A reader posted a comment with this article:
Dr. Saud Al-Ammari is Managing Partner, Saudi Arabia & Gulf Region, Blake, Cassels & Graydon LLP, Al Khobar, Kingdom of Saudi Arabia. He has experience in a wide variety of corporate and commercial matters inside and outside the Kingdom. He served for ten years as special counsel and later general attorney for Saudi Aramco. Dr. Saud participated as legal counsel and a member of the team negotiating the Kingom’s accession to the World Trade Organization and served as chairman of OPEC’s legal defense team.
Here is a salient point:
The unintended consequences of taxing expatriate Americans by the US Government is that fewer of them seek employment overseas, and even fewer are hired by global firms. With fewer proponents of American goods and services who can influence buying decisions, there are fewer exports made by domestic companies, and in turn, fewer jobs in America. Ultimately, the US Treasury collects less overall revenue and America has a less competitive economy.
Thus Dr. Al Ammari agrees 100% with Roger Conklin.
Good article. Maybe they’ll listen to businesses complaining about their inability to hire US citizens overseas due to them being too expensive…Or maybe the companies won’t complain at all and quietly stop hiring US citizens entirely. After all, why pay someone more just based on his or her nationality when you can hire someone else who is just as good and doesn’t come boxed together with big brother?
*The article is correct. The IRS is making one time cash grab, but pushing deemed citizens away from its own country and losing investment, annual spending and periodic tourism. It is incredibly poor policy as it is also damaging to the reputation and image of the US as a just and fair minded society. The IRS is an entrenched silo in government and only sees revenues over the short term and not the damage it has already caused. In general people in the US are oblivious because all of the retroactive taxation and bully tactics are outside of the country
It is great to see others publishing the Roger Conklin advocacy position on other blogs. I have a short comment posted there, with links back here to Roger’s story. Let’s see if they let it out of moderation.
@madeleine pinder
Your name is new to me, so wanted to welcome you to Isaac Brock, and thank you for commenting. We enjoy new voices.
This is an excellent article that echoes much of what we discuss here…maybe he’s a Brocker? I like how he mentions how congress makes regular attempts to milk the cash cow (US persons abroad) by obliterating the FEIE. Congress is the US’s biggest obstacle to good, sound legislation.
I just read that the the US supreme court is upholding Obamacare. What if anything does this mean to us?
@RogerConklin; it was a pleasure to see this article that reiterates the very points you’ve made here, and the valuable historical perspective you provide on these issues.
@all, this excerpt particularly struck me because it directly addresses and rebuts the constant unfounded claims we meet in articles and commentary:
“So why does this tax exist? In truth, the tax is a remnant of an
out-dated 1924 Supreme Court decision in the case of Cook v. Trait.
There, the Court held that the Federal Government had the right to tax the foreign-earned income of Americans and justified its decision largely on the “presumption that government by its very nature benefits the citizen and his property wherever found.” Today, proponents of the tax offer the same tired argument: If Americans living and working overseas enjoy the benefits of citizenship, they why should they get a tax break just because they choose to live overseas?
This argument, however, is misinformed. Americans residing abroad do not receive many of the benefits of citizenship. They do not use US infrastructure, cannot claim Medicare, do not enjoy the protection of the US Government to their person or overseas property, must pay for all
consular services, and are charged at full commercial rates if they should ever need to be evacuated from a foreign country.”
This unfounded presumption; that (US) government by its very nature benefits the citizen and his property wherever found ” we know to be the exact opposite case for those of us born or permanently living ‘abroad’. It should read; “that (the US) government (system of citizenship-based taxation) by its very nature (threatens) the citizen and his property wherever found (‘abroad’).” The manner and method in which the US has chosen to aggressively, unjustly, and inequitably assert and assess absolute and lifelong claim to our person, our children, and our property – ‘wherever found’ (and wherever produced or located), and it’s obdurate refusal to acknowledge the legitimacy or primacy of non-US citizenship, tax residence or other status, by birth, naturalization, or permanent residence outside the US) is precisely why we are protesting the substantial hazards to our well-being and that of our families – so substituting ‘threatens‘ for ‘benefits‘, and that sums up the reasons why we have arrived at this point.
Since this extraterritorial tax system produces substantial inequities in process and result for US ‘persons’ inside the US, versus those born and/or residing in other countries, as to benefits and hazards, this is a clear case of systemic discrimination. Instead of US politicians asking (disingenuously) ‘why should Americans abroad pay less tax than Americans ‘at home’, they should be asking themselves; ‘ why should those we’ve deemed to be taxable Americans ‘abroad’ be forced to produce exponentially more complex and labyrinthine paperwork, for less result (0 tax owed), at much higher personal cost (in time, stress, and specialist fees), for less than zero benefit, and with far greater risk of life-altering jeopardy.
