Senators to Unveil the ‘Ex-Patriot Act’ to Respond to Facebook’s Saverin’s Tax ‘Scheme’
The Saverin fall-out, as expected, has begun:
Key quote:
The senators will call Saverin’s move an “outrage” and will outline their plan to re-impose taxes on expatriates like Saverin even after they flee the United States and take up residence in a foreign country. Their proposal would also impose a mandatory 30 percent tax on the capital gains of anybody who renounces their U.S. citizenship.
The plan would bar individuals like Saverin from ever reentering the United States again.
What does this mean? Can we never be free from these people? Is this implying that if you renounce citizenship now even with under the 2 million in assets that you will end up paying capital gains taxes anyway? And what is this about “re-imposing taxes on expatriates”? Does that mean that renouncing citizenship doesn’t do anything and that there would be no way to get out of the US net? Personally I couldn’t care less if they ban me from travelling there, but this has me very alarmed at what is going on. I just want to get rid of this unwanted, accidental citizenship and get about living my life in my own country!
http://video.foxnews.com/v/1644676756001/cavuto-many-americans-feel-overtaxed-overwhelmed/?playlist_id=87937
Just me posted the below op-ed about Severin from the “Economist” over at Phil’s blog.
http://www.economist.com/blogs/democracyinamerica/2012/05/renouncing-citizenship
Isaac Brock and ACA need to connect with someone at the “Economist” which is highly respected, read globally, and has consistently empathized with American ex-pats.
Here is a recent blog post by Talking Points Memo, Josh Marshall.
Senators Announce Crackdown on Saverin
He doesn’t have the narrative or the facts right yet, but he is writing about this, and it is a first…and it is an opportunity.
He is smart enough that he can get beyond the left wing characterizations, if he is educated enough. Josh is one that is worth the effort at reaching out to education and try turning, like Al Lewis. He can be tweeted to @joshtpm
Here are three I just sent, and plan more. Please join in, you twitters. 🙂 Be nice..
@joshtpm Josh, you are a smart guy. Avoid characterizations and narratives until you really know more. @TheEconomist http://econ.st/JDY4p6
@joshtpm Here is what U.S. Expats are saying and thinking about Shulman’s bill. http://bit.ly/L3HKLX
and about Saverin http://bit.ly/LYkVLQ
@joshtpm Regarding ur http://bit.ly/J9MqDO So what do you know about US Citizenship taxation issues and the #FWhat forms #FBAR #FATCA ??
Oops… Forgot Josh’s email. I am sending him and email now.. talk@talkingpointsmemo.com Reasoned comments will work better than calling him an idiot or flaming him. 🙂
@Just Me, this will be interesting to see how the Reed amendment will be tested in what the US government thinks is a bona fide case. I don’t know how the US government can use the Reed against a former US citizen whose income is consistently below the threshold for owing the US taxes, unlike Mr Saverin’s.
@all
https://twitter.com/#!/renounceus/status/203111190728155136
If you want to read some beautiful things read the comments at the ABC News article. The vast majority of comments take the position that Schumer (or whatever his name is) has gone out of this mind (to the extent that he ever had one). There are so many comments that I stopped reading after about 20 minutes.
But they are well worth the read. Here are two examples:
“These senators have concluded that when someone is prepared to renounce their citizenship because the U.S. tax system is so highly uncompetitive, the right response to penalize them. My conclusion differs. I would say that 1,700 annual renunciations points instead to an urgent need to reform our tax structure and make it globally competitive. It is quaint to cast someone who abandons his U.S. citizenship as “unpatriotic”. But the instinct to do so ignores American history. The United States was founded on a voluntary social compact to promote the pursuit of happiness. If someone born here, who never consented to that compact, discovers the government created and tolerated under that pact impairs their ability to pursue happiness, surely our enlightenment values are expansive enough to permit them to emigrate and better pursue happiness elsewhere. Weren’t impediments to emigration one of the main criticisms we used to level at authoritarian regimes such as the Soviet Union (see, for instance, the 1974 Jackson-Vanik Amendment).”
and
“I love how fools like Chuck Schumer like to call themselves “progressives” … how the hell is it “progress” when you’re trying to goosestep our country backwards into tyranny? I personally dont give a rats rear end about Facebook, dont have an account and dont want one. But millions of people do like it, and to punish one of the fellows who made it possible is just plain idiotic.
