In the midst of all the frenetic, shallow coverage about “tax dodgers fleeing the country”, it’s nice to see that at least one newspaper ran a front-page story which honestly portrays the various motivations that Americans abroad had for leaving the country and the reasons that they ultimately cite when they take the big step of giving up citizenship. Joan Zyda of the Los Angeles Times wrote an in-depth article: “Changing Citizenship — Why Americans Go”; as the subhead in one paper put it, “More Citizens Switch Allegiance; Tension, Politics Tied to Giving Up Citizenship”. It covers all the various reasons: tax savings do get mentioned in a couple of paragraphs among its thousands of words which took up nearly an entire broadsheet page, but flight from U.S. militarism, government harassment of political activists abroad, and the desire to become a full member of another society receive far more emphasis.
Surprised you didn’t catch this one on Twitter or Google News? Sorry, I failed to tell you in my first paragraph: this article is from four decades ago.
Overview
I extracted most of the article from a hasty OCR job of a rather badly-done scan of a library microfilm (I didn’t pay for the ProQuest Archive version); any errors or discrepancies in the cleaned-up text are my fault, and the full article is far more extensive than what I’ve quoted here. Edit: guess I should have done more digging before I posted; I was able to find a readable and accessible version of the full article in the Google News Archive here; I swapped the link above for this one.
I’ll start with the statistics, which Ms. Zyda presents in cumulative form. Even this small detail contrasts with today’s articles, which never mention total numbers over any period of time greater than a year. For the record, there’s been 15,063 Published Expatriates up until 2013, if you include that Joint Committee on Taxation report on 1994–1995 — though this figure includes duplicates as well as nonsense entries like Kfar Saba and RBC Reinsurance. There’s an even larger number of 22,908 renunciants added to the FBI’s NICs system since 1998, suggesting that a total of about 40,000 people became ex-citizens by renunciation or relinquishment over the same period.
The State Department reports that nearly 10,000 Americans have renounced their citizenship since 1951. Another 71,900 Americans lost their citizenship — either unknowingly or deliberately — by acquiring a foreign passport. There were 200 renunciants — as they are called by the State Department — a year from 1951 to 1963. From 1968 to 1973, the number has jumped to almost 500 a year. Government officials predict a new peak in 1974. The rise, they say, will continue despite the Congressional abandonment of the Selective Service system and the obvious reduction in draft dodgers.
Ms. Zyda’s article mentions something which is often forgotten about the allegedly involuntary relinquishers of the mid-20th century: not all or even most of them were necessarily like the plaintiffs of Afroyim v. Rusk and Terrazas v. Vance, viewing their U.S. citizenship as a precious birthright that they’d go all the way to the Supreme Court to protect. Many others were indifferent or indeed excited that they’d lose U.S. citizenship as a consequence of their naturalisation elsewhere, and did nothing to hide it from the U.S. government. Note also that the above figure doesn’t include the other ways in which a person might choose to lose U.S. citizenship or get it stripped away: serving in a foreign military or foreign government, or swearing an oath of allegiance. We’ve previously pointed to articles stating that about 95,000 people lost U.S. citizenship between 1945 and 1969 through all the various methods possible.
Later on, after describing the procedure for renunciation which should be familiar to many readers here, Ms. Zyda notes:
Some consular officials say that because the renunciation procedure is so lengthy and complicated, it has deterred thousands of Americans. “You can’t just shed your American citizenship like an old shirt”, said a U.S. consular official in Rotterdam, the Netherlands.
An entirely unintended consequence of bureaucratic accretion, I’m sure.
Robert L. Kennedy, from California to New Zealand
As you get into it, the first interesting thing you’ll notice about Ms. Zyda’s article is that she didn’t slap it together primarily by talking to tax lawyers or government officials and at the end cherry-pick one sentence out of a much longer discussion with an actual ex-American for “balance”; she actually went out and wrote a proper human-interest story, getting in-depth details about the lives of multiple people she’s discussing before daring to make generalisations about them.
Robert L. Kennedy now calls the United States “your country”. When an American visitor stopped by his modest home above the Tasman Bay at Nelson, New Zealand, Kennedy told why he left the United States. “America was becoming a cardboard world. It was the commercialization of everything that finally got to me. That and the worry we wore going to obliterate each other with nuclear weapons.”