It is also significant to me that one would reasonably presume that a country which at every opportunity purports to be the model of democracy in the world, that the statement of presumption above, from Cook vs. Tait, does not address one of the assumed signal demonstrations of government – and that is equitable access to participate in the democratic process of the government that one is subject to. We know that many who have inherited US taxable status from a parent, will never be able to vote without a period of US residence, and that this varies widely from state to state. In addition, even those who can vote have no direct or effective representation. So, we are ‘presumed’ to have imaginary benefits, and are deprived of one of the signal rights of a ‘participatory’ democracy. As this deficit, and others (ex. no inclusion in the census, etc.) was established by none other than President Carter http://www.aca.ch/joomla/images/pdfs/happybir.htm, it cannot be dismissed as a groundless complaint by those ‘abroad’.
@bubblebustin: In means, my friend, that the US will expect us expats to pay for it. What else could it mean? They certainly won’t be paying for it themselves.
There must be a way that the 6 million of us can start a class action suit (human right abuse, discrimination, etc…) as it is painfully obvious that it’s the only thing Congress will pay attention to. Any expat lawyer out there that could take a lead on this?
*The linked-linked article within showed a very impressive campaign effort from their organization. Wow! How can I join?
http://www.mecacc.org/pdfs/2012_Post_Door_Knock_Report.pdf
Old article:
I don’t know if ACA was successful in excluding US citizens abroad.
http://muqata.blogspot.ca/2009/11/health-care-bill-taxes-american-abroad.html
@popol Welcome…
I think the natural place for such a suit would be the ACLU in America, if anyone could interest them..
In the meantime, we could use a few more Expat Tweeters. There are very few of us, and where are the millions that could? If the Arab spring could utilize it, to good effect, why not the Brocker revolution?
https://twitter.com/FATCA_Fallout/status/218367274543886337
Here is the one I did on this…
https://twitter.com/FATCA_Fallout/status/218346134228303875
@Mark Twain
Thanks for highlighting that. I have sent that to the NZ American Chamber of Commerce to encourage them to follow this lead..
@bubblebustin, that’s an interesting find,
and @all, and we might have unknowingly been spared yet another hazard most of us wouldn’t even have known was being forced on us – in addition to all the others we had no clue existed (FBARs, FATCA, etc.) – based on the 2009 article @bubblebustin provided the link to (above) ; “Under Title 1, Subtitle D, “Shared Responsibility”, the Personal Responsibility Requirement currently states on page 28 that “Beginning in 2013, all U.S. citizens and legal residents” would be required to purchase coverage of one of the specified types of insurance coverage. This broad reference clearly includes U.S. citizens residing overseas. Yet citizens who are bona fide residents in foreign countries have health coverage plans valid in the country where they reside. If they subscribe to the U.S.-specific insurance outlined in the program – which they do not need and cannot use – they will be paying twice for health insurance. If they do not participate in the U.S. program, they will be subject to an excise tax to be levied on their IRS returns as defined in the bill on page 29.” from http://muqata.blogspot.ca/2009/11/health-care-bill-taxes-american-abroad.html
I haven’t been able to find anything else, but this ACA page http://www.aca.ch/joomla/index.php?option=com_content&task=view&id=352&Itemid=2 which is more recent seems to say that application to us abroad was changed. Whether the current incarnation does as well, we’d have to establish. In any case, it’s another illustration of why citizenship-based taxation is a continuing hazard for those living outside the US – they simply can’t/won’t concern themselves with anything that isn’t relevant to those inside the US – and so, these types of measures are proposed to apply to everyone, until/unless someone points out the unworkable/unnecessary/inequitable and unethical application to those ‘abroad’.
Given the US deficit and current global economic situation, more and more temptations for US legislators to export domestic US costs to those ‘abroad’ will come up to bite us – with the usual absolute lack of any benefit – and accompanied by the usual overgenerous application of penalties (in the usual units of 10,000. ) and mounting jeopardy for being deemed a US ‘person’.
We aren’t able to scrutinize every piece of legislation that might be proposed which intentionally (ex. the regular threats to the FEIE), or ‘unintentionally’ penalizes, or threatens us with double taxation. Without the ACA (and like-minded individuals and organizations), we’d be even worse off than we are already – as this story about our inclusion in the original version of the healthcare levy demonstrates.
As stories here attest, the tax treaty between Canada and the US has serious and historical flaws and shortfalls (GST/HST not credited, registered savings penalized), but other countries don’t even have that (ex. taxes paid in other countries that don’t fit the narrow US definition of an ‘income’ tax, and so don’t preclude additional US tax).
@@badger and all, I’ve sent an email to ACA to see if they had any success in excluding US citizens abroad.
Whew, badger, thanks for finding that.
I just heard back from ACA:
“If you are a bona-fide resident overseas you are excluded from participating in Obamacare in the United States.”
What a relief, I though I would need some of that nice Canadian health care with some CPR!
@bubblebustin, even if what ACA says is true, it doesn’t mean we won’t be paying for it. Consider that the kinds of taxes that the US has implemented to “pay” for Obamacare are on unearned income–already without these extra levies, investment income in Canada is treated unfavorably in the United States (PFIC, TFSA, capital gains, eligible dividends). So US investors living in Canada will be killed by this. There is no way to be an investor or in business abroad as a US person without first relinquishing US citizenship.
