The deadline has now passed to submit comments to the Ways and Means Committee on Tax Reform. Comments are posted here. There were (and hopefully continue to be) a large number of letters from U.S. citizens abroad. Who knows what will happen? I am hopeful that Shadow Raider’s optimism will “carry the day”. For those who missed his comment:
Shadow Raider says
@Just Me, You can keep your hopes up. The reporters who wrote that article on The Hill probably contacted both chairmen of the international tax reform working group, Devin Nunes and Earl Blumenauer, and I suspect that the Republican aide who responded is the same Devin Nunes’s assistant whom I met last year. Yes, he defends citizenship-based taxation, but he is the only aide that I met who does. His opinion is not representative of what Congress thinks about the subject, so I think we can safely ignore his comments. All other aides that I met were supportive or at least open to changing the tax system to one based on residence.
Speaking of congressional aides, most of them are young, as you noticed (20-40 years old), highly educated, motivated and friendly. Also, most of them have traveled abroad, and they live in or around DC, which has a substantial international presence. Perhaps because of these characteristics, they are open-minded about the rest of the world and are interested in new ideas. A 150-year old policy that restricts international mobility is not something that they support. I think citizenship-based taxation is not going to survive much longer.
Also, Earl Blumenauer responded himself to the article on The Hill, and his response seems positive. I think I finally found the point that makes Congress care about the subject: thecompetitiveness of Americans for jobs abroad. When Bill Alexander proposed expanding the FEIE to all kinds of foreign income in 1992, he titled his bill “Overseas American EconomicCompetition Enhancement Act”. When Jim DeMint and Gregory Meeks proposed making the FEIE unlimited in 2007, they titled their bill “Working American Competitiveness Act”. Earlier this year, Dave Camp wrote that tax reform is needed to make US workers more competitiveinternationally. Now Earl Blumenauer mentioned something similar. The Senate Finance Committee scheduled a meeting on “international competitiveness” for next month, and I don’t think they are just talking about corporations. So congressmen don’t care much about logic, simplicity or fairness in the tax code, banking problems, exports or additional tax revenue, but they don’t want Americans to be undesired for jobs outside of the US simply due to their citizenship. In the past, this problem could be mostly solved with the FEIE, but today, with FATCA and the enforcement of FBAR penalties, even excluding all foreign income wouldn’t be enough. For Americans and foreigners to be considered equally for jobs abroad, Americans abroad can’t have tax or financial reporting requirements to the US either.
The Joint Committee on Taxation should say something about the subject in its report on May 6, and the Senate Finance Committee should also say something after its meeting on May 23. I think we’re in for a pleasant surprise.
Here are some comments that really captured the life of “U.S. citizenship abroad”.
Somebody trying to live an “every day life” in Canada
I suspect that #americansabroad in Canada can relate to this waysandmeans.house.gov/uploadedfiles/… – Accurate portrayal of the burdens of US citizenship
— U.S. Citizen Abroad (@USCitizenAbroad) April 17, 2013
This is an excellent submission from a U.S. citizen in Canada who is nowhere near retirement and is faced with the prospect of trying to live and build a life. What is particularly interesting in this one is that she suggests that many U.S. citizens abroad are afraid to write because they are not compliant.
And from a person at a similar stage of life in Switzerland
Excellent description of how “US citizenship abroad” is a punishment and why #americansabroad must renounce waysandmeans.house.gov/uploadedfiles/…
— U.S. Citizen Abroad (@USCitizenAbroad) April 17, 2013
The complete community of U.S. citizens abroad owes a great debt to those who are writing to the Ways and Means Committee.
Not all letters have been posted! (at least yet)
For those who have not been following this discussion, comments on this blog reveal that at least three people have written letters that have not been posted. Hopefully they will show up. But I am beginning to wonder (some were clearly written before some that have been posted). Perhaps those who wrote and find that your letters were NOT posted should post them here.
In any case, many helpful letters have been posted.