Kennedy, a former Calif. upholsterer, is one of the thousands of Americans who have given up their U.S. citizenship and opted for other countries. Most Americans do so quietly without fanfare and with only a few goodbyes … [he] blamed future shock as the main reason why he left the United States. “I feel things are going on there that are literally painful”, said Kennedy, who is 49. “And I’m not just talking about the assassinations. The pain is that the country has people backed into a corner so bad that there often have to be violent recourses.”
Kennedy first became enchanted with New Zealand when he was stationed there with the Second Marine Division during World War II. After the war, he returned to the United States and made his home in Lafayette Park, Calif. Years later he moved to New Zealand with his wife Lillian and three sons. They became naturalized citizens on Dec 14, 1964. “I could see all the things happening in the United States that people finally got around to worrying about 10 years later”, said Kennedy. “The kids were having practice drills at school about what to do in a nuclear attack and we were digging deeper and deeper in the basement.”
In the 1960s it was nuclear attacks, and half a century later it’s terrorism, but at the root it’s all the same: the government wants to keep you scared of the outside world and ever-grateful that you live under their protection in the Homeland. This wonderful policy has proven itself as an effective method of preventing the labour force from running away from their bosses, traitorously depriving American companies of their intellectual capital, and moving to other countries to seek a better environment in which to raise their children.
After settling in New Zealand, Kennedy ran for the Nelson City Council in the March 1971 by-election and finished fourth among 16 candidates. Seven months later he ran for the Nelson Catchment and Water Board on a strong environmental platform and won. His three grown children speak with New Zealand accents. Two of them, Tom (27) and Jeff (24), have married New Zealand girls and live in the country. Asked how he felt about the United States, a third son Scott (18), a university student, said, “It’s like watching a house on fire. We’re glad we’re not in danger.”
More than a year ago various commenters here expressed sharply divided opinions on recalcitrantexpat’s post advising young duals to renounce U.S. citizenship; USCitizenAbroad followed up on a similar theme a few months later with his Letter of a Canadian businessman to his dual U.S./Canada citizen son on the occasion of his high school graduation. Some felt that it wasn’t our place as outsiders to butt in on family debates, while others thought that parents’ biased or incomplete information could cause serious future trouble for their children.
This is the flip side of the debate that the quote by Robert’s son Scott brings up. Scott would probably have been a toddler when his father brought him to New Zealand, and just eight years old when he acquired Kiwi citizenship due to his father’s naturalisation. Basically, his father made a choice on his behalf, without his input, and I’m sure some Homelanders, whether in 1974 or 2013, would lambast his father for “forcing his politics on an innocent child”. Scott himself sounded very pleased with his father’s choice. Of course, he may not have been aware that under INA § 349(a)(1) as it stood at the time, he couldn’t automatically lose U.S. citizenship as a consequence of being naturalised along with his father until he turned 25, but he still had to register for Selective Service upon turning 18. I’m guessing no one in the State Department actually caught this, but under the letter of the law he had just thirty days to figure out how to renounce his U.S. citizenship before his draft registration obligations kicked in (though he probably would have been classified as 4-C).
Today it’s even more complicated with all the IRS paperwork issues. A minor who renounces can claim his U.S. citizenship back upon adulthood through a fairly simple administrative procedure (INA § 351(b), 22 CFR 50.20). But an eighteen-year-old whose parents chose U.S. citizenship for him because they wanted to “keep his options open”, but never filed his Form 8621s and 8938s, has just six months to figure out the far more complicated procedures for renunciation if he wants a free pass out of being deemed a “covered expatriate”. I suppose the IRS wouldn’t go after him if he later falsely certified under penalty of perjury that he’s complied with all his filing obligations for the past five years; unless he’s a wealthy heir he probably doesn’t have any assets to make it worth their time. But you never know — if Jack Reed had his way, Scott and everyone like him would be permanent exiles who couldn’t even go visit their U.S.-based grandparents.
Will Reed, world citizen
And other Americans have dropped their citizenship because they simply could not obey the laws of the land — or often, the laws of lands to which they moved. William Floyd Reed (24), a former first lieutenant in the U.S. Army in Vietnam, talked through his detention bars in Bangkok to an American visitor about the events that led to his renunciation of his U.S. citizenship. Reed’s cell in the substandard prison was dark. There were no lights turned on in the daytime, Reed wore dark glasses.
