Seventy-one years ago today, Franklin Roosevelt signed Executive Order 9066, paving the way for the internment — without due process of law, nor the consent of the legislature — of 120,000 people of Japanese descent.
Most of us are familiar only with modern-day attempts to get Americans to report non-US accounts and investments: the controlled foreign corporation laws of the 1960s, followed by the Bank Secrecy Act of 1970, and today’s FATCA. But three decades before TD F 90-22.1 and seven decades before Form 8938, there was WRA 126, “Application for Leave Clearance”, which had to be filed by any Japanese American seeking to leave a War Relocation Authority internment camp. This form is most famous for its questions about swearing allegiance to the United States, serving in the U.S. military, and foreswearing allegiance to Japan — earning it the “loyalty questionnaire” nickname, but it also asked about more prosaic matters:
15. Foreign travel (give dates, where, how, for whom, with whom, and reasons therefore).
22. Give details of any foreign investments.
(a) Accounts in foreign banks. Amount. Bank. Date account opened.
(b) Investments in foreign companies. Amount. Company. Date acquired. Contents.
Later versions of WRA 126 even asked about foreign safe deposit boxes. Look familiar? Today, “U.S. Persons” who live abroad or have financial connections to foreign countries — largely immigrants and the descendants of immigrants, not wealthy tax evaders hiding money in Switzerland as Congressional demagogues try to portray us — are forced to disclose all this information and more on Form 2555, 8865 and 8938, and of course Form 8854, the modern cousin of the Application for Leave Clearance, and are threatened with life-altering fines, deportation, or even imprisonment. Taxpayers who keep their savings in the U.S. are presumed loyal and innocent until proven guilty in a court of law, but taxpayers who dare to put their savings abroad are presumed disloyal and guilty until they prove themselves innocent of failure to report income by giving an inventory of everything they own and all their travels.
Who has a non-U.S. bank account, and why?
Contrary to the image in the mass media, the vast majority of Americans who have non-U.S. bank accounts and pension plans are those who have immigrant background, or close connections to someone who does — those of us who came from another country and left some savings behind, those of us who continue to invest some of our paychecks in the country and the markets whose investment opportunities we understand better, those of us who followed a non-U.S. spouse back to his or her country of origin, and those of us who were born in the United States but whose ancestry and upbringing has given us the language skills and qualified us for the non-U.S. passports or diaspora visas required to pursue careers outside the US without the need for expensive corporate sponsorship.
Even Wikipedia’s list of famous people renouncing US citizenship comprises mostly not “wealthy businesspeople fleeing the estate tax”, but immigrants and second-generation children. But in desperate times, we see ordinary connections to other countries — whether personal connections or financial connections — being cast as evidence of disloyalty and precursors to economic sabotage.
Tiny reporting thresholds for non-U.S. assets criminalise ordinary savers
What were the consequences of answers to the War Relocation Authority questionnaire? Even the staunchest supporters of the internment admit: those “who had made substantial foreign investments were subjected to heightened scrutiny. Kibei were generally ineligible for leave clearance.” (Kibei were Japanese Americans who studied or worked in Japan for some time in their youth before returning to the United States). And what was the definition of “substantial”? In American Inquisition: The Hunt for Japanese American Disloyalty in World War II, Eric Muller discussed the detailed criteria the government used to evaluate responses. From page 52 (emphasis mine):
The [Provost Marshal-General Office]’s Japanese-American branch compiled two lists of derogatory factors, an “a” list and a “b” list. On the “a” list were “major factors” such as “immediate relative interned”, “father and/or brother in Japan”, “seriously objectionable occupation”, “undisclosed foreign investments in Japan of $250 or over”, and “residence in Japan after the age of six for more than ten years though married to citizen wife with citizen children”. The “b” list included minor factors such as “mother and/or sister in Japan”, “objectionable occupation”, “parent’s investment in Japan of $1000 or more”, “disclosed assets in Japan of $250 or over”, and “residence in Japan from five to nine years inclusive over the age of six though married to citizen wife with citizen children”.