I read it and didn’t know whether to laugh or cry – so did both
It’s Friday and the censor trolls are still munching on my submission. I’ll give them a call in about 2 weeks to see what happened and report back.
Another dozen submissions posted today (Friday) but Andrea Tylczak hit some pretty obvious (to us) nails on their heads. He had a rather thorough “don’t do” list for US citizens abroad which included get married …
“People do it, but if the potential spouses were aware that all their personal assets (earned outside the US) would have to be declared to the IRS they would think twice about marrying a “US Person”. Sometimes when the spouses find out about the US reporting requirements they get divorced.”
Animal — bravo and thanks!!
@AbusedExpat:
Thanks very much for your work in sifting through so much information to abstract these powerful highlights into an accessible format. They paint a very moving portrait of what faces us.
(I’d love to see a direct link to your abstracts from the home page if that were possible, so that new site visitors could be exposed to the power of these statements early on.)
@Sad-in-UK
The abstracts I posted only scratch the surface. Many more submissions have been made since I went through the ways and means list.
I just noticed I forgot to put quotation marks around the 2nd, 3rd and 4th postings of abstracts. Perhaps somebody with editing capability can put them in.
My censored submission was far too polite and formal. Americans abroad former Americans deserve an apology from the US government. Whenever the US government talks to anyone outside of US jurisdiction, its first words should be: “I’m sorry…”
Here’s the Swiss press writing on the topic:
“Harte Zeiten für US-Expats in der Schweiz”
http://www.aargauerzeitung.ch/schweiz/harte-zeiten-fuer-us-expats-in-der-schweiz-126421968
@SwissPinoy,
I have been thinking often lately what you said, ‘Americans Abroad (not that I really think of myself as one having left as a toddler) deserve an apology from the US government’.
What an understatement! This is why I refuse after 50 years of living in ignorant bliss of US citizenship-based taxation, to bend over and comply. US owes ME. I don’t owe US.
I meant ‘Americans ABROAD’, not Homelanders, are owed an apology.
Here are some more Submissions:
From Sweden:
“Saving for retirement has become impossible for Americans abroad – The foreign equivalents of American IRAs are not recognized by the IRS so it makes no sense to open one in my country of residence. Saving in a US-based IRA makes little sense as the money has already been taxed in my country of residence.”
From Switzerland:
“…it would be good for the US economy for Americans to be able to live globally with out punitive and restrictive tax regulations that make us more expensive, which put us at a competitive disadvantage. This cannot be good for US exports and US entrepreneurship.”
From Switzerland:
“I was attending a part-time MBA program in Switzerland. One of the many goals of an MBA student, including mine, is to start their own business. So, when I entered into a business plan group to draft a potential business proposal, (which all members where non-US citizens except for me), I was told that they preferred that I withdrew my participation due to the FATCA compliance burden and account disclosures that I would face and be placed upon the group if the business plan was implemented.”
From Germany:
“…I contemplated the idiocy of it all: why did the US government want to waste its resources processing forms from me, when it was a foregone conclusion that I would owe no money? And why did the US think it ought to tax me since I did not receive any services or nor was eligible for any benefits, the way a resident of the US would be? It seemed that the Micky Mouse tax form filing exercise was designed to punish me for living outside the US.”
“Why did Congress pass FATCA? Was it because they wanted to make life outside the US impossible? Was it because they were ignorant of or simply did not care about citizens living abroad? For whatever reason FATCA was passed, it became obvious to me that my elected representatives were not representing me at all and probably never would. I felt betrayed. That’s when I decided I had to become a German citizen and renounce US citizenship.”
From Somewhere:
“For a long time I have felt that I am being unfairly treated. I have paid my taxes in my countries of residence, according to their rules. And I have filed a US tax return every year as well, as required based solely on my citizenship, unlike virtually any other country. I have had to pay high fees for tax preparation services, given the complexity of the US return for Americans living abroad.”
“Many years, I owed no US taxes, nevertheless I still had the burden and cost of the tax return preparation, and in the process spent nearly twice as much personal time in tax return preparations. In the years when I did owe US taxes, it was mostly a case of taxation due to differences in tax systems.”