Reed, formerly of Parshall, Colo., said he got mixed up with the wrong crowd when he was in Vietnam. He said he engaged in various criminal activities. After an honorable discharge from the military Reed was arrested on his return to the United Stales by customs officials. They found a $100 counterfeit bill and a quarter-ounce of opium on him.
Reed told authorities what he knew about illegal activities in Saigon in exchange for a misdemeanor charge. He returned to Saigon as a free-lance photographer. He was accredited with a wire service giving him access to military transport and entry to bases. The U.S. military arrested him and turned him over to the Vietnamese on charges of smuggling, possessing false papers and carrying a weapon without a license. He was released and two months later the U.S. military picked Reed up again and put him in solitary confinement on similar charges, and said he was then turned over to local authorities. He said an American embassy official told him the embassy would pay his way as far as Bangkok if he would leave Vietnam voluntarily.
The lieutenant agreed and went and turned in his passport for the proper stamping but the embassy revoked the document. Reed then renounced his citizenship. He started making the rounds of embassies in Southeast Asia asking for travel documents or asylum when he was jailed in Bangkok for illegal entry. After some months of detention Reed wrote Garry Davis asking for a world citizen passport. Davis sent one and it sprang Reed from jail. The document also took Reed across a dozen frontiers with visas to France.
For what should have been such a major scandal — the U.S. military harassing a journalist in the midst of a war, with the apparent collusion of the State Department — it’s remarkably hard to find any further information about Will Reed. There’s a brief mention of him in this 1974 story about Garry Davis, and an acquaintance of his says that he eventually got French citizenship and ended his odyssey of statelessness, but got cheated in real estate deals gone bad. And that’s about all I’ve been able to dig up.
Reed’s situation is an example of a much larger phenomenon of which scholars have previously written: the U.S. passport as an instrument of political control. The State Department used its power over travel document issuance to ensure that Americans abroad either toed the party line, came back home, or stopped being American.
The Supreme Court has since deprived the U.S. government of the authority to cast malcontents out of the body politic in the name of the people, but of course the popular sentiment which supported the government’s use of that power remains in place: the U.S. public still believes that people who have settled abroad permanently are not truly American. The only difference is that they now express this sentiment through the tax laws and the IRS rather than the passport laws and the State Department: instead of doing the hard work of stripping troublesome expats of their citizenship, let them strip themselves of it. Higher operational efficiency, just like fast food restaurants which make customers bus their own tables.
An immigrant-turned-emigrant
At a time when tens of thousands of Mexican citizens are wading rivers and climbing fences to come illegally to the United States, there are each year hundreds of others who renounce their U.S. citizenship: those with dual nationality. By Mexican law, at the age of 21, Señorita C.R.N. had to choose her citizenship: U.S. or Mexican. (The deciding age is now 18). Her father, a Mexican doctor, was doing his internship in Minneapolis when she was born.
“I did it because I am living in Mexico and I think I will for the rest of my life”, she said. She has a good job as an assistant in one of the Mexican government ministries. Her parents brought her back to Mexico when she was two and except for two brief trips she did not return to the United States. She is now 27 and considers herself a Mexican, not a Norte-Americano.
Homelanders these days insultingly refer to children born in the U.S. to non-citizens as “anchor babies”. But many of these babies are not American anchors for their families, who were never planning to stay permanently in the U.S. anyway; rather, they are “accidental Americans” and the U.S. is the anchor that’s weighing them down as they pursue success in their other country. Celebrities and ordinary members of other societies alike feel little sadness in renouncing U.S. citizenship in the course of pursuing their lives abroad among the people who made them successful, even if that means they must face heavy civic burdens in the countries where they actually live, such as serving in the army for two years to protect their neighbours.
And as any Mexican schoolchild can tell you, Mexico is in North America.
And, the inevitable mention of taxes
Some U.S. citizens take an oath to country in which they have their largest financial interest or tax break. Investors and businessmen receive a warmer welcome in some countries if they are not foreigners. A brother and sister in Hong Kong both married to British subjects decided to renounce their U.S. citizenship before they sold shares in a major Hong Kong corporation. Both made a combined total of millions in the deal. Hong Kong has no capital gains tax, while the United States would have taken a minimum of 25 per cent. They lost their U.S. citizenship but profited by millions because of the tax break.
Film celebrities are among those who have gained tax breaks by moving to other countries. Film director John Huston says that only by being a citizen of Ireland can he save enