And it just gets better. This is so funny that I just had to share it with you.
I discovered that one of “my” senators is up for re-election in 2012. So I went to her opponents website to learn a little more about him and read up on his platform. I really liked what I saw so I did what I do normally and sent a campaign contribution.
The morning I got an email (a very nice email) from the person who manages these things for his campaign thanking me for my contribution but also saying that I was “red-flagged” because of the foreign address. So she rather apologetically asked for two things from me:
1. confirmation that I am a US citizen or Green Card holder
2. A US address.
Whoa! The first I think I can sort of understand but not the second. From what I understood from the mail the reporting for the FEC does not allow them to enter a foreign address connected to a campaign contribution (can anyone confirm that?)
I’m not angry at the candidate or his campaign team – on the contrary the person who wrote to me handled it very well. It was also a good opportunity for me to write a mail back talking about Americans abroad and what issues were of heightened interest to us in this election year. My contact promised to pass it along to him.
That said, it is another glorious example of how Americans abroad find barriers to participating fully in the homeland political process.
Amazing.
Not yet. Working on it. But I don’t think it matters. I think they would turn the info over even if I were a citizen if the US said I was an evil tax evader or some such thing. EU countries have their own issues with people with tax evasion and I don’t think they would have much sympathy for me if I were accused of it. So I comply with US tax law and I have my nice accountant do my declaration and I send in forms and wire money and do all that stuff.
And you know what the best part of complying is? I could relinquish right away with no hassle! Not a bad deal, huh?
What about the assumption that all of your assets are sold the day you relinguish and subject to income tax for that year?
@Joe – good question and one that did trouble me until I found out that it only applies to people with a certain amount of money/assets. I am SO far from being in that case. I am an IT manager, for heaven’s sakes! 🙂 I don’t even own my own home and my car is twenty years old. But here is something that does bother me – I am a real squirrel when it comes to saving, I am at the peak of my profession. All it would take is rise in my savings over the next few years combined with a change of U.S. law lowering the threshold for the “exit tax” to suddenly make it a real problem. So the question I have (and there may be others who have it as well) is – should I bail before things get even worse or do I stick it out in the hope that things will get better? It’s the uncertainty that is really bothering me – not the current situation with taxes or the annoyances of reporting and the like. I’m just really scared that something much worse is coming down the pike like a complete repudiation of the Foreign Earned Income Exclusion, for example. If the political process can’t work for me and there is no way I can have a voice in these decisions, well, I think that will be the end of the line for me.
@joesmith- that assumption is actually the norm around the world. The difference being though that the majority of countries actually charge the exit tax on the day that you give up residence and then they no longer subject you to their tax regime. I believe that this is a much fairer way of doing things. It is the same principal as is applied to your assets upon your death. When you die everything you own is considered to have been sold by you. This is one reason why a will is so important to have since upon death you can transfer some of your assets without triggering their sale.
The U.S. is backwards in their application of the tax. This allows them to follow you for life and bleed you dry.
@victoria- you must have missed it but the recently passed bill to extend the payroll tax deduction holiday has a provision in it to repeal the FEIE. If you are waiting in hope that things will get better or even not worse then I think that you are waiting in vain.
http://topics.nytimes.com/top/reference/timestopics/subjects/f/federal_budget_us/index.html
You really need to think about what is it that you gain by holding onto a piece of paper that you don’t use but which is costing you money every day. It is also more likely than not that unfavorable changes will be made to the application of the expatriation tax.
I say this because it seems that there is a spirit of spitefulness that pervades the U.S. legislature and I doubt that it will go away with the next election.
In the end you can’t live on love.