And here are some more:
From Germany:
“….citizen-based taxation places an unfair burden on U.S. citizens living abroad. Every year I have to submit two tax returns, one to Germany and one to the U.S. Add FATCA to this tax system and you have a grossly unjust regulatory framework that punishes Americans for living and working abroad.”
“In casting a huge net to catch tax evaders hiding money abroad – whom I believe overwhelmingly reside in the U.S., not abroad – the IRS has created two classes of U.S. citizens: Those who live at home, who enjoy all the freedoms of being an American and those who live abroad, who are subject to punitive tax filing requirements and have fewer rights than their counterparts at home.”
From Switzerland:
“…my personal difficulties have recently extended to having difficulty opening even basic bank accounts for my two year old son, who is also a dual US-Swiss citizen. It puts me in an extremely unfortunate situation, whereby I need to seriously consider revoking my son’s citizenship so that he is able to have normal bank accounts to save for his future education.”
From France:
“what the vast majority of Americans living abroad wish for is to be treated by the United States government the same way that every other country in the world treats their own citizens living abroad: residence-based taxation, not citizenship-based taxation.”
“As I understand it, there is currently only one other country in the world which taxes their citizens living abroad; Eritrea. This has been condemned as a human rights violation by the UK, Canada and other Western nations. It may sound like hyperbole, but the phrase “human rights violation” rings true, and reflects the feelings of a great many Americans living abroad regarding double-taxation, FBAR and FATCA.”
From Switzerland:
“Citizenship based taxation leads to discrimination against Americans living abroad. Because we are taxed by Switzerland and the U.S., there is no incentive to invest in our pensions, pay off our mortgage, make charitable contributions, or even to save for the future, all of which are normal activities for Americans living in the U.S. Under citizenship based taxation, what is tax deductable or tax deferrable in one country is not so in the other.”
From Canada:
“When you hear of the increasing numbers of people renouncing their U.S. Citizenship please have sympathy for them that their situation has become so difficult that they have been pushed to the extreme of renouncing their citizenship. A better idea than sympathy is to switch to Residency based Taxation!”
From Switzerland:
“In recent years, especially following the creation of FATCA, I have sadly witnessed the international standing of the US become adversely impacted. Foreign governments and financial institutions view the unilateral imposition of FATCA and Citizen Based Taxation by the US very negatively. They are responding by divesting their investments in US securities and refusing to do business with American citizens living abroad given the highly expensive and burdensome cost of complying with FATCA.”
More than I want to see my own submission appear there, I would love to see the AICPA’s!
Arrgh. I just noticed some double-entries in my earlier posts of submissions. Perhaps an editor can remove the redundant ones?
The quoted comment from Germany sums it up well. Since the objective of Citizenship-based taxation is to insure that Americans abroad pay inome taxes to “somebody;” it really does not matter whether to the foreign country or the US, it is indeed a punishment tax directed at US citiens who have the audacity to live and work in a foreign country, as it it were some sort of a crime. Generating revenue for the US Treasury is clearly a possible secondary consequence of citizenship based taxation, but not its principal objecdtve. From Nina Olsen’s report to Congress 82% of the US tax returns filed by US persons abroad produce zero revenue for the US Treasury.
The IBS Consulate Report Directory contains a great compilation of anecdotal accounts from ex-pats who went through the process of renouncing or relinquishing US citizenship.
Perhaps ACA would consider putting on their website a compilation of anecdotal accounts of ex-pats writing to the ways-and-means committee. Such a compilation would provide an indisputable account of the unjustified punishment that honest, hard-working Americans abroad are receiving from the homeland government.
The voices of American ex-pats need to be heard load and clear and need to be heard now while tax reform is on the table. ACA is the closest thing ex-pats have to representation — no money, no votes, just determination to live normal lives.
and don’t don’t forget to send them a few Crumbs for membership
Over 20 more international submissions went up on the Ways and Means site today. I’m happy to say bubblebustin’s excellent report is among them. So many people did such a great job of presenting their cases that I can’t imagine anyone not wanting to take remedial action on their behalf. So c’mon Nunes and Blumenauer — get with it!