Adjusted by the CPI, $1,000 in 1942 would have been about $2,400 in 1970 or $14,500 today — roughly a quarter of the FBAR or FATCA reporting limits at the time of their respective enactments. The analogy to FATCA or FBAR is closer in wage terms: according to the St. Louis Federal Reserve, the average wage in the US during World War II for non-supervisory employees was rising rapidly, hitting about $125 per month by late 1942 and $150 per month in early 1944. This made the $1,000 threshold about six to eight months’ wages — similar to FBAR, which due to its lack of inflation adjustment now represents significantly less than half a year’s wages for most U.S. Persons abroad.
The consequences of saving outside of the United States
Others at the Isaac Brock Society have previously noted the general xenophobic and anti-immigrant parallels between Japanese American internment and today’s OVDI/FATCA witch hunt. But the parallels are far more direct than we thought: both of these government initiatives stigmatise the holders of non-U.S. accounts — reported or not, without any evidence of actual wrongdoing — and threaten to strip the basic right of freedom of movement from a group of people defined largely by foreign ascendancy or intimate relations with foreigners. (In 1942, non-Japanese spouses of Japanese Americans — like Estelle Ishigo — were also sent to the internment camps, while our previous posts have discussed the impact of FBAR and FATCA on U.S. spouses of foreign nationals).
For Japanese American internees, even “b” list factors could result in a finding of disloyalty, and thus denial of freedom. In one case, a man who applied for release from an internment camp to work in a war munitions plant was denied because his father had a Japanese bank account, and because his mother refused to renounce Japanese citizenship and make herself stateless — being Japanese, she was an “alien racially ineligible to citizenship” of the United States. From American Inquisition, page 69:
Whereas the Subject is regarded as loyal by his schoolmates and school teachers, his home influence has been just the contrary. His mother refused to deny allegiance to the Emperor and to swear allegiance to the United States. His father has more than $2600 in Japan.
Again adjusting by the CPI, $2,600 would have been about $6,400 in 1970 — the year when the Bank Secrecy Act which established the $10,000 FBAR requirement was first passed — or $38,000 in today’s era of FATCA. It would have been a bit more than an average year’s wages — hardly an unreasonable amount of savings for a man who might consider going back to Japan in his old age for retirement, since he couldn’t naturalise in the United States anyway. And of course, as Bryan Dooley at International Tax Counselors and Jack Townsend over at the Federal Tax Crimes blog point out, the same denial of naturalisation — and even deportation — could be applied today to green card holders who fail to file FBAR or one of the government’s other endless “information returns” that threaten to assess hundreds of thousands of dollars of penalties regardless of the underlying tax deficiency.
Motivated by racism?
As Muller concluded about the Japanese American internment:
The PMGO was not much interested in the subtleties .. the notion that an American citizen might react angrily but not subversively to the injustices of evacuation and internment was simply foreign to the PMGO’s approach.
Speaking out against Manzanar and Tule Lake? Doesn’t matter what your reason is, you must be one of those America-haters who wants the Japanese and the Nazis to win World War II. Speaking out against FATCA and citizenship-based taxation? Doesn’t matter what your reason is, you must be one of those America-haters who wants tax evaders to take over the country.
Everywhere from IRS press releases down to comments sections of demagogic columns, we see endless repetition of the idea that people with non-U.S. accounts are wealthy, disloyal, dishonest, and deserving of closer scrutiny. What the executive branch is doing to holders of non-U.S. accounts is clearly far from the least restrictive means of accomplishing its purported goal of finding wealthy tax evaders like those at UBS, and does not evince evidence of any but the most cursory and half-hearted attempts to narrowly tailor the relevant laws and regulations.