Nice try Chuckie, but your days running the Senate are numbered. All you tax fattened parasites are going down in flames this November, starting with that empty suit in the White House”
Anyway, the word it out: Stay the F*** away from Form Nation and everything that it now stands for.
They keep on coming. Here’s one suggesting Saverin is a “jerk,” but he shouldn’t be denied a visa. (Do we know if he wants a visa?!?)
http://news.cnet.com/8301-1023_3-57436753-93/you-cant-deny-eduardo-saverin-a-visa-for-being-a-jerk/
And, here’s one British take on it: http://www.guardian.co.uk/commentisfree/cifamerica/2012/may/17/eduardo-saverin-tax-free-global-citizenship
@all
In any case, this whole thing has become a big joke. It is becoming more ludicrous by the day. The effect is now going to be that fewer people will make any effort to complete with the laws of Form Nation. What’s the point? Form Nation is simply demonstrating that it will not behave in any rational, predictable or fair way. They will change the rules whenever they want.
So, I expect that people will just start thinking:
1. If I comply I will guarantee myself problems.
2. If I don’t comply, I may have problems.
The longer this goes on U.S. citizens abroad will recognize that there is good news and bad news.
The Good News – U.S. citizens abroad no longer live in the U.S. Let’s all pass for a moment and sing “Oh Canada”. The people I feel most sorry for are the people who are trapped in Form Nation.
The Bad News – It is becoming increasingly clear, that to ever return to the U.S. is far too risky, (and may no longer be possible).
Of course, the longer this goes on, fewer and fewer people will care whether they can return. They will just let their passports expire and it becomes – Audios Amigos.
The U.S. government and its people are living in some kind of reality that is different from the rest of the world. Hell, they don’t even use the metric system – probably evidence of American Exceptionalism.
Reblogged this on Renounce U.S. Citizenship – Be Free.
From Senator Casey’s website:
Summary of the “Ex-PATRIOT” Act
“Expatriation Prevention by Abolishing Tax-Related Incentives for Offshore Tenancy” Act
Sponsored by Senators Charles E. Schumer & Bob Casey
I. Current law (Section 877A of the Internal Revenue Code) already provides that any individual who either has:
(a) A net worth of $2 million or more; OR
(b) An average income tax liability of at least $148,000 over the last five years;
and who renounces their citizenship has to pay an exit tax based on the value all property and assets owned by that individual.
The Ex-PATRIOT Act provides that when an individual expatriates for a substantial tax purpose—as judged by the Internal Revenue Service—that individual will be subject to a 30% capital gains tax on future investment gains. Section 871 of the Internal Revenue Code already taxes non-resident aliens for dividends, interest and other items at the 30% rate. The Ex-PATRIOT Act adds capital gains to this mix of taxable earnings. The tax will apply to anyone who gave up his citizenship in the last ten years but only taxes capital gains earned in the USA following the date of enactment.
II. The Ex-PATRIOT Act also provides that if the IRS finds that avoidance of taxes was a substantial purpose of expatriation, the individual who renounced citizenship will be barred from any type of re-entry into the United States. This section requires the IRS commissioner to make a decision regarding tax-avoidance intent for every individual subject to Section 877A who renounces citizenship. It is retroactive and will encompass individuals who have renounced citizenship for the 10-year period prior to enactment of the statute.
http://www.casey.senate.gov/newsroom/press/release/?id=b8e896f3-eb5d-451e-ab60-6a3cb40cc533
Perhaps this was Mr Saverin’s real reason for renouncing:
http://thedailywh.at/2011/10/07/dangerous-precedent-of-the-day/
@Joe Expat
Three points:
1. The Act speaks of “renouncing”. As Petros has pointed out on many occasions this is an argument for trying to “relinquish”.
2. I don’t believe that it is constitutional to apply this to people for the last ten years. People are entitled to the benefit/burden of the governing renunciation at the time they renounced.
3. The 30% thing clearly contemplates taxation on U.S. assets, income. This would provide one more reason to not invest in the U.S. (How about cutting off the nose to spite the face?)
@Blaze…Those Guardian responses are interesting.
Not sure I will bother adding anything to the comment stream.
This one caught my eye, because of the reference to a need for a GATCA.
From one dougbamford
17 May 2012 10:51PM
@Joe, Thanks for finding the text. So it seems that I was right, the tax would be only on US capital gains, and probably withholding. I don’t think this kind of tax is a good idea because it would discourage US investment by former US citizens, but overall it’s not that bad, and I think very few people would be affected. It’s very easy to avoid the 30% tax: just sell the US assets and pay 15% capital gains before renouncing. No exit tax on those assets and no future US capital gains to tax.
