Crossposted from the Flophouse. Okay, folks, am feeling perkier and so I thought I’d bring this one over. This is a very modest attempt to explain some of the thinking behind a decision to renounce (or not) American citizenship. I know there was another thread about this some time ago here at Isaac Brock so I’m sure there is nothing new here. But given all the recent media attention about this issue, I thought it was timely to bring it up again. This represents the state of my “internal committee” at this time. Your mileage may vary. 🙂
The U.S. has a new export that is really taking off: Americans. In 2010 a record number of U.S. citizens decided to renounce their citizenship. A mere drop in the bucket (under 2000) but a trend that has some people worried and others horrified and angry. This topic has finally hit the mainstream media with articles in the New York Times and the Huffington Post. Any discussion of why this is so tends to degrade very quickly into an emotional argument with lots of exclamation points, capital letters and a “don’t let the door hit you on the way out” mentality. It’s a subject that hits all of us (homelanders and expatriates) right where we live.
I think we have a failure to communicate here and so perhaps it might be instructive to use my own case as an example in order to dispel a few myths about why some Americans abroad are considering renouncing. What follows here is my own situation and my own reasoning – a cost benefit analysis, if you will. My case is definitely not representative of all Americans abroad but I’m sure it will resonate with some.
I left the U.S. in 1989 for France when I was 23 years old – right after I graduated from the University of Washington. I was married to a French citizen in 1990 and though we have expatriated to other countries during that time, the majority of our life has been spent here in Europe. When I left the U.S. I had no money and no assets since I had just finished school and had not yet started my working life. Today not one dime of my savings was earned in the United States and I currently have no property or savings in my home country. Everything I have in France was earned in France or in Japan. I have had a modest but good career as an IT manager in those two countries and I have paid taxes in every country I’ve lived in and worked. I have two children who are dual nationals (French/US citizens). My husband is a French national and has neither US citizenship nor a Green Card. As of this time I am not a French citizen though I currently hold long-term EU resident status. Our family has no intention of returning to the U.S. to live though we have never ruled that out as a possibility for the future.
Given my situation (and looking at it with cold reason) what are the costs and benefits of holding American citizenship? Let’s start on a high note and talk about the benefits:
Voting in U.S. Elections: As an American citizen abroad, I have the right to vote in Federal elections (president and congressional representatives). The way the American system works, I must vote in the State of Washington (my last state of residence) and will do so as long as I remain outside the country. Since our numbers are few, our impact is negligible and I don’t feel terribly well represented in the United States but I will concede that I do have this right which I can exercise or not as I wish.
Right of Return: My U.S. citizenship gives me the right to return to the United States at any time to live and work. As a practical matter however, my ability to exercise this right is limited since I am married to a foreign national and I would not think of returning unless my spouse could (and wanted to) come with me and I was assured that he would receive a warm welcome in the U.S. From the news reports we are getting from the States, it seems rather evident that the “welcome” is not what it was. Another factor is that I have one minor child (dual US/French citizen) at home and if I chose to return to the U.S. without my spouse, I would have to have his permission to take her to the U.S. Needless to say that just wouldn’t happen and both the U.S. and French courts would forcibly return my daughter to France were I to try this.
Opportunity: With a U.S. passport and EU residency I have the possibility of working on two continents (Europe and the U.S.) with a minimum of hassle. This is tempered by the high unemployment rates in both countries and the lack of benefits and worker protections in the U.S. Given U.S. work laws it is quite conceivable that I could return to the U.S. for work and find myself unemployed with no benefits the day after I arrive. So moving to the U.S. one day might be a grand opportunity or a complete catastrophe. I am not complaining about this, mind you, just pointing out that at 46 it is not an obvious decision to pack up and seek a rather risky opportunity on the other side of the Atlantic. But my U.S. passport does give me access to the U.S. job market which is not a small thing.
These are the benefits that I currently enjoy as a US citizen. What about Social Security, you might ask, or the right to pass American citizenship onto my children or consular protection? Well, the first does not apply since I never worked in the U.S. long enough to qualify for benefits. The only pension plan I am vested in is the French national system. As for the second, my children are already U.S. citizens and it’s irrelevant at this point whether I remain a citizen or not – they will keep their US citizenship regardless of my status. And finally the third just doesn’t exist. If I am accused of breaking the laws in my host country (France) the only help I will get from the U.S. embassy is a visit (if I wish) from a consular officer and help finding an English-speaking lawyer. Concerning the latter, my French is fluent and I already have a very good lawyer here so I don’t really envision needing that service. As for a U.S. passport being a useful bit of protection when traveling, I think that time has come and gone, my friends. It’s certainly not worth more then an EU passport these days. Most places I’ve visited have either been strictly neutral about my pretty blue passport or slightly hostile (perhaps that was my imagination but I did sense a rather cool reception in a few places.)
