Estimated world population as of Oct. 31, 2011 7 billion
Estimated population of the U.S. for 2012 313,281,000
Estimated number of U.S. citizens living abroad 6 million
Estimated costs to administer FATCA and chase those 6 million- billions of dollars forever. Net benefit to be derived at the best is most likely zero but is more than likely to be negative because the taxes collected are not likely to ever exceed the cost of FATCA compliance. Of course we will never know because the U.S. very conveniently refuses to establish any criteria for costs calculation.
@Steve
Thank you for responding to my two questions. If only more Americans could see the injustice of ‘citizenship’ based taxation when it effects people who certainly do not believe themselves to be citizens.
@Blaze
Thanks for posting that. Very impressive of Mr. Davies. I never thought of writing to him.
Just sent this to
Don.Davies@parl.gc.ca
RE: Greetings from Toronto-Danforth!
Hi, I am one of those “Born in the USA” Canadian citizens who would love to see the USA and Canada enforce the section of the Universal Declaration of Human Rights that states:
Article 15.
(1) Everyone has the right to a nationality.
(2) No one shall be arbitrarily deprived of his nationality nor denied the right to change his nationality.
I have no contact with the USA, no assets in the USA, no income from the USA, and just want to be a Canadian citizen. I have lived in Canada for 37 years and been a Canadian citizen for 17 years.
Please help!
xxx xxx
@whoait’ssteve- Only the U.S. government attempts to impose its laws on its citizens even if they don’t live in the country. My wife and I lived in the States for five years and in that time she was never felt it necessary to see if her life was in accord with her Canadian citizenship.
The U.S. has never in a real way acknowledged dual citizenship. Rather the U.S. has only ever conformed with the letter of the Supreme Court decision, which said that the government could not strip someone of U.S. citizenship just because they performed a certain act. Since then though the U.S. has never given any real force to dual citizenship. As far as the U.S. has always been concerned you have to live like an American no matter where you are and without any regard to whateve other citizenship you may hold.
Holding U.S. citizenship is more like wearing a brand.
WhoaSteve –
If US citizenship is such a great thing to have, then why does the United States …
(1) Charge $450 for disposal? We are not even allowed to give the thing away. As someone memorably put it, being stuck with that unwanted “status” is more of a pain than a junk refrigerator.
(2) Attach a ball-and-chain to people who just desire to be free? When you get right down to it, ditching US citizenship may be the most American thing a liberty-loving extraterritorial could do. Leave us to pursue happiness – and to not be pursued by a failing state!
(3) Set up kafkaesque Catch-22’s that make it horrendously difficult to cut loose? Like having to pay thousands of dollars to become tax-compliant on incomprehensible forms, when owing no tax, in order to be allowed to expatriate.
(4) Ration consular and embassy appointments – recent report of six month wait in Ottawa – in a manner that mimics the barriers to exit thrown up by the likes of the Soviet Union and Nazi Germany?
(5) Foot-drag for months and years on giving final closure to those who manage to obtain that so-sought-after appointment for relinquishment or renunciation? (We in Canada have not one single confirmed report of issuance of a current Certificate of Loss of Nationality.) Limbo is one version of indefinite detention.
(6) Produce a public record on skyrocketing severance that is nothing but a blatant farce of useless data?
@Steve. The US Consulate states that parents/guardians/trustees cannot renounce the ‘US citizenship’ of their developmentally delayed family member even with a court order — in my family’s case for a son who was born in Canada, raised in Canada, never registered with the US, never lived in the US, never received any benefit from the US (only and many from Canada).
I would be interested in your opinion (as an ordinary American). This is a long post, but very important to a segment of the ‘US person’ population you are discussing …
As I submitted to TAS Office of Systemic Advocacy, February 26, 2012:
Parents/guardians/trustees of developmentally delayed dependent adult children cannot renounce US citizenship on their family member’s behalf. That dependent adult does not have the capacity to understand either the benefits of US citizenship or consequences of its renunciation.
Parents/guardians/trustees make all day-to-day decisions, some of life or death, for their family member’s well-being. They need to live in the same country as their family, without the prohibitive stress and monetary cost of yearly US tax and reporting compliance.
Most countries have better rights for developmentally disabled persons, better health care benefits, better tax-assisted savings plans for retirement. They are discriminated against by the persons looking after their well-being not being able to renounce their US citizenship on their behalf to end unnecessary administrative costs (by their government funding) for US tax returns with $0.00 owing and possible prohibitive penalties resulting regarding FBARs.
Because of additional health problems most of these developmentally delayed persons have, it makes no sense for them to live in the US where they would not have the health care insurance or benefits they have in their family’s country.
Who will administer the responsibilities of their US citizenship when the US parent is either incapacitated or deceased? To have an executor carry on this pointless yearly exercise is a further expense charged to their government disability benefits.
This is discrimination on the basis of citizenship, i.e. our dependent children have additional compliance requirements, additional expense of administration, all for $0.00 owing to the US, because they are considered US citizens in addition to the citizenship of their birthplace.
These dependent individuals are denied health care assistance from the US in the country where they live. It appears they are denied access to benefit of legal tax laws provided by their country to save for retirement in their resident country.
Let those of us who look out for our developmentally delayed dependent family member’s well-being EVERY DAY be allowed to renounce that US citizenship on their behalf and continue in the important things like ensuring the quality of life for our sons, our daughters.
This is from the ‘Americans with Disability Act’ which doesn’t address a lot of the discrimination for Registered Disability Savings Plans (RDSPs), etc. for Canadians with developmental disabilities (and the like).
But I did glean the following portion, which talks about discrimination ‘economically’. (My comments are in CAPITALS.)
The US Congress finds that:
(1) physical or mental disabilities in no way diminish a person’s right to fully participate in all aspects of society, yet many people with physical or mental disabilities have been precluded from doing so because of discrimination; others who have a record of a disability or are regarded as having a disability also have been subjected to discrimination;
(2) historically, society has tended to isolate and segregate individuals with disabilities, and, despite some improvements, such forms of discrimination against individuals with disabilities continue to be a serious and pervasive social problem;
(3) discrimination against individuals with disabilities persists in such critical areas as employment, housing, public accommodations, education, transportation, communication, recreation, institutionalization, health services, voting, and access to public services;
THESE INDIVIDUALS HAVE EMPLOYMENT, HOUSING, PUBLIC ACCOMMODATION, EDUCATION, TRANSPORTATION, COMMUNICATION, RECREATION, HEALTH SERVICES!!!!!, VOTING, ACCESS TO PUBLIC SERVICES IN CANADA — THAT IT WOULD BE DIFFICULT TO PROVIDE FOR THEM IN THE US (WITHOUT THEIR FAMILIES WHO ARE ALSO LIVING IN CANADA).
(4) unlike individuals who have experienced discrimination on the basis of race, color, sex, national origin, religion, or age, individuals who have experienced discrimination on the basis of disability have often had no legal recourse to redress such discrimination;
(5) individuals with disabilities continually encounter various forms of discrimination, including outright intentional exclusion, the discriminatory effects of architectural, transportation, and communication barriers, overprotective rules and policies, failure to make modifications to existing facilities and practices, exclusionary qualification standards and criteria, segregation, and relegation to lesser services, programs, activities, benefits, jobs, or other opportunities;
(6) census data, national polls, and other studies have documented that people with disabilities, as a group, occupy an inferior status in our society, and are severely disadvantaged socially, vocationally, economically, and educationally;
THESE INDIVIDUALS ARE DISCRIMINATED AGAINST ECONOMICALLY; I.E. THEIR CANADIAN BENEFITS ARE DIMINISHED IF THEIR PARENTS / GUARDIANS / TRUSTEES ARE NOT ALLOWED TO MAKE A DECISION FOR THEIR BEST INTERESTS TO RENOUNCE THEIR US CITIZENSHIP, WHICH THEN BECOMES A SEVERE ECONOMIC HARDSHIP FOR THEM LIVING IN CANADA OR ANOTHER COUNTRY. IF THEY HAVE IN THEIR NAME A CANADIAN REGISTERED DISABILITY SAVINGS ACCOUNT OR A TAX-FREE SAVINGS ACCOUNT, IT DOES NOT GIVE THEM THE SAME VALUE FOR THOSE LEGAL TAX-SAVINGS PLANS AS A CANADIAN WITH A DEVELOPMENTAL OR OTHER DISABILITY COMPARED TO THE SAME CANADIAN WITHOUT AN ADDITIONAL US CITIZENSHIP AND ITS RESPONSIBILITIES.
(7) the Nation’s proper goals regarding individuals with disabilities are to assure equality of opportunity, full participation, independent living, and economic self-sufficiency for such individuals; and
THESE INDIVIDUALS CANNOT HAVE ECONOMIC SELF-SUFFICIENCY — IT IS INCOMPATIBLE WITH AN EXTRANEOUS (TO THEIR CANADIAN OR OTHER COUNTRY CITIZENSHIP) US CITIZENSHIP.
(8) the continuing existence of unfair and unnecessary discrimination and prejudice denies people with disabilities the opportunity to compete on an equal basis and to pursue those opportunities for which our free society is justifiably famous, and costs the United States billions of dollars in unnecessary expenses resulting from dependency and nonproductivity.
THIS IS, FURTHER, UNFAIR AND UNNECESSARY DISCRIMINATION BY NOT LETTING THE PARENTS / GUARDIANS / TRUSTEES OF DEVELOPMENTALLY OR OTHERWISE DISABLED CANADIANS RENOUNCE US CITIZENSHIP ON THEIR BEHALF, WHICH DENIES THESE INDIVIDUALS THE OPPORTUNITY TO COMPETE ON AN EQUAL BASIS (IN THE COUNTRY WHERE THEY RESIDE AND HOLD CITIZENSHIP), THEREBY CREATING MORE DEPENDENCY AND MORE RESULTING EXPENSES. THE COST OF ADMINISTRATION OF THEIR EXTRANEOUS US CITIZENSHIP IN CANADA (OR ANY OTHER COUNTRY) CREATES LITTLE, OR IN MOST CASES $0.00, FOR THE US. IT DOES GIVE MONEY TO CROSS-BORDER ACCOUNTANTS AND US TAX LAWYERS IN CANADA (OR ANY OTHER COUNTRY) — NOTHING FOR ANY SERVICES IN THE US.
WHAT ARE THE OPPORTUNITIES FOR THESE INDIVIDUALS FOR WHICH THE US IS JUSTIFIABLY FAMOUS THAT IS BETTER THAN WHAT CANADA, IN THIS CASE, PROVIDES?
@Tiger: The reason I wrote to Don Davies was to thank him for the letter which he sent to Jim Flaherty. I learned about this from another thread here at Brock.
Here is a link to Davies letter to Flaherty: http://dondavies.ndp.ca/post/getting-results-response-from-minister-flaherty
All. remember what Rick Mercer said -Talking to Americans=waste of time
@Chester12
Yeah you got us numbered fat, stupid, and armed to the teeth. I’ve detected a thin veneer over the anti-Americanism here. It’s fine if you don’t want to be an American due to political reasons you have every right to do so.
You’re handling the anti-Americanism really well Steve. I’m surprised you haven’t gone on an expletive laden rant … you have a lot of patience.
Canadians are not usually this nasty … we’re just burnt out from this intrusion into our lives. I hope it ends soon.
@usxcanada
I believe the US Government thinks US citizenship is a one way street. All the actions the government takes are to benefit the country and people who live within it’s borders. I’m seeing that the government pays no attention to those that choose to live and work outside the borders permanently. The situation is what it is, I don’t have an opinion positive or negative about it, I think people gotta be themselves, and if your life takes you away from the country that’s your life.
I dismay at the thought that the government makes it extremely arduous to release those who don’t want to be American’s. I cannot understand the mindset, but I empathize with their struggle.
I’m coming to the conclusion that the US has you over a barrel if you choose to make your life as an American abroad, the manner in which our government conducts itself seems to discourage people from choosing to live away permanently, and that to be honest sucks.
@omg…
Hahah I have a thick skin, I can deal lol like I said a minute ago this situation sucks, and I can’t imagine having it hang over my head. On the lighter side if you’re one for conspiracy theories you won’t have many more years to worry the Amero is supposed to be right around the corner with the NAU, hahah
@whoait’ssteve- please don’t do what Americans usually do when cornered and dismiss our arguments by saying that they come from a “hatred of America”. Such a move is only a resort to the traditional U.S. attitude that America is only hated because it is secretly envied. Once this pattern of thought sinks in then all discussion is at an end and American belief in their own rightousness gets even stronger.
Up until this IRS thing started we were all comfortable with the U.S. and none of us were secretly utilizing our U.S. citizenship for personal gain. What we are legitimatly upset about is the opportunism that the U.S. is making use of. What we object to is being labelled as crooks and being told that choices that were made long ago have now been unilaterally negated. I can assure you that if there were a segment of the U.S. population that was being subjected to a similar witch hunt by their home country that the U.S. would be doing the same thing.
@recalcitrant…
I’m not one to dismiss your argument, you can hate or love America, you can hate or love American citizenship. I as an American wouldn’t trade it for anything in the world, I don’t feel righteous, I know it’s not for everyone and some people have differing values to mine.
I don’t think any less of you for choosing to not live in this country, and I empathize with your struggle with the IRS, although I have tiny reservations that a few are really trying hard to hide their assets and from contributing their fair share. I can also understand that this is probably a miniscule minority.
@Steve: In terms of any anti-Americanism you may have detected here, it stems from the way we are being treated. Most countries see their citizens living around the world as a fabulous opportunity to have informal ambassadors representing their country.
The US sees their citizens around the world as a potential cash cow to solve its economic woes. It tries to force law-abiding, honest responsible people to capitulate by calling them “tax cheats” or “tax evaders” or “traitors.” As a result, former and current US citizens living independent lives outside the US are now among the most anti-American people anywhere. How sad.
Because of how I now feel, I personally will never again cross the border after my elderly mother’s death. Instead, I will happily spend my money in Canada or in another welcoming country. Many are already taking that approach. How does that help the American economy?
I’m glad you’ve hung in and tried to educate yourself about this and perhaps develop a different perspective. I hope you will reply to Calgary’s posting.
@Blaze
I’m not sure I detect anti-Americanism in the way you’re thinking. From my understanding a lot of people’s reasons for leaving the US in the first place comes from their more liberal leaning politics, of which the US is not at all famous for. So to me that’s underlying most of what I see coming from expatriates, and I just take that at face value and understand that politically most expatriates fall in to that section of the spectrum. Stereotypical anti-Americanism shows more a lack of knowledge on the part of the person saying it, you can’t make any generalizations about a country of 313,000,000 people.
@calgary…
I don’t have expertise in law (although I bought an LSAT prep book lol someday maybe.) Also as I am unfamiliar with the Canadian social system, and only slightly familiar with OASDI, and the only interaction I’ve had with ADA was a handrail in the bathroom, I cannot really formulate an opinion. I guess I’d say that a guardian who has power of attorney should be able to make the decision for someone that is completely incapable but I think that also probably opens the door to abuse, so I think State would have to be extremely cautious about accepting that kind of declaration.
Steve said: “From my understanding a lot of people’s reasons for leaving the US in the first place comes from their more liberal leaning politics, of which the US is not at all famous for.”
I think you nailed that one Steve. My husband’s mother wanted him and his brother to become Canadians and lose their US citizenship before they turned 18. This was in 1980 around the time that Reagan came to power. Remember him, he talked big and scared the hell out of everybody. She was afraid that the US would draft her two boys but they never ended up having a draft.
She had a much older son who went to Vietnam. She also was in the Second World War. She was a dancer entertaining American troops with the comedians Wayne and Shuster.
She was originally from Canada and left the US after her divorce since all of her family was still here.
@WhoaIt’sSteve…
Regarding your: “I have started to feel empathy for you all which I did not have yesterday, so I will indeed keep researching.”
Good for you Steve, and I have empathy for my liberal and Conservative friends in America who don’t understand the fuss either.
Chester12 doesn’t speak for me. I understand that Americans living in Kansas, going about middle “real American” life have no basis for understanding these issues. Frankly the cost of a gallon of gas is more important and close to home. The lack of good paying jobs is more of a concern,and the idea that some concept of citizenship tax would have any impact on export job creation would not resonant. They wouldn’t see the direct line correlation, as you don’t either. You probably think our trade deficit with China is just foreign exchange related.
Anyway, i don’t think you are a waste of time, and in fact, I appreciate and respect your opinions. I think they don’t have a wide enough perspective yet, but that comes with years and from additional exposure. My hat is off to you for continuing the dialog here. I know you love your citizenship, but traveling overseas is not the same as living overseas, and maybe if you did, perspectives would begin to broaden.
