earnings a quarter of it to a country where they yield no services. This is money that people NEED in order to get by in countries without a developed infrastructure or services. Is anyone else outraged at what the removal of this exclusion would do?
Combine this with FATCA and every “US person” waking up to this nightmare in 2013-2014 and I predict MASSIVE renunciations. This is an outrage.
Sorry about the mini-rant 🙂
“Removal of the foreign earned income exclusion which allows U.S. citizens living overseas to avoid paying taxes ($5.4 billion in 1st year)”
That is how this is described in the summary of the “Tax Equity and Middle Class Fairness Act of 2011”. I don’t know about you but I am paying taxes to the country where I LIVE. I am not “avoiding taxes”!
@Don Hear! Hear! You are fully within your rights to proffer a “mini-rant”. Now I’ll try to do “worse”: This is an OUTRAGE because even the Foreign Tax Credit might not protect the middle class, especially because of the current exchange rate situation, and especially not in cases of high tax countries of residence (due to the effects of the AMT, which may subsequently have been mitigated, but I am not sure– I have trouble understanding the convoluted IRS worksheets on the subject.) This would also (as you mentioned) flog those with lower incomes and middle incomes who live in flat-tax and low-income-tax countries where other fees and excises and/or VATs might be considerably higher (and not deductible from the extraterritorial tax burden).
THIS H.R.2495 Section 402 attack on the FEIE IS A FURTHER OUTRAGE, AN ABOMINATION and an INTOLERABLE ACT because they already did this in the 70’s and had to repeal it because US Persons Abroad were furious and many felt forced to return to the US (and many did as well).
Since the 70’s there have been many attempts to strike the FEIE. In view of the current pattern of continued accumulation of Intolerable Acts such as FuBAR (FBAR) enforcement, OVDI scam (bait and switch), FATCAt (FATCA), Levin’s CUT (substute the pejoratives you like), etc.: I am afraid this time it might pass, so let’s get busy folks. THIS MUST NOT STAND! and we must roll back the other Intolerable Acts as well!
http://www.livingondividends.com/articles/expatriation-faq
“Q:> But if only X politician were elected, or Y political party could get more control, wouldn’t the whole system change? Shouldn’t I be out there writing Congressmen, signing petitions, and protesting in the streets?
A: The system is rotten to the core. No individual, no matter how noble and righteous, can save it. Once it collapses under its own weight, hopefully something much better will emerge from the wreckage. Protesting against it is about as effective as protesting against the plague. You can spend your time and energy agitating and making noise, but the fastest way to change the system is to cut off access to its power source: You.”
@Don: “What is going on with this bill H.R. 2495? Is this actually progressing through the US Congress …”
http://www.govtrack.us/congress/bill.xpd?bill=h112-2495
@Don, the 10% tax band on $0-8,700 starts on any income above the standard deductions and personal exemption which comes out to a similar amount to your personal exemption in Euros so you probably wouldn’t be effected that much by these changes.
It would be expats living in lower tax countries who would be worst effected.
Living in the UK, I probably wouldn’t be that much effected though having to fill in form 1116 could result in increased accounting costs since it’s a lot more complicated than the simple 2555 form.
What would really worry me is if they also removed our rights to a foreign tax credit.
In a perverse way, I almost hope all this passes so that everyone will WAKE UP to how outrageous it all is. After all, once I retire, I will no longer be protected by the FEIE anyway since all passive income from dividends and pensions is fully liable to US taxation. Hopefully there will be enough of a pushback for citizenship-based taxation to be reformed to residence-based taxation.
After all, the IRS could still go after US residents hiding money offshore by still requiring them to declare their worldwide assets and income. The amount of money they’ll be able to raise from genuine expats is tiny in relation to the amount of hassle and expense that compliance is costing us.
I also believe that there is an industry to all this; accountants, attorneys and advisers obviously benefit from the status quo.
@monalisa: it may not affect you, but it will others (as you also stated). But if we let them strike the FEIE, then they will continue their momentum and keep hammering us. We need to mount a massive campaign to repeal all of the Intolerable Acts.
@Jefferson, I hear what you’re saying.
I’ve concluded that if it gets intolerable I will have no choice but to renounce but hope it won’t have to come to that.
I feel stuck until I get through my statutes of limitations for several years’ disclosures though; I fear that if I tried to renounce now that it might raise red flags and the risks of a nasty audit. But give me another three or four years and I may seriously consider it.