@recalcitrantexpat – Well, it hasn’t passed yet, right? (said in small quivering voice)
You’re right and I know you’re right. But I’m a Catholic and if I can believe in the Virgin Mary then I can believe in anything. 🙂
@victoria- If you read the link you will see that the bill has passed and now only awaits the President’s signature. Now as to when and if they will make good on elimination of the FEIE is anyone’s guess. The FEIE was eliminated back in the 70’s but then it was later reinstated. If there is one thing that politicians will do it is that they will make the same mistakes over again because they rarely look at history:
http://www.aca.ch/joomla/images/pdfs/comm12.pdf
Oh, s%(*&
@recalcitrant: I’m looking at HR 3630 now (the bill that passed on 17 Feb) but I don’t see anything about FEIE or Section 911 in there. Is there another bill?
http://thomas.loc.gov/cgi-bin/query/z?c112:hr3630:
@eric- http://www.aca.ch/joomla/index.php?option=com_content&task=view&id=507&Itemid=46
@all
Found this on the net:
http://www.thefreelibrary.com/Perpetuation+of+the+foreign+earned+income+exclusion%3a+U.S….-a0117449040
@eric,@victoria- I apologize about my error. It seems that I was thinking of the wrong bill.
Whew!
Just about had a heart attack there….
@recalcitrant too late, we already all had heart attacks and went to hospital =P
@UncleTell Nice find. For the rest of you all who don’t want to be bothered reading a pile of badly-argued garbage, here’s my summary: this guy starts out his paper by calling the US system a “residence-based system” in contrast to a “territorial-based system” (Section II), demonstrating his complete lack of understanding of the difference between taxation of worldwide income of residents, and worldwide taxation of citizens. He rambles on about capital export neutrality, which has nothing to do with individual taxation. Then he goes on to Section V, which consists of literally every fallacious FEIE argument I’ve ever seen rolled into one giant tarball: “FEIE is a subsidy to multinationals” (Part C), “without FEIE corporations would raise wages for Americans” (instead of firing their Americans and replace them with cheaper foreigners!) (Part D), “Americans abroad benefit from US embassies and the US military” (Part E). Having run out of actual arguments, he moves on to ad hominem: “an American schoolkid (who did not benefit from the FEIE) spraypainted cars in Singapore, therefore all Americans abroad are an embarrassment and we should revoke the FEIE so they come home” (Part F), and then fearmongering: “oh noz don’t live abroad, u might catch SARS or get hit by evil terrorists!” (Section VI Part C). Another case of a professor with an axe to grind starting with a conclusion and throwing in every piece of “support” he could think of along the way.
@recalcitrant
I think you mean this one: (see Sec. 402)
http://www.govtrack.us/congress/billtext.xpd?bill=h112-2495
@Uncle – I concur with Eric. Great find. I read it and, from my plankton perspective (and thank you to rivka88 for that word), the issue I have is that it makes a fundamentally flawed assumption about Americans abroad – that we work for American companies and that we are “temporary.” It’s a fun thing some of us do when we are young and sprightly and the company offers us a great gig with fabulous bennies in an exciting locale for a few years.
But here’s one thing all people who study migration in all its forms know – whatever the original “pull” and the good intentions, some people never go “home.” A few years becomes a few decades before you know it. Then one day you wake up and you realize that “home” is right here under your nose. When you have enough of those folks and their kids, then you might have the makings of a diaspora – a permanent “domestic abroad”. And they don’t for American companies as expats – they work as “locals” for local companies and they send their kids to local schools and join the local church and bank at the local bank and all that jazz.
Something about that phenomenon, however rare it has been, is just beyond the capacity of a homelander to wrap his head around. Some days I just want to shout from the rooftops at these people and explain that I am never coming back to the U.S. not because I don’t like where I’m from but because I love where I am. I will undoubtedly die here and that makes a very “permanent resident” indeed. 🙂
@victoria- you hit the nail on the head. This same basic assumption- that we are only temporarily gone- can even be detected in the tax treaties. Certainly when the Congressmen talk about us on the Floor they refer to us as if we are bound to be coming back eventually.
But the issue should not be one of whether or not we are coming back but what right do they have to treat us as if we never left? Do our ongoing tax obligations represent a franchise fee that must be paid for each year?