But no one takes even a cursory glance at the motivations of the people who promote this demonisation. Are they driven by a genuine desire to promote the country’s interest, or by baser, more selfish motivations? The strongest support for Japanese American internment came from the white farmers who had to compete with them — and who would go on to buy up all their assets on the cheap as they evacuated. From Korematsu v. United States:
Special interest groups were extremely active in applying pressure for mass evacuation. See House Report No. 2124 (77th Cong., 2d Sess.) 154- 6; McWilliams, Prejudice, 126-8 (1944). Mr. Austin E. Anson, managing secretary of the Salinas Vegetable Grower-Shipper Association, has frankly admitted that ‘We’re charged with wanting to get rid of the Japs for selfish reasons. We do. It’s a question of whether the white man lives on the Pacific Coast or the brown men. They came into this valley to work, and they stayed to take over. … They undersell the white man in the markets. … They work their women and children while the white farmer has to pay wages for his help,. If all the Japs were removed tomorrow, we’d never miss them in two weeks, because the white farmers can take over and produce everything the Jap grows. And we don’t want them back when the war ends, either.’ Quoted by Taylor in his article ‘The People Nobody Wants,’ 214 Sat. Eve. Post 24, 66 (May 9, 1942).
Who lobbied for the U.S.’ PFIC laws and regulations? Was it just tireless crusaders against tax evasion, or do you really imagine there was not a word of support from American mutual fund vendors who benefit from the giant non-tariff barrier against outside competition? And who do we see standing up for FATCA today, aside from the Tax Justice Network? That’s right, the good old “Compliance-Industrial Complex”, consisting of all the tax consultancies who stand to make billions of dollars from non-U.S. banks and governments — and ultimately the customers and taxpayers of those banks and governments, us — in fees for advice on how to build giant computer systems to comply with FATCA. Not to mention US banks with non-U.S. branches, which unlike their non-U.S. competitors are exempt from the most onerous provisions of FATCA.
And that’s not even getting into the xenophobic sentiments of people who are convinced that immigrants use foreign accounts to conceal their wealth while abusing the U.S. welfare system, and that FATCA, FBAR, and all those other intrusive provisions are the perfect tools to get those immigrants deported.
Escape through renunciation of citizenship
The culmination of this whole saga is much like our own: some interned Japanese Americans — appalled by the violations of their human rights and the even sadder fact that people they thought of as their friends and neighbours heartily endorsed those violations — renounced their U.S. citizenship as a way of freeing themselves from the internment camps and moving forward with their lives. As Japanese American newspaper Rafu Shimpo describes it:
According to statistics in the report of the Commission on Wartime Relocation and Internment of Civilians, those who answered “no” to both questions were a very small number of those required to answer the questionnaire. Of the approximately 78,000 who were required to fill out the questionnaire, approximately 68,000 gave an unqualified “yes” to Questions 27 and 28 amounting, to 87%.
Of the remaining 10,000, 5,300 answered “no” to both questions, amounting to 6.8%. The remainder failed to answer or gave a qualified answer. Of the eligible men who received induction notices, 315 refused to serve and 263 were convicted … Approximately 20,000 filed applications to be repatriated and expatriated to Japan or about 16% of the evacuees, of which 4,724 returned to Japan. Over 5,500 Japanese Americans renounced their citizenship.
The few who took this route were demonised as fascists and enemies of America even by fellow Japanese Americans. And of course today, those of us today who renounce U.S. citizenship — so we can become full participating members of the societies in which we actually live — are called cowards, traitors, tax evaders, and enemies of America who should be banned from the country and never permitted to return. Yet the numbers of renunciants continue to rise, with more than three thousand last September and October alone.
In a final little piece of historical irony, if you look at the the House and Senate roll calls for the final votes on the HIRE Act which made FATCA into law, a curious fact jumps out: every Japanese American in the 111th Congress — Mike Honda, Doris Matsui, and Mazie Hirono in the House, and Daniel Akaka and Daniel Inouye in the Senate — as well as most of the other Asian Americans, voted “aye”.
In seven decades, the guilt-by-association smear against people with connections to other countries has not changed one bit. The only thing that’s changed is who does the smearing: just like in other areas of American politics, the descendants of the previous generation of immigrants demonise the current generation; Asian Americans attack Asian immigrants. The people hardest hit are not the purported elite “fat-cat” targets, but we ordinary immigrants and emigrants living out our lives with unremarkable financial arrangements, like pensions and bank accounts, in the countries to which we are connected — arrangements which Homelanders regard as suspicious and “un-American” simply because Homelanders themselves don’t use them.