In the meantime, please write your Congresspeople (even if anonymously) and lobby your local MP’s and inform your local concil of the issues (whether or not you are yet a UK citizen, you are still subject to UK laws and hence deserving of their protection).� Even Dept. of State seems to recognize this (look at your US Passport if you still have one: “The Secretary of State of the United States of Americahereby requests all whom it may concern to permit the citizen/national of the United States named herein to pass without delay or hindrance and in case of need to give all lawful aid and protection.”)
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Just to let you know John Tierney’s wife and brothers in law involved in some serious funny business involving internet gambling and money laundering. One of Tierney’s brothers is still a fugitive hiding from the US in Antigua. Currently Tierney’s wife is under house arrest for filing false tax returns and racketerring.
http://bostonherald.com/news/politics/view/2011_1205rep_john_tierneys_brother-in-law_found_guilty
Americans Living Abroad are millions. And we can vote with absentees ballots. It is a question or organizing ourselves. Usually we vote in the US State where we last resided, Someone, perhaps ACA could organize us by States and help everyone to register to vote. Perhaps we could concentrate in thetwo senators of each state. May be easier. I am sending this message to ACA. ACA could speak in our names in each State working with the senators. Something like this. Am I dreaming?
Could be worse, if they adopt the Québec techinique of programme specific after-tax levies.
After reducing my income tax to zero, I will need to write a cheque for $500 as contributions to the Health Care Fund and the Prescription Drug Insirance Plan
@rivka88 at least the Obamacare act omitted the obligation to purchase US insurace for US Persons Abroad
@Jefferson D Thomas: As they used to say “cheer up, things could be worse, so I cheered up and sure enough they got worse.” President Obama’s latest proposal to “lower tax rates for corporations appears to have as one of its objectives to totally ignore the recommendations of the Simpson-Bowles Commission on Fiscal Responsibiity and Reform. That report, issued in December 2010 recommended that the US adopt a territorial tax system (as opposed to its current world-wide tax system) “to help put the US system in line with the other countries, leveling the playing field.” That Commission was appointed by the President Obama himself. The president has not lifted a finger to recommend that Congress take any action on any of these Commission recommendations.
Without providing details, because apparenty the President’s plan just released does not contain them, one of the stated objectives of that plan is to tax the foreign earnings of US corporations when earned. Currentlhy they are only taxed when such earnings are repatriated (at 35%). The proposed tax rate is not revealed, but taking this action would create one additional disadvantage to discourage US companies or US citizen entrepreneurs from establishing subsidiaries or branches outside of the US to sell US exports.
Very few foreign countries impose any income tax at all on foreign earnings of their corporations, and only a few impose a very small (5%?) tax on such earnings when they are repatriated. For all others foreign earnings are repatriated free of home country taxation of any kind.
It would appear that in spite of the President’s Export Initiative announced early in his administration to double exports in 5 years, what he really wants to do is to increae the US trade deficit by making US corporations less competitive in the world market. That is not what he says, but his actions speak louder than his words.
Since he announced that initiative US exports have indeed increased, but imports have increased even faster so the the trade deficit per day of $1.5 billion when he announced the initiative has steadily increased to $2 billion per day. The US goods trade deficit in 2011 was $730.7 billion. Canada closed 2011 with a $1.2 billion trade surplus. For Germany it had a $193.5 billion trade surplus (and the lowest unemployment rate in 20 years.)
So I believe we can rest assured that he has no intention of proposing anything to relieve the double tax burden on US citizens residing abroad. In my humble opinion, based on his latest proposal, he is more likely to support increasing it. That is the cold reality we should recognize.
@Roger: I don’t trust Barak Obama. I have already recognized the cold reality of his policies, but we cannot give up the fight.
@mona your comment “once I retire, I will no longer be protected by the FEIE anyway since all passive income from dividends and pensions is fully liable to US taxation” sheds light on the scariest of all perhaps: that when one arrives at retirment after working their entire life and saving, discovers that they will be charged double for their retirment years and may find themselves living in a tiny appartment with little money to enjoy their well-earned retirement.