Against these benefits, let’s look at the costs:
Tax Compliance: It is costing me between 500 and 1000 USD per year to be compliant with all the tax and reporting requirements of the U.S. government. This is not a huge amount of money but, as I start saving for retirement, the complexity of my tax situation will grow and I will surely have to pay more just to keep up. I’ve had estimates from 1000 to 10,000 USD depending on the amount, types of investments and so on. There will also be taxes to pay in the U.S. in addition to what I pay in France. Not all French taxes count as a tax credit in the U.S. Capital gains (on the sale of a house, for example) are a direct hit. I would need a professional to quantify this for me in a more precise manner but what is sure is that I will pay more and more every year (unless, of course, I throw caution to the wind and stop saving for retirement at all).
Discrimination: I have already had one interview with a U.S. company here in Europe that didn’t even want to talk to me until I showed that I was a long-term EU resident. Clearly the fact that I was an American citizen was not a point in my favor. I have also had my bank give me trouble over certain kinds of investments because I am a U.S. citizen. From the stories circulating among other U.S. expats here in Europe it seems that Americans are becoming persona non grata in the banking communities in our host countries. From what I am hearing, I am probably safe for now with my existing accounts but may have trouble opening new ones which means not being able to change banks.
Lost opportunities: I have always wanted to work as an independent or start my own business here in France. A quick look at the U.S. tax rules for Americans living abroad who do this sent me running for cover. Ouch! Very complex. Potentially very costly. In addition, just as Americans are becoming pariahs to the local banks, local business is becoming less then eager to start up a venture with an American partner because of the onerous reporting requirements. And, finally if I have trouble opening new bank accounts here in my host country, I may be seriously limited as to the kinds of local investments I will be able to make in the future.
Stress: The FBAR/FATCA fiasco came out of nowhere for many (if not most) Americans abroad. The U.S. Congress is constantly cooking up all kinds of brilliant ideas that impact us and we are usually informed after the fact. I have to wonder what else they have planned for us. Over the past few months I’ve seen some pretty persistent people trying desperately to get the U.S. government, politicians, and the public to listen to our grievances and to take them seriously. While I am so grateful to all of the organizations and individuals who are tirelessly working on the behalf of all Americans abroad, I’m not seeing much traction. I feel like a pigeon waiting to be plucked with very little say over the next surprise to come out of Washington. I greatly fear that next year’s (or the year after) legislation will financially ruin me and my family.
Rejection: I am also getting very tired of reading headlines about how we are “tax evaders” and “ingrates.” Clearly homeland Americans do not love their diaspora. Since there seems to be a large number of homelanders who think we should “shut up and comply” or “get the hell out” I have to wonder why I’m even bothering to maintain my membership in the club as they seem perfectly happy to see me and others go.
On a last note, to be brutally honest with you, I’m just very tired. Tired of writing letters, tired of explaining, tired of fighting. There is so much about this that I simply cannot change. I cannot make homeland Americans feel differently about their expatriates. My influence (even as a U.S.voter) is practically nil. I have lost all faith in the U.S. government (Obama and company included). I no longer think it will improve – on the contrary I can think of a hundred ways it could get worse. And I have slowly come to the realization that American citizenship and globalization are an imperfect fit these days. Perhaps it will get better with time but that, it seems to me, is something I can hope for for my children’s sake but not something I am coming to believe that I can realistically expect to have for myself.
*@To All, I realise it’s irrational of me, but something in me won’t budge…I empathize deeply with people who want to renounce…but for me, not all decisions are merely financial or practical. I know my family and friends would forgive me but feel that I’d sold my soul…
Though I am obviously outraged, I nonetheless retain a tribal loyalty to America. I chose to live abroad so grudgingly feel I’ve got to comply. :ie: ‘the law is the law is the law…
I was brought up to believe that money is not everything. My beloved grandfather was one a Chief Judge of the IS Tax Court and was my mentor growing up, even more than my parents, etc. He was a thoroughly honourable man whom I worshipped and adored…obviously have many ambivalent feelings right now.
I sympathize very much with your conflicting thoughts and accept your wanting to ‘probably never’ renounce your US citizenship.