That said, I am not one of those contemplating giving up my citizenship yet. I am trying to comply with the extra requirements that consume a lot of my LCUs that you in the Homeland don’t have to bother with. I am also trying to help Homelanders understand how misguided the US policies are and the negative consequences that can result. However, no one was listening to Nouriel Roubini prior to the Financial melt down, and there is little comfort that he was right after the fact. It is only in hindsight do Americans begin to understand things, and then only if they turn off the TV and read a few books.
Yes, there is some anti-American feelings being generated by all of this, and if you would Google FATCA and look around here, you would pretty much see that the Financial Institutions of the World have been in total opposition to these unilateral actions of the US. “Draconian and obnoxious” descriptors have been used by some pretty conservative bankers to describe them.
However, reality being what it is, there does seem to be a “Complain by Comply” mentality beginning to settle in, now that the US is imposing the same regulations on it’s domestic banks as are being applied on the foreign institutions so that they can engage in a reciprocity exchange of tax data to help undermine FATCA opposition.
You might read this post too..
http://isaacbrocksociety.com/2012/03/17/dualing-editorials-datca-vs-fatca/
It is a brave new world being created, and you are one of the few Americans engaging with those that see it and concerned about it.. The man in the street in Kansas City has no idea.
http://isaacbrocksociety.com/2012/03/27/a-global-fatca-in-the-future/
This is not a partisan issue, and it is not just Liberals that are concerned about it as you said. You would think it would be a Conservative issue, but only some Libertarians understand it. I am pretty sure Ron Paul does, as does the Catco institute.
Carl Levin, who is hardly a conservative, is the one Senator who has been leading the charge against offshore evasion. He has single handedly done more harm than any one person with his unilateral extraterritorial FATCA laws slipped into the Hire Act in the dead of night. It is sending us down the road of a Global FATCA, or GATCA.
It was his dogged determination to get those tax evading Homelander cheats that launched this offshore jihad, and as with every legislation with its thousands of pages of amendments, it is only much later that the collateral damage is tabulated. The FATCA drone strike is not as precise as he would believe
Maybe you think that these movement towards a GATCA are a good idea, and maybe you don’t, but you have stumbled upon one site that is actively discussing it and opposed to it. You won’t find the subject being debated anywhere in the MSM back in the Homeland.
You said….“Probably a one time amnesty should be at hand with a grace period to get current. ”
Would to god that the IRS operated like the Canadian IRS when it comes to amnesties. Few minnow US immigrants or Expats who wished to hold onto their US citizenship would have much complaint, if the IRS followed the CRA example towards off shore reporting and tax compliance. However, that isn’t what the US does.
http://www.cra-arc.gc.ca/gncy/nvstgtns/vdp-eng.html
Now compare that to what the US does with threats of criminal prosecution and 27% penalties of all overseas assets, and you will begin to understand some the complaints.
Anyway, Mate, when you launched your first comments about “evaders and whiners”, I am sure you did not think you would be so engaged.
Keep an open mind, and we will try to keep a civil discourse. I enjoy reading your perspectives, as wrong as I think some of them are…but over time they can change. That is unless you are locked into the world of “certainty” that often accompanies partisan political dogma, American Exceptionalism or religion.
Glad you got that minor in Finance. I guess I should have gone to school to learn about the FBAR and citizenship taxation. When I tell my Kiwi and Australian friends they are gobsmacked (technical term) that American would tax and penalize its citizens the way it does. Similarly American Homelanders are amazed that some would not want a greencard or US citizenship anymore. It just doesn’t compute. 🙂
cheers
Correction: “Complain but Comply”….. duh
Thanks for your reply, Steve. For my Canadian-born son and those like him and parents/guardians/trustees who have legal authority to make decisions in their best interests, I see what is happening as nothing more than blatant discrimination and that’s where any ‘abuse’ comes in. We ‘US persons’ in whatever country are second-class citizens by virtue of our extraneous US citizenship.
Fortunately, the country we live in has better health and disability benefits and protection for its disabled. I am sure the US Department of State is not going to afford my son a better life in the USA.