Although not clear in the summary of the bill, I read in one of the media articles that the former US citizen would not be barred from entry in the US if this tax is paid. If this is confirmed, the bill doesn’t seem so bad. It could be worse.
Perhaps its time to put Felix Salmon on the Wall of Shame. I personally despise Felix Salmon for other reasons unrelated to IBS so I have to say I am enjoying this moment with great pleasure. Salmon born in Britain but living in New York City represents everything that is wrong with the American media. Why do Brits view America in the way freshmen girls like senior guys. When I first saw the blog post below I thought about calling for Salmon and his Canadian boss Chrystia Freeland (once of Edmonton Alberta) to be terminated by Thomson Reuters(itself technically a Canadian company that also own the G&M) for publishing such drivel but I have mellowed as the evening has worn on. (Almost all of Thomson Reuters operations are based out of in NYC other than the CEO’s office in Toronto which I think is right across from City Hall).
http://blogs.reuters.com/felix-salmon/
The summary of the bill mentions “every individual subject to Section 877A who renounces citizenship”. If they intended to include also those who relinquish citizenship and former long-term permanent residents, they wouldn’t have added “who renounces citizenship”. But I’ll wait for the actual text of the bill to be sure.
Here is our newest inductee on BNN(Canada’s version of CNBC) tonight It figures he was on with Andy Bell(someone else on my “sh**list” who is always taking the side of the EU and US over Canada). I remember Salmon and Andy Bell back during the Global Bank Tax fight between Canada and the EU and US Salmon and Andy Bell would go on and on about how Canada needed to be a “team player” and understand the anger of the bank bailouts and big bank bonuses in the US.
Felix Salmon on BNN
http://watch.bnn.ca/#clip681484
Perhaps BNN would be a good place to have a debate between an IBS member and this Felix Salmon guy over citizenship based taxation.
oK…am i missing something here. I thought that there was already an ‘exit tax’ if you decided to relinquish/renounce and your networth was in the ‘covered expat’ ballpark….less 625k.
Having said that, would he not have to pony up some cash to remove himself from the land of the fee and the home of the brave?…regardless of any new legislation….?
What has changed exactly?
@mach73, There is already an exit tax for those who renounce or relinquish their US citizenship and for those who abandon long-term (more than 8 years) US permanent residence. The exit tax applies to unrealized capital gains of worldwide assets, at the current tax rate of 15% and a credit of about $630,000. Also, payment of the tax can be deferred until the assets are actually sold and the gains are realized. So yes, the renunciant already has to pay this exit tax under current law.
However, capital gains of US assets held by foreigners are not currently taxed at all by the US. So, a US citizen is able to renounce US citizenship, becoming a foreigner, invest in the US and have US capital gains not taxed by the US. The proposed bill seeks to change only this detail, the capital gains of US assets held by former US citizens after they renounce, at a rate of 30%.
By the way, I found out that Canada also has an exit tax for those who end Canadian residence (regardless of citizenship), at a current rate of 50% on capital gains. However, Canadian real estate and some other items are excluded.
Please read Shadow’s Raider’s further comments below, May 18 @ 12.27 am and 5.04 am, in conjunction with this comment.
I’m sorry, the capital gains tax rate in Canada is not 50%. 50% of the capital gains become taxable income, which is then taxed at the normal tax rates.
@justme- now that is a recipie for economic disaster. Death by a thousand cuts.
@shadowraider- I for one am tired of taking consolation in the fact that a law “isn’t as bad as it could be”. Rewriting laws out of a personal vendetta and making them retroactive is something that is characteristic of dictatorships, fascism and totalitarian regimes.
A true legal system cannot have knee jerk reactions as its animus. FATCA and FBAR laws are products of such arbitrary and vindictive legislative processes.
The idea that renunciation can be a punishable act is a denial of human rights.
@mach73- for one thing they are going to reopen cases going back ten years and that isn’t fair. For another the tax of 30% on U.S. based capital gains. And now they seem to be determined to find a way to make the Reed Amendment work. So far this amendment has proven unworkable and hasn’t been applied.
And last but not least the rewriting of the law based upon a politician’s desire for revenge is not the way that any legislation should be written. If they get away with doing it now then you can bet that it will be done again one day and the resulting legislation may not be so benign.