If you want some good reading, have a look at the now 224 comments of http://online.wsj.com/article/SB10000872396390444592704578062570295543436.html?mod=googlenews_wsj#articleTabs%3Dcomments. There you will see what many homelanders think of us, our leaving the continental USA, our traitorous ways. They call me; they call you — Tax Cheat as well as Traitor, even Trash. Perhaps your immediate family doesn’t feel this way about you (but you think they will if you renounce); however it is what ‘a bigger segment of your US family’ (many other homelanders) feel about you.
It is obvious to me that the US Government will not consider becoming fairer to ALL of its citizens, perhaps by going to resident-based taxation. I’ve lived most of my life and want my remaining years to be anything but a continuation of fighting this absurdity.
Re your: not all decisions are merely financial or practical. Mine are financial, practical AND not wanting to waste the rest of my life on this — I have one life to live and I want it to be with as much quality as possible for myself, my family, my society. My Cost Benefit Analysis answer is clear, although different from yours. I refuse to accept such abuse so will renounce. I am not a criminal.
@Mona: ‘the law is the law is the law…’
But what about “If a law is unjust, a man is not only right to disobey it, he is obligated to do so.”? Thomas Jefferson. I think he meant women also…
@Watcher and @monalisa,
A while back I was trying to think who said “the law is the law” and thought it was Mr. Mopsick. Indeed it was and this is what my previous thoughts were:
Yep, I still feel the same.
“Unjust laws exist; shall we be content to obey them, or shall we
endeavor to amend them, and obey them until we have succeeded, or shall
we transgress them at once? Men generally, under such a government as
this, think that they ought to wait until they have persuaded the
majority to alter them. They think that, if they should resist, the
remedy would be worse than the evil. But it is the fault of the
government itself that the remedy is worse than the evil. It makes it
worse. Why is it not more apt to anticipate and provide for reform? Why
does it not cherish its wise minority? Why does it cry and resist before
it is hurt? Why does it not encourage its citizens to be on the alert
to point out its faults, and do better than it would have them?”―
Henry David Thoreau,
Civil Disobedience and Other Essays: Collected Essays of Henry David Thoreau”
As I understand it, a lawyer has the obligation to tell his clients in advance on how to follow the laws as they are written. (not to give advice on how to break them). It is pretty irrelevant whether they like the laws or not.
As I sit in law school classes, the students are reminded that every action in their socialization reflects how they are viewed in the professional association they belong to.
Very much hope that this does not increase the numbers who become US taxable persons – or generate more ‘accidental Americans’. Somebody should stand outside and hand out warning flyers to those attending.
Canadians Pursue U.S. Education
28-29 September 2012
“High school students pick up fact
sheets and fill out surveys on U.S. education at the Study and Go Abroad
Fair 2012 held in Toronto at the end of September.
Every year thousands of Canadian students head south of the border in
pursuit of higher education. This was reflected in the Study and Go
Abroad Fair 2012 – which showcased dozens of American universities. The
fair, held annually at the Metro Toronto Convention Centre, and at other
cities across the country, describes itself as “Canada’s Largest
International University and Student Travel Expo”.
This year the Consulate’s Public Affairs Officer, Scott Walker, spoke
to a crowd of high school guidance counselors on post-secondary
education in the U.S. The presentation clarified common Canadian
misconceptions about schools in the U.S., such as the differences
between American colleges and universities. In addition, the Consulate
hosted an information booth, aimed at addressing general inquires upon
U.S. education. The booth had a constant flow of visitors, ranging from
high school and university students to adults thinking about studying
abroad or asking on behalf of their children.
The information resources were provided by Education USA – a global
network of over 400 advising centers, administered by the Bureau of
Educational and Cultural Affairs at the U.S. Department of State.””
Another good reason not to be a US Citizen: the embassy and consulates will not help you and possibly give the “green light” for you to be killed. This is a very interesting read, with a fairly recent development (10/2012):
To me, these guys were in the wrong country at the wrong time, and the US didn’t want to take any chances or show any link between the US and Pinochet, which eventually came out later anyway.
It is interesting to note that renunciation does not free from tax obligations, as others here have said.
BUT having the certificate of loss of nationality is enough to bank normally again (i.e. the bank is satisfied that you are outside FATCA), and unless one is suspect of evading taxes I find it highly unlikely that the IRS will pursue matters after that.
But of course I am imagining someone living abroad long term, with another passport, with a low net worth, and low or no tax liability.
Nothing will ever substantively change in the us empire. It looked at its tax base/subjects with utter contempt. You’re owned by the empire. All road lead to: renounciation.