And when it comes to the issue of whether or not we as citizens benefit from the American military I would reply that I benefit no more from the existence of the American military than do the other people who share the same piece of rock with me. In that case why doesn’t America make everyone else in the nation also pay their fair share?
And as for PFIC’s. Well the IRS had to give mutual funds a name that would make them sound like tax dodge vehicles. If you simply call them mutual funds then it makes it hard for the average person to be upset about expats holding them. The IRS should remember that it isn’t the instrument that cheats but the person. Basically I am offering the same argument that the opponents of gun control advance, when they say that guns should not be outlawed because it isn’t guns that kill but people.
Mutual funds are just common investment instruments that are used the world over. For the IRS to criminalize their possession by expats is a violation of our freedom to enjoyment of our property. But I guess that the IRS would say that this is an invalid argument. Afterall they get to call the shots (pun intended).
@Victoria:
Sadly, the author appears to be aware of that and sees it unequivocally as a bad thing. Part V Section H:
This is mercantilism bordering on fascism: it argues that the purpose of the citizen is to make profits for the companies of the State, and that the goal of the tax system should be to punish citizens who make profits for foreigners instead. What’s really dangerous is important people are reading what he writes and incorporating his arguments into their proposals. Tom Coburn (the junior senator from Oklahoma) wrote just a few months ago in his “Back in Black” plan (at page 35) something that very closely echoes the above argument:
@Victoria
Apropos “…shouting from the rooftops.” You’re most likely to get the same response as Eddie Murphy did 🙂
@eric- they constantly ignore the fact that Americans who are working overseas are not consuming any government services so it is actually a win for the budget when a citizen moves away.
They also refuse to look at the real answer which is that the U.S. should trash citizenship based taxation. If people want to move away from the States for whatever reason they should be able to and without having any ongoing tax obligations to the U.S.
The American government is trying to make an issue where no issue should or does exist, but then it turns around and offers an answer to what is a non existent problem. The issue is purely contrieved by the legislatures.
@all
If the ever dare to repeal FEIE, then this will be my response.
Sorry in adave for the dirty language, but this is definately what I would have to say to them:
@all
This is what it must be like in one of those IRS “help centers ??”
@uncletell- if they do repeal the FEIE it would be interesting to see what if any kind of reaction the U.S. would get from the nations with which they have so called “tax treaties” with. FEIE is the closest acknowledgement that the U.S. has made to the reality of the truly territorial nature of taxation.
If you couple this repeal with FATCA I think that you end up with good economic arguments that nations could and should use in order to bar any immigration by Americans or U.S. persons who are not citizens of their country.
@Victoria and recalcitrantexpat
I work as a tax preparer in Canada. Today, I was doing a tax return of a “non-resident”, someone who had been here for a short time and has gone back home to Europe. As I don’t do alot of non-resident returns, I got the old textbook out. Things are so different here when compared to the U.S.
“Where Canadian residents are absent from Canada for less than two years, they will be presumed to have retained their residence status while abroad, unless it can be clearly established that they severed all residential ties when they left. Where individuals are absent from Canada for two years or longer, they will be presumed to have become non-residents of Canada, provided that they have severed sufficient residential ties with Canada and established residential ties elsewhere”.
Doesn’t this make alot of sense? Are there no logical minds any longer in the U.S? Or could it be narcissism?
@tiger- it does make perfect sense. Everything has a shelf life, patents do eventually expire, and even water rights can be considered to have been abandoned when they are used. But U.S. citizenship seems to be eternal, just like God. You ask if this isn’t a case of narcissism on the part of the U.S. And my response is a resounding YES.
The biggest problem with the U.S. is the U.S. America is an extremely conceited country and yet it has a real belief in itself as the country that no one understands but every country wants to be.
I can’t believe that no matter how long I have been away from America that they would still treat me as if I were a resident. Even the fact that I have abandoned all connections with any American institution doesn’t seem to wake them up to the fact that have made a life elsewhere. The Americans think that they are protecting our rights as citizens when they do this when really what they are doing is mistreating us.