Just posted by Innocente here. It needs to be called out for special attention.
Bloomberg: “Cost of Dropping Citizenship Keeps U.S. Earners From Exit”
In the past most clients who renounced citizenship were green-card holders, dual citizens or those who had been living abroad for many years, Christensen said.
Comment section is open!
Smells like another propaganda piece to discourage people from leaving. Kinda like those war movies where the Americans are always the “good guys” when they go blow up some country and take the resources.
I WISH I had the kind of money that these high earners have. I’m just a small fry, but I’ll never step foot in that country again.
Agreed. Definitely smells like propaganda. However, it never ceases to amaze me how fear, uncertainty, and doubt, can be used with such great effect to imprison people.
It can also be easily justified by the victim, just by simply saying, “Better to stick with the devil you know. …”
Little addressed, and probably unmeasurable, is the flip side of this.
To what extent does the increasing future cost of dropping US residency discourage potential immigrants into the US from arriving in the first place? Especially those who have already been successful outside the US?
And to what extent does it dissuade those already immigrated in from taking out US permanent residency or citizenship and committing long-term, and instead encourage them to stay short-term only and then just leave when the work visa expires?
It is a ridiculous article for the following reasons:
1. It is written from the vantage of point of Homelanders wanting to escape.
2. It presumes that renunciations are tax motivated. Very few renunciations are motivated by tax liability – it’s the life restrictions and reporting requirements.
3. When considering Exit Taxes, the issue is NOT so much what it costs, but what it saves!
4. No consideration at all given to U.S. citizens abroad.
It has become increasingly clear that the single best investment a young person can make in his/her future is to get rid of U.S. citizenship. Not even the “Stepford Wives” types can explain what the benefit of U.S. citizenship is.
Let the word go forth …
http://renounceuscitizenship.wordpress.com/2012/08/21/letter-of-a-canadian-businessman-to-his-dual-u-s-canada-citizen-son-on-the-occasion-of-his-high-school-graduation/
FBAR-Penalty-CA-TAX-JOURNAL-SMM-AVD.pdf … I forgot who mentioned this most recent piece from Moskowitz regarding the NW FBAR penalty but not to be picky take a look at the bottom Endnotes under 26. … it should have read for tax years 2003 through 2010 if applicable or 2004 through 2011 if applicable (for taxpayers who disclose after the due date (or extended due date) for 2011, the disclosure must include 2004 through 2011) not 2003 through 2011 if applicable …… details,details,details – even those “specialists“ get it wrong 🙂
….“It presumes that renunciations are tax motivated. Very few renunciations are motivated by tax liability – it’s the life restrictions and reporting requirements….when considering Exit Taxes, the issue is NOT so much what it costs, but what it saves…..“ sorry but @ USCitizenAbroad I have to be honest here …. for me it is mainly tax motivated 🙂
@ Mike
Well, you are one of the few then. You must be living somewhere where U.S. taxes are higher.
Also, the article you are referring to found here:
http://taxattorneynews.moskowitzllp.com/post/2013/02/20/A-Closer-Look-at-the-Non-Willful-FBAR-Penalty.aspx
may have a huge (unless I am misreading it) mistake at the top of page 7 where the author says that the non-willful penalty can be assessed if there is “reasonable cause”. “Reasonable cause” is a complete defense to the non-willful penalty. So, this article has (it seems to me) got some problems. Could somebody else look at this and confirm that I am reading this properly. But, I am tired today, so maybe I am misreading it.
@ USCitizenAbroad…. yes US taxes are higher and for 2013 A LOT HIGHER !
they are talking about IRM , Normal FBAR Penalty Mitigation Guidelines for Violations Occurring After October 22, 2004 – Per Person Per Year …. which is correct –
with reasonable cause NW FBAR penalty mitigation without reasonable cause W FBAR penalty mitigation.
Good comment by Patric Hale…
PBHale 2 minutes ago
Here’s a thought: How much of any of this would be necessary if we had a President who knew how to manage a balanced budget? Answer: NONE! The first indication of economic and political failure is when a government begins erecting walls. Having lived in West Berlin as a student for 3 years during the height of the Cold War, I know quite a lot about political walls. After having visited many countries around the world who had fiscal walls, particularly on currency exchange rates, each and every one of them were indications of political and economic failure by the regime in power. So it is, too, now with America.
How ironic that we are now discussing in Congress schemes for providing benefits for those who entered our country illegally and every scheme you can imagine to deny the rights of Americans to actually leave the country. Does this sound like “success” to you?
Finally, forced sale of assets is as un-Constitutional a law ever written by Congress. The 16th Amendment permits “INCOME” taxes only. They specifically deny the right of the Federal government to tax assets, as has been unheld numerous times by SCOTUS. There is no provision whatsoever that gives the right of the Federal government to force the sale of assets specifically to collect taxes. This is also against the amendment prohibiting illegal searches AND SEIZURES. The last country that tried to do this was Cuba – so 50 years later how is that working out for them?
