By James M Bennett on 05/15/2013 in fair tax
We FairTax supporters have been contacted by two different gentlemen who are United States citizens who live abroad. One lives in Paris, and the other lives in Tokyo. Both support the FairTax. Why should six million US expatriates support the FairTax? And why does their support matter?
Expatriate Americans are unique in the world. United States citizens are subject to income taxation on their worldwide income even if they have no home in the United States.
This curious rule puts the United States in an exclusive club of countries. As best we know, the only other members are North Korea and the Philippines. One might understand the Philippines, who inherited our tax code when they became independent from us in 1946.
By contrast, a French citizen, or a Japanese citizen, who lives in the United States and who has no home in France or Japan has no income tax obligation to France or Japan. The French and Japanese expat, as well as the US expat, is subject to the full body of law of the host country.
Why then, should a US expat be required to file a federal tax return in addition to the return required by the host country? Is this requirement fair?
To be sure, there are provisions in the Internal Revenue Code to avoid technical double taxation. There is also a so-called “foreign earned income” exclusion of $95,100 (but that amount counts in pushing remaining income into higher tax brackets). However, the US expat gets the worst of both tax worlds.
I read the article and of course, the author’s points are sound and well-explained. However, I have found that homelanders simply refuse to except logical reasons for a fair tax in terms of expats. For themselves, they are all for it, but the narrative there has so poisoned their perceptions of us that even a very clear concise article like this sails over their heads without touching their thought processes at all.
People in the US really almost see citizenship there as something people should pay for whether they live there or not. Anything else sets homelanders to shrieking. Expats are rats that jumped ship. Rich people with entitlement issues. Criminals. Nothing based in reality but there you go.
I don’t see us being allowed to live our lives outside the boundaries minus the extortion pretty much ever.
Just a correction. The Philippines discontinued citizenship taxation in the early 90’s. So that only leave Eritrea and Northr Korean whose people can’t leave anyway so it is moot.
@Yoga Girl, Americans are generally not that bad. Most are good people with good intentions who do not yet realize why their views on the issue are in need of tuning. One just has to kindly and patiently explain it to them, one after another for all the 300 million. I find that all Americans oppose citizenship-based taxation, but do not yet realize why.
@freddy, I posted a comment to the article with that correction.
I’ve really don’t know anymore how resident Americans think about expats. I bet they have a hard time comprehending it, especially if it involves a different language and culture.
The only thing that I can tell is that when there is an article on someone renouncing, there is always someone saying “Good Riddance” so obviously they hate it that someone doesn’t want to play on their team anymore.
Swiss, I would like to believe that but even those people who know me personally have a very hard time processing the idea that expats don’t have an obligation to pay some sort of fee in the form of tax to the US. Even when I explain it to them and I can tell that my points have turned on a light for them, they still cling to the narrative. which is that I am lucky to be an American and that citizenship is worth whatever I have to fork over to maintain it. It’s difficult to remain optimistic in the face of family and friends who agree that I am not a tax cheat on the one hand but still think I should fund their sinking ship just because.
Standard response is that you have the unique protection of the US govt, whereas the Germans and Canadians and Japanese who work beside you are just people that profit from not paying union dues.
The US today is the same as Japan of the 1800’s and as China was when it lost its dominance.
Every country thinks it is the greatest, and every country finally gets what it deserves based upon its actions.
Yoga girl, and when you mention to these people that something like 60% of Americans living in the United States pay no federal taxes, despite being citizens, and many of these are receiving major benefits from the Federal government, whereas you as an expat receive none, how would such people respond?
Oh, Yoga Girl, don’t let them put you down! You do have a valid point. Around the time I renounced, one brother vanished from facebook, my stepmom said “it’s the taxes”, another brother said: “Americans think you have to pay”, my dad said: “no comment” and my sister listened but her kid vanished from facebook. One friend said: “I understand” and another asked: “can you still visit?”. All this and yet, I never owed a dime of US taxes outside of US jurisdiction (the IRS even still owes me $700 from 2000 and CA owes me 1 unemployment check of $220), and I renounced since all of my financial services reject(ed) US persons.
As such, I don’t really know what they think, didn’t push the issue and don’t care. My world is in Switzerland and anyone who wants to visit is welcome.
What matters is that of the thousands of comments that I’ve posted on the issue for personal entertainment, maybe 5 or so thanked me. So, with 5 down there is now only 300+ million left to go. Gotta take it one step at a time. I’ll probably eventually get bored and pull the plug on my US heritage, but for now, I’m still typing! 🙂
@SwissPinoy, wow, your family is not very understanding… What would they have wanted you to do? Divorce, pack up and go home? Renounce to your right of owning a house? That’s ridiculous.
@freddy, the North Koreans don’t pay tax. They only have to make varous “donations”.
Petros, I mentioned that frequently back before the last POTUS election and lost a lot of FB “friends” (they were mostly liberal journalists and bloggers) b/c they thought I was shilling GOP lies. It really depends on who you mention it to, however, and how the great American narrative is viewed by each one. Interestingly, my right wing friends (some of the wing nut so even) have less of a problem understanding the issues I face then those who are supposed to be more open minded.
Swiss, my family only worries that we won’t be able to visit and as much as I explain, they don’t think the compliance stuff should be an issue. It’s a huge issue b/c hell will freeze solid (and that will be quite the feat b/c it’s a mythical place) before my husband allows any of his financial info to be reported to the US. I was telling him about the new requirement that FBARS by filled online and his comment was “Are they retarded?” I am not worried though about losing family or real friends. I just weary of how thick headed they can be about something that’s really quite simple.
@Chris
I’m likely going to deal with the same issue with my family once I relinquish. I hope at least a few of them might understand, but I have serious doubts on that.
Why am I certain that it will not go well? It’s because not one of them has ever bothered to pay me a visit since I’ve landed nearly a year and a half ago. So much for that family love, huh?
I have found quite the opposite reaction with both family and friends. I was so freaked out about the possible total penalty I could face and when they heard that figure and the lack of any reasonable justification for it, they all supported my decision. Especially as they could not agree with the idea that my Canadian husband’s info/accounts were any of the IRS’ business. I approached it from FBAR only and it seemed to work.
There have been a few homelanders I recall from commenting at various sites/articles who at least tried to understand. But it does feel like a generally hopeless exercise. Just Me and Swisspinoy are tireless warriors at this!
@Chris, it’s a rather long, complicated story. My US family has been in conflict since my parents divorced 30 years ago and I’ve been rather independent since I was 13. So, for the half of my life that I spent in the US, I moved around frequently and became friends with many people while commonly being misunderstood with my European culture. At home in Switzerland, the renunciation boosted my status among the locals and all of this is irrelevant to my home in the Philippines. The advice of my spouse and offspring is to forget America.
I’m not even going to bother to tell my US relatives. We exchange letters and the occasional phone call and if I’m lucky I can afford to go back and visit them every few years. But they’ve got enough on their plates trying to make a living and keep a roof over their heads for me to bother them with this. Apart from a brief mention of FATCA I haven’t told them anything and see no need for them to know anyway. If I get to go back and visit again I doubt the subject of citizenship will even come up; we’ll have too much other stuff to talk about.