Unfortunately, my “accidental American” son is the loser, economically, health-wise, family-wise, stress-wise, along with those entrusted with his care. The Albertan and Canadian taxpayer also loses as the US is requiring this country’s taxpayer dollars to go for the administration of US tax and financial information reporting, stolen from provincial dollars allocated for that disabled person’s living and medical expense. This will bring zero tax dollars to the US — only the absurd penalties that could be incurred and the dollars to competent Canadian professionals for administration of US tax and financial information reporting.
These families need no further stress or expense in their lives. I am using my retirement savings for resolution, which I am not confident I can get. There are many, many with a disabled person in their family who are not fortunate enough to have that to draw on.
If there is no resolution, I too am prepared not to again cross the US border with my “illegal son” for travel or to visit US family members. My son is protected in Canada but, illogically, could be arrested on US soil for not holding a US passport, not reporting his ‘big $$’ legal Canadian Registered Disability Savings Plan (RDSP) and Tax-Free Savings Account (TFSA) by FBAR or the new IRS Form 8938 or for sending the US a yearly tax return for $0.00 owed.
I just feel that when I know something is wrong, it is my responsibility to act on it the best way I can. It is not just my family’s story — it is the story of many in whatever country. I am thankful every day that my path brought me to Canada. I could have never dreamed that this is what my retirement years would be and the trouble I’ve brought to my children, born Canadians. It is not the legacy I wish to leave for them.
Common sense could go a long way in circumventing any abuse — that being taxation based on citizenship rather than residence as for the rest of the world.
@ omg who wrote: “Canada is the only country that already had an agreement in place long before FATCA to automatically forward Canadian bank information on US residents to the US government. If you are a US resident trying to evade taxes, the last country you would put your money in is Canada.”
That is exactly the point I get so hung up on although I don’t think the banks provide our bank account numbers and balances to the Canadian gov’t, just the amount of interest earned in a year. (Although maybe if there was a criminal investigation they would provide everything, I don’t know.) Nevertheless it was always my belief that if the IRS wanted T4 and T5 information they merely had to request it because of the reciprocal tax treaty. That’s why FUBAR is so outrageous because it isn’t searching out taxable interest income for a year, it is basically asking people to give up the keys to their accounts. (Please note, I am not familiar with any investments other than GICs because we have never had any of those things.)
Anyway we don’t know who reads those bank numbers and dollar values at the Treasury Dept. and we don’t know who else they share the information with (IRS for certain though). I think FUBAR filers are all at risk of identity theft. Seems to me that unscrupulous TD employees would have almost everything they needed to empty our accounts — bank name, account number, rough balance, holder’s name, DOB, SS number, address and even a signature to copy. (They might have to search out SI number and mother’s maiden name but for those cleverer than I it would be possible to do that.) Also, we might all be at risk of future, beyond FACTA, US tax laws whereby the IRS might order a Canadian bank to actually freeze access to or even seize banking accounts. Yes I know it hasn’t happened yet and the Canadian gov’t says it will protect us but there is nothing put down in serious legislative writing yet — it’s only words from politicians. Paranoia strikes deep … Into your life it will creep … I just don’t trust anybody very much.
On a lighter note, I mentioned somewhere, that we have never received any acknowledgement from the Treasury Dept. that my husband’s FUBAR had safely reached them. I lied. One year they wrote back to say my husband had not filled in his date of birth. I wrote a one page letter back to them pointing out that my husband’s DOB was the same as it had been recorded every year before on his forms. It was something he couldn’t change (even if he did want to shave a decade off).
@em- I believe that the Tax Treaty requires the sharing of financial information about U.S. residents who have Canadian bank accounts. Even today when you read about FATCA compliance that still seems to be the understanding that many non U.S. financial institutions have.
It hasn’t quite yet sunken in that the U.S. considers any financial account that is held by a U.S. person with a financial institution that is outside of the U.S. to be a foreign account.
It is the inability for U.S. persons to have domestic accounts, without having to divulge them to the IRS, that is probably one of the biggest insults to us as individuals. So bascially we are being punished everyday for living outside of the country. None of which makes any sense whatsoever. The simple and fair answer to this problem would be for the IRS to exclude from FBAR and 8938 reporting all accounts that are held in your country of residence. Of course then the next logical step would be for the U.S. to adopt territorial taxation since the financial reporting rules and citizen taxation are all a part of the whole.
But there is no way that the U.S. would ever be willing to acknowledge that it is not the only sovereign nation around.