For those of you “good riddance” gang who seem to think the net result of an individual’s efforts and hard work is the natural right of the Federal government to determine at will, you might want to revisit both our Declaration of Independence and Constitution of the United States and ask yourselves if these are the acts of a government that is supposed to be slave of the people and protector of their rights or the master of the people and the determinant of the extent to which you should be free?
Freedom should not be dependent on permission of the government – that is why we fought our war of independence.
and Roger…
RogelioC 6 hours ago
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The author states that it is really not worth it for most people to give up their US passports. But for the middle class person living and working abroad whose assets and income falls betow the exit requirrement, renouncing citizenship is quite likely the only way they can survive living abroad. With Fatca many foreign banks where they live abroad are shutting down their own and their joint accounts, without which they cannot survive, calling in their mortgages for immediate payment, etc.
No other nation on the face of the earth places its citizens living in in another country in such a straight jacket as this as to force them to renounce their citizenship. Many have no other choice because their spouses and adopted children are foreign citizens and cannot enter the US if they relocate back here having been forced by FATCA and double social security taxes to shut down their self-employed businesses abroad. And nobody in Washington can figure out why the US stands alone in the world with a massive $747 billion trade deficit.
Our tax laws go out of their way to punish Americans, who like the citizens of all of our successful exporting trade competitor countries, actually encourage their citizens to relocate abroad and sell our products that create jobs and prosperity back home.
Sweet Land of Liberty? It is certainly not the US with its unique citizenship-based taxation. Not even Cuba, with is current emigration policies, requires its citizens living abroad to pay Cuban income taxes or makes it impossible for them to have a bank account in their new country of residence..
@ Just Me
That’s an excellent comment by Patric Hale (PBHale). I’ve already been through the comments with my quiver of “up arrows” (or “likes”, whatever) but I’ll go back in with another arrow for that one.
@ All
Please don’t miss this chance to support comments at Bloomberg by Swiss Techie, RogelioC, AJBaker, Samuel Clemmons, HDaryl and LongShortman (hope I didn’t miss anyone there). And now this one by PBHale too.
and just for good measure, I put up one also…. might as well, eh?
It is a sad state of affairs, when U.S. Citizenship has become a “Tax, Form and Penalty” club. The message being sent to the rest of the world, is one of “buyer beware”.
When you take on US Citizenship, it comes with unique and onerous member requirements, including a BIG Exit Tax, if you decide that membership no longer meets your needs. Congress has also heaped on FBAR and FATCA reporting requirements too.
If you are an American by birth lottery, you are stuck with it. It is what it is. If job opportunity or family relations takes you abroad, just remember that you are US tax chattel until you die, or give up your Citizenship. You better learn the rules and regs on what it means to be a “Covered Expat” to avoid the Big Exit Tax on world wide ”mark to market’ assets. You need to do your own ‘cost vs benefit’ analysis of what it now means to be an American.
If you are choosing to come to America because you think there is something called “The American Dream” and freedom and opportunity behind the “golden door”, I would just encourage you to do your own due diligence about future compliance costs and exit fees should you decide you want to return to your homeland later.
American Exceptionalism comes with a cost and it could be a one way street! Little did you know what those words on the Statute of Liberty actually meant:
“Give me your tired, your poor,
Your huddled masses yearning to breathe free,
The wretched refuse of your teeming shore.
Send these, the homeless, tempest-tossed, to me:
I lift my lamp beside the golden door
but don’t exit here, when you are no longer poor!”
@Em…
I just finished reading all the comments and giving all of those the up arrow too. Some pretty good points being made.
@ Just Me
And I just went back in and gave yours an “up arrow” too. 🙂
@USCitizenAbroad …..did you see this regarding the application of a willful penalty : http://americansabroad.org/files/2413/5492/0434/thirdtimesthecharm.pdf
@Mike
Yes, I saw that. Here is an analysis of the Williams decision at the time it came out in July.
http://renounceuscitizenship.wordpress.com/2012/07/23/williams-case-reversed-willfulness-no-longer-means-willful-judges-legalize-irs-tyranny/
Sooner or later this issue will be going to the Supreme Court which will not be good for the government. You know what they say: Tax issues are too important to be left to the Supreme Court.
The comments just keep coming on this Bloomberg article and my “up arrows” are flying. Here’s another humdinger by PBHale (Patric Hale) …
For all of you “good riddance” guys, let me put this into a domestic context that MIGHT explain it:
Imagine you live in California, the state with the highest state income taxes in America. You decide to move next door to Nevada that has no state income tax. Now how would you feel if CA says, “we don’t care if you’ve left our state, we are going to impose our taxes on you anyway!” Suddenly you get a bill from the CA Revenue Service. But before that even happens, and before you even leave CA to move to NV, the state actually imposes an exit tax of 30% on ALL of your belongings or they won’t let you leave. And if you still have any property in CA, they consider it sold and charges you income taxes on THEIR valuation on the day you want to leave. If you don’t pay, of course, you are not “permitted” to leave and move to Nevada. Do you think that’s fair?