@petros, I think blue passports would make nice kindling for your War of 1812 party plans.
Reading this statement from the pen of the managing patner of a Saudi law firm made me feel that I am no longer a bird singing in the wildness. He has summed it up very well indeed. This is not a Republican or a Democratic brainchild but a prime example of bipartisan blindness.
President John Kennedy, a Democrat, was responsible for the 1962 law that implemented citizenship based taxation. Republican Congressman Chuck Grassley was a co-sponsor of the Tax Reform Act of 1976 which massively increased the double taxation of US citizens abroad and transformed it from affecting only the very wealthy into destroying the middle class Americans living and working abroad. Grassley became a senator and was chairman of the Senate Finance Committe for many years. He remains a outspoken foe of any Foreign Earned Income Exclusion for Americans abroad and has never missed an opportunity to slip in a tax increase on Americans abroad (the last time being TIPRA when he was still chairman of the Finance Committee.)
What is so amazing is that a Saudi attorney can see so clearly what totally escapes our legislators on Capitol Hill and the Administration.
This is a good article but I wonder if Dr. Saud Al-Ammari had a ghost rider by the name of Roger Conklin. It was interesting to read when citizenship based taxation reared its ugly mug and what kind of convoluted rationale they used to justify it.
Regarding ObamaCare and Americans abroad: The $1,900 per family penalty was left out of the final version but it’s something to keep an eye on because you never know when they will sneak it back in, especially now that the Supreme Court has ruled ObamaCare to be constitutional. Their reasoning, if you can call it that, might be that Americans living overseas could come back to the USA for medical treatment because everyone knows there are no competent doctors and clean hospitals outside of the USA (snark). It’s sort of like Americans abroad must pay taxes and LCUs to the USA because you never know when the US Navy will have to sail into Switzerland to rescue (at a hefty price) Americans who have been left high and dry without a bank to put their pennies in, thanks to FATCA (more snark).
@Em, that’s good advice re keeping an eye on it in case they use the reasoning you provide. That would be consistent with the approach and disingenuous rationalizations repeatedly offered up publicly as justifications for the current burden.
Oops too late to fix it. I meant ghost writer not ghost rider in my previous comment. 🙁
@Roger Conklin:
I strongly agree with your position that US citizenship-based taxation hurts US exports. To push US exports, Americans need to be on the ground in foreign countries and anything that makes it more costly or more difficult to be abroad hurts US exports and competitiveness.
As a short story to illustrate this, in the early 1980s I was working for a US Midwest appliance manufacturer in its export department. The US was in a recession and, because of the strong dollar, exporting was also most difficult. One day this 25 year old kid (me) gets a call from the purchasing agent for a Dutch construction company with a project in the Middle East. He wants to discuss buying 1,500 of our top of the line refrigerators (which would fill 60 steamship containers) and wants to know when he could fly in to discuss terms and production timing.
A few weeks later we met and agreed the order for around $2 million and scheduled production. At lunch we learned that this Dutch purchasing agent had a long list of supplies that he was purchasing in the Midwest ranging from fire plugs to floor coverings for this project. Since there were dozens of manufacturers of refrigerators worldwide, including in Europe and Japan and Taiwan at that time, we asked him why he selected us, as we were just a $400 million company. His response: an American architectural firm designed the project and a US-based construction company was the general contractor. They specified our American-made refrigerator.
Consider: if the architects or general contractor had been German or Japanese, would we have gotten this business? Would Inland Steel in Chicago have received an order from us for steel, not to mention the many other component suppliers? Would the US railroad and trucking companies have had the opportunity to transport 60 steamship containers to the port in Baltimore?
The US needs Americans working abroad to guide business to the US. Impediments that cause Americans to remain in the US hurts US business and the US economy. As a professor said in a class, the 1,000 year Third Reich lasted five years because their leaders only thought 15 minutes into the future, similar to our politicians.
@Innocenete
@Roger
Your arguments are correct and could be understood by a five year old in a sand box. Therefore, I think they can be understood by the US government. So, the question is: why does the US act in a way that is so contrary to its interests?
The reason is that the US government is not interested in the good of the country. I will say it again: The US government is not interested in the good of country – never has been. Why not you ask?
It’s because the political process is used to benefit the politicians. There are many instances where one can benefit oneself by hurting the country.
Let’s look at an example that I have written about. I.e. the application of the PFIC rules to punish buying “foreign mutual funds”. I.e. U.S. citizens in Canada who own mutual funds will certainly end of paying more than the fund profits in taxes. They may ending up paying almost the complete value of the investment and profits in fines that are called taxes.
Why? Well, I would guess that the U.S. mutual fund industry did not want competition form foreign fund companies (that were not forced to pay their profits out every year). So, they go there favorite Congressman to get that person to sponsor a bill that will hurt competitors. This is NOT in the interest of the country. It is in the interest of a politician.
So, my point. As long as Congress is not interested in the good of the country you will have citizenship-based taxation. Meaning forever.
The US government is the enemy of freedom loving people everywhere.
*@renouncecitizenship: Totally in agreement!