Let’s not forget just how unfair all of this law is people who move to America and never do become Americans. No longer can they have financial accounts the land of their birth unless they are willing to subject these accounts to IRS rules. Even if they move back to their native land they will still be treated as U.S. citizens by their local financial institutions. Having any association with America is now a less appealing status.
If you are a young person the biggest hinderance to your life is now U.S. citizenship. Not only can such citizenship hinder your job prospects in the land your birth and in other countries but it will cost you untold thousands of dollars in fees for accounting/lawyers. The cheapest thing that you could do would be to get rid of your U.S. citizenship. The payback over a lifetime is huge. By jettising your U.S. citizenship you would get rid of untold and unknown legislative risks in the present and the future.
@Blaze, Congress may be visualizing Americans living abroad as a huge cash cow, but that is not the way the US citizenship based tax laws are written. The way they are written it really does not matter to the US to whom you are paying income taxes, just as long as you are paying them to somebody. In reality the are punishment for living in a country whose tax laws do not mirror those of the US and have tax rates at least as high as US tax rates. If you live in a country like Canada where the tax laws are similar, then your foreign tax credits will likely totally satisfy you US tax obligation and you will owe nothing to the IRS. But you have to go to great expense to prove to the IRS that you don’t owe anything to the US. You have to maintain intricate records and fill out complex forms, and be able to produce receipts that you have paid enough in Canadian taxes so that you don’t owe the IRS anything.
What defies any logical explanation is why it should be a matter of concern that you pay taxes to the foreign country where you live. That should be a matter of concern to the tax authorities of that country, but not to the US.
Tell me how this can possibly serve any useful purpose other than to justify a massive and costly government bureauracy. It is truly a “make work” program. And it also creates jobs for accountants whose fees have to compensate them for correctly undertanding these very complex tax laws. They produce nothing really worthwhile.
But if you are a US citizen and have the audacity to live in a country whose tax laws are very different than those of the US, then is when you really experence in the flash the wrath of the US, as if doing this was somehow almost a capital crime. Not only do you have to go through keeping detailed records, filing complex forms that you cannot possibly do wtihout expensive professional assistance, but also you end up owing a pile of money to the US as punishment for living in a country which generates its tax revenue, not through income taxes, but through VAT, Sales and all kinds of consumption taxes that likely do not have any US equvalents. The act of living and working in such a country is somehow regarded is such a treasonous act that you must pay income tax to the US as punishment. Not ony that you must pay the US in US dollars. If you happen to live in a country with foreign exchange controls you have another problem. You may have to obtain the dollars to pay the IRS by “buying” them on the black market and secretly smuggling them out of that country. In doing so, you risk getting caught, having everything you own confiscated and being sentenced to prison for the rest of your life.
According to the Tax Advocate’s most recent annual report to Congress, 91% of the tax returns filed from outside of the US showed a zero balance due to the IRS. The remaining 9% were filed by US citizens mostly living in countries with very different tax laws. These are the few that produce the bulk of the blood money for the IRS. And those who live in these countries would be expecially hard hit if the Foreign Earned Income Exclusion were to be eliminated. The exclusion, currently at $92,000 represents $19 627 in additional tax cost for a single person currently able to exclude this amount. What would happen? The people hardest hit would have to chose between moving to the US or renouncing their citizenship. It is nothing more than dreaming in techniciolor that this exclusion elimination would produce any significant additional revenue. It might even result in a drop in revenue. The Joint Tax commission does not take into consideration the behavioral change that would result, because they have no way of guessing what it would be. So they just assume there would be no change.
@rogerconklin- I agree completely. It is none of the U.S. government’s concern about what your tax situation is like in your country of residence because the U.S. has no vested interest in the situation. It is all just a pretext for imposing their taxing regime on an extra territorial basis.
What we’re experiencing are the negative side effects of being connected to a country that has the most super rich people who maintain residences and businesses in multiple countries.
It’s hard to separate average people from really rich ones through the tax system when you don’t have real legal jurisdiction. That’s why even now the US government sites warn you about the hazards of dual citizenship. Why they went and reclaimed so many former citizens when they knew this is upsetting.
@WhoaSteve:
Would you consider the signers of America’s Declaration of Independence a bunch of whining British expats?
Were their grievances so different from the grievances of American expats today?
http://www.ushistory.org/declaration/document/index.htm