Anybody think of getting AARP involved? I notice that at the top of their site http://search.aarp.org there are advertisements for Voluntary Disclosure help, so the IRS-CPA complex will reap lots of money on their backs ;-(
I have tried to keep my financial situation dirt basic. I don’t even use savings accounts because I don’t want to have to report any interest. Just current accounts (though to be honest I wanted some more complex accounts back in 2011 before I really knew about FATCA and they rejected me due to birth place. Good thing at the time I guess, huh?!). Had no bank accounts over 10,000 dollars until this year. No income before 5 months ago. Still under the reportable limit (9400 dollars roughly) for single taxpayers overseas to not have to file a 1040 for 2011 or 2012 (depending on when I renounce this year). Basically trying to cruise through 2012, renounce and then will hopefully be able to actually start to plan financially! The more I learn from posts like that by Monalisa and the more I hear about “Alternative Minimum Tax” that and “Foreign Tax Credit” this, the more I feel overwhelmed and just want to renounce asap, even if it would be reckless. I unfortunately have to wait a couple of months to get everything in order first 🙁
I imagine that lots of other people who never worked in the US like me also have no idea what any of these terms like AMT and Foreign Tax Credit mean and are just renouncing because they simply don’t understand what to do! After FATCA itself, this is my primary reason for dropping US citizenship – Its waaaaaay too complicated to understand how to stay in compliance and not accidentally mess up big time and get hit with out of proportion penalties!
it is really painful to see that so many otherwise compliant
and lawful citizens relinquish US citizenship.
@Don: I respect your personal policy decision, everybody has to watch out for their own “kiester” with informed and well-thought calculation (and a little gut-feeling as well). However IMHO keeping your financial situation “dirt basic” as you say may keep the IRS from zooming in on you and your wallet, but in so doing you may not be practicing your right to full economic freedom to work hard, contribute with all of your talents to the economy where you live, save, invest, and retire with enough income not be a burden on the social welfare system of your country of residence and to do something interesting with your retirement years (travel, hobbies, having enough money to be able to contribute your time to charitable or artistic/cultural activities) without having to work a part time job during your retirement. That’s not fair to you for your own “LCUs”. That’s not fair to the society you live in abroad (wherever that may be, I respect your privacy).
As I can see from your posts here, you are a great intellectual asset to your entourage and you have wisdom to go with the smarts. IRS policy is forcing you to forgo some potential life quality as well as some richness (“monetary”, social, cultural) that you could help build in your village, town, or whatever. In this way, Unca Sam is ripping your neighbors off, whether or not some of them might be USP’s. I don’t want to knock your decision: I just want to bring to light the opportunity-cost tradeoffs to provide food for thought for everyone facing similar personal policy decisions. Maybe we will prevail (despite all odds) in our struggles over the next few years and we will all be truly free again (but still obliged to maintain a good measure of constant vigilance, critical thinking, and struggle).
On another (related, I think) note:
Some Senior Citizens in the US are being forced to return to work http://seniorjournal.com/NEWS/Money/2008/8-02-15-NumberofSenCit.htm because their benefits don’t provide them a living pension. It seems Unca Sam ain’t doing anything about it, despite the ways that they try to siphon money away from USP folks abroad.
I’ve concluded that even in a best case scenario that I will suffer ongoing annual compliance costs of at least $2500 in accounting fees plus trailing fees on investments of between 2-2.5% of the compliant portfolio’s value. This means that if I hold high yielding stocks providing 4% yields, I will lose at least half of this income to admin fees (and commission to my financial planner).
It almost makes me regret that I didn’t just keep my assets in straightforward savings accounts. But I’ve been led to believe that if I sold the stocks and moved the money into a non-compliant local credit union that they would be obliged to withhold 30% of this for the IRS…which means that I will have to find a US-compliant bank account as well. It thus seems to mean that it will be difficult to enjoy any direct access to these assets.
But another issue is that if I renounced, I fear that a large portion of my future inheritance from my parents in America would be withheld in taxes as punishment for renouncing.
I too have a sense that, in a perverse way, this attempt to remove the foreign tax credit might be a good thing in the long run. If it passes, it will remove all doubt that the US operates on anything other than spite when dealing with expatriates; it will turn the trickle of renunciations/relinquishments into a flood; it will destroy any option a resident American has for working offshore (even for a US company) and raise the hackles of corporate America; it will further piss-off all nations that have Americans living/working within their borders because, well, that tax money is now being sucked out of their economy; and it will, in my opinion, reduce that ex-pat tax compliance rate from the current single-digit status down to something close to zero.
Surely all of that would spark some media coverage in the US?
Just out of idle curiosity — wasn’t the US-Canada tax treaty drawn up to prevent this very kind of double taxation? And wouldn’t Tierney’s bill, passed into law, violate that treaty? I realize US politicians couldn’t care less about violating treaties — but I wonder if Flaherty is watching this.
@ all of above
I don’t know if this information is pertinent as I really do not understand the U.S tax form. However, I have a friend who prepares U.S. returns for dual citizens. She said that her firm almost always finds they use the Foreign Tax Credit rather than the Foreign Earned Income Exclusion. So perhaps, that would be how they would get around the “double taxation” clause of the US-Canada tax treaty?