In short, the government and the people declare you are guilty of disloyalty until you prove to their satisfaction that you are innocent, and to get that proof they may rifle through your private life and require you to humiliate yourself on any questionnaire they demand.
This is a very interesting approach and historical comparison to underscore the injustice of FATCA/FBAR. Immigrants and emigrants are internees too but with little hope for reparations in the future. Thank you, Eric.
February 19, 1942 is also a “date which will live in infamy” and we should add March 18, 2010 to many such dates in American history.
Eric, thank you. What a great read — the similarities you point out are very chilling. History repeats itself.
impressive write. The quality is too impressive to be in mass media.
Green card holders and NRAs have their own modern-day WRA 126 too. They are supposed to (although very few do, at least for now) get a Departing Alien Clearance from the IRS before they are allowed to leave the US. Even for vacation or a business trip.
Form 1040-C includes questions on the market value of all assets you hold in the US and their location, your citizenship, and even details on whether your spouse and children will be left behind in the US when you depart. Up to now enforcement on this has been lax to say the least, with the IRS itself broadly unable to even measure compliance, let alone enforce it — my guess would be low single digit percentage compliance rate. Perhaps we’ll see more focus on this once the FBAR and FATCA jihad has (surprise!) failed to raise $280bn a year in new revenue.
Anyway, nicely written indeed. Have you considered trying to get this published in the mainstream?
Eric: this is a truly great post. Thanks for taking the time to write it.
When it comes to the USA, some things never change. Specifically its hatred of anything foreign and its incredible unfairness.
@Watcher, are you sure that they must do that even for vacation or a business trip?
This IRS link mentions that they need to do that when they leave “permanently, or for an extended amount of time”, without of course mentioning the amount of time.
“Before leaving the United States or any of its possessions permanently or for an extended amount of time, all U.S. resident aliens and nonresident aliens (with certain exceptions) must prove they have met all federal tax requirements. This is done by obtaining a tax clearance document, commonly called a “sailing permit” or “departure permit”, from the IRS.”
I could not find the penalty for failure to obtain that departure permit.
@Eric, amazing post, and research and analysis. I echo the urgings to see how to get it published elsewhere. That and the one on the FBI data re renunciants is probably not being written anywhere else.
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Mike Honda – Camp Amache
Doris Matsui – b. Poston, Arizona (in an internment camp);
Mazie Hirono – Mazie’s family was in Japan during the Second World War; did not know about her Uncle Akira being interned as a Japanese-American – no information on that.
Daniel Akaka – Chinese American
Daniel Inouye – according to him his parents were never interned, but could potentially have been interned after he left for military service at Honoliuli Internment Camp.
There are several others now.
Rep. Mark Takai – 4th Gen. Japanese-American, from Hawaii, his ancestors like Inouye’s were probably interned at Honoliuli.
former Rep. Colleen Hanabusa – both of Hanabusa’s grandfathers were interned, one at Honoliuli and the other at an unspecified camp on the Mainland.
To have those who have undergone the very meaning of “freedom violation” support a bill urging the ripping of financial information from expatriates (the somber parallels that were outlined by Eric to the similarities between WRA 126 and FATCA) is a is a spit in the face to all who have underwent internment, discrimination by classification and denial of rights (deemed guilty prior to fair trial).. In fact as an actual internment camp direct descendant. (My mother, grandfather, grandmother and uncles were interned in the Slocan Valley Internment Camp in British Columbia). In fact that they could betray the very ideals for which their fathers, uncles and brothers fought for or in Inouye’s case himself enrages me to the very core, because it spits in the face of all that is just and all that the 442/100 fought for. Loyalty doesn’t equate with taxes. In fact the very founding fathers of the United States were tax evaders themselves. Loyalty means that you are loyal to the principles that the nation was founded upon. And in that case American expats who defy the taxes imposed upon them by a greedy nation looking to expand their tax base are the most loyal Americans of them all. Remember the Boston Tea Party. It may come down to the Great Lakes Tax Party and a big giant FU to the United States.