Now you’ve submitted to their highway robbery and paid over the money they demanded and move into your new home in NV, thinking you are finished with CA. But wait – not CA says, we don’t care where else you live. Once a Californian, ALWAYS a Californian! So they tax you on your income even though you no longer live in CA, and, of course, because NV has no income taxes, you now must pay ALL of CA income taxes.
Now imagine that in order to make sure you keep paying CA, CA forces NV banks to turn over to them the bank account details and balances of every former resident of CA or that bank will be penalized 30% withholding on all of their dealings with any CA entity. And because CA is big and powerful, and NV needs their tourist dollars and access to CA ports, CA forces the state legislature of NV and the governor to agree that NV will inforce CA laws on NV residents. How are you feeling now?
Wait, we’re still not done. So you put up with this chicanery because things are going well for you in NV. You decide to sell your NV house and buy a new one. Suddenly there’s a knock at the door and it is a CA Revenue Service agent congratulating you on your new home but he presents you with a CA capital gains bill for what you made on the sell of your previous home – both, of course, were in NV not in CA at all.
We’re not done yet…. While you’ve been working in NV you have been saving money in a retirement account each pay check that, it being NV, isn’t taxed at all. Then there’s that knock on the door again from CA demanding that you pay ordinary income taxes to them on those retirement savings because they consider it income because it doesn’t comport to CA definitions of tax-exempt/deferred savings. How are you feeling now?
Of course, all of these impositions by CA come with the myriad of rules, regulations, and multi-copied, layered forms to fill out, each carrying a fine of $10,000 if not filled in correctly. You have no chance whatsoever to do this yourself without risking multiple $10,000 fine, so you have to pay an accountant at least $2,000 just to fill in the forms. And if he/she makes a mistake, YOU will still be charged the fines. Oh, yes, I forgot – if CA believes you made a deliberate mistake, you are subject to a 50% forfeiture of your assets.
So how do you feel about being from CA now? Does that make you “proud” of that state?
Sadly, we’re not finished with this very real parable… Now imagine that your parents were living in CA when you were born but moved to FL – another state with no income taxes – when you were 1 years old. Now imagine that you are 30 years old, settled into a career and life in FL having never lived anywhere else but FL, but there is that knock on the door again. CA tracked you down and tells you that because you were born in CA you are liable FOR LIFE to continue to pay CA income taxes. You, of course, protest – too bad! You are not “permitted” to deny your CA birthright unless CA decides to let you. And the only way they’ll let you do that is by charging you 30% on the value of ALL of your assets, charge you a fee for applying to let you out, but will refuse to let you do so if the reason you are doing it is because you object to their entire cockamamie tax scheme.
Of course, instead of having moved from CA to a no-state income tax state, you move to, say, IL then CT, then NY then FL, CA will follow you to each and every state and continue to impose their scheme on you. They make allowances, of course, for the taxes you paid in each state, but because CA is the highest tax state in the country you will still have to pay them something. And, of course, the filing and potential for fees increase, the complexity increases along with your uncertainty. You are as trapped as any fly that fell into a spider’s web!
Now it dawns on you: You have an obligation to pay taxes to another state where you don’t live and you receive absolutely no benefits at all for doing so. So what are you really paying for? Why the “privilege” of having one time been a resident of CA!
Some of us Americans believe the purpose of taxation is to pay for services from our government that we receive in return, not simply the privilege to pay taxes. Is this the America you REALLY think represents freedom?
sad. It is an aside from your real point, but actually, I talked to a guy, and California indeed does that kind of sh_t.
Good parallel.
I can’t get that comment section to work on my computer—it has crashed me 10 times today.
As far as I can see “the light” is pretty dim. 😛
@Em…
Patric, when he finds time to comment, is really good! Thanks for highlighting that one, and I see the Likes have soared!
@Em…
I just put this one by Patric up on a few Linkedin groups… Like here and here and here
Just spreading ‘the light’ around a bit… 🙂
Lots of really good comments over there, especially PBHale’s analogy about leaving California.
Hopefully some Bloomberg reporter will ‘get it’ after reading comments like that someday and write the real story about how unjust citizenship-based taxation is for Americans already living abroad and that’s what’s causing renunciations and a major factor fomenting resentment toward the U.S. But that would require thinking and real work.
and there is another article on Bloomberg business week that has generated some good retorts to someone called RayLeigh who thinks Rogers description of Citizenship tax impacts on ones ability to take a job in Korea boil down to paranoia, fear mongering and disinformation. I think the come backs have probably silenced him.
@EM… should put this on Mopsicks blog……. he is from California 🙂
It would be interesting to see how he spins this one !
I don’t know about the rest of you, but with my slow Connection and new laptop, these articles that connect in to my Diskus account slow my computer to a crawl–then make it crash. McCaffee doesn’t detect any issues.