For one Canadian couple the cost of compliance is outrageous. I had to look twice to see that it really is $50,000 ($12,500 per year). Yipes!
“The amount of taxes we pay compared to the accounting fees we pay is absurd. Just taking the last four years into account, our total taxes paid were just under $1800.00 and our BDO Canada fees were over $50,000. We can’t imagine what the cost must be for the U.S. government to process our returns.”
@FromTheWilderness
That is a good idea. I have forwarded it to the Executive committee for consideration. I think there were some similar thoughts percolating there, and these snippets here really help…
Pessimism grows over prospects for bipartisan tax reform deal
@JustMe, what you say is so true. However, we must recognize that Congress in general remains indifferent to the plight of the US citizen who has the audacity to live in a foreign country. I fear that to many of them their attitute is “they brought this on themselves.” They could be living in the United States where they would have none of the problems. After all there are hundreeds of thousands, if not millions, of foreign citizens who are clamouring to be admitted to the US on a path to US citizenship
From Canada:
“Does the US really need millions of citizens living outside its borders who are confused, bewildered, hostile and angry at their country!”
From Switzerland:
“I have lived in several countries in the past thirty years and I have acquired three additional nationalities. None of the other countries in which I have citizenship require me to file an income tax return unless I am resident there during the tax year.”
From Somewhere:
“For overseas Americans the outcome of these laws has been to demand a massive outlay of time and expense, even when no tax is owed, and to produce a constant fear of disproportionate penalties.”
From Somewhere:
“I have worked for non-profit organizations all my life earning sufficient but not luxury income. However the inconveniences of foreign earned income tax filing, and the FBAR make my life rather tough. In addition to paying taxes in my new home country and paying accountants here to do my paper work I have to pay a US based tax accountant every year to file my papers when I don’t really have anything worth declaring.”
From Somewhere:
“I think that the USA, as all other countries in the world, should not tax its citizens who live and work in a foreign country. We are not the same as Americans who live in the mainland who hide investments in foreign countries to avoid paying taxes. Yet we are being placed in the same category: one size fits all, when it does not.”
From Switzerland:
“In Europe especially, it is disadvantageous to be an American or work for an American-based business simply due to tax compliance (not residency or passport) issues – this makes us all worse off.”
@BubbleBustin
Congratulations on a truly outstanding submission to the Ways and Means Committee
Hope you have also sent this as a submission on the IGA issue to Ottawa.
They can’t even pass common sense legislation that extends background checks for the purchase of firearms. How can we expect that they’ll agree on a much more controversial rewrite of the tax code.
Nonetheless, I think it can be possible to make it simpler without adding more revenue. I don’t really agree with the last sentence of the quote Just Me posted. The problem is that they’ll never agree on who will have to give and who will benefit from the change.
I am pessimistic that anything will happen until both the house and the senate have a majority in a single party.
@Em, USCitizenAbroad
Thanks so much! I was beginning to think that my submission had too much of an ‘international’ flavour for them.
I had to actually look back at what I submitted to Canada’s Dept of Finance to remember what I written to them. I sent them something other than what I had submitted in the Pre-budget survey, as the survey had been sent to them already. Question begs, is the Dept of Finance closed for comment regarding IGA’s now that they expressed a commitment to GATCA?
@Roger
I’m afraid that you are probably right about the mindset of Congress and many Americans. We are thought of like draft dodgers, but unlike them we have no Carter to help us heal our psychic wounds by granting us a workable amnesty. Unfortunately, circular reasoning has many Americans believing that we must be rich in order to afford to do all of that filing, and worse, must be guilty of trying to evade taxes because the IRS requires so much reporting of us. The fact that we would renounce as a result just proves our lack of loyalty! Can we ever win when dealing with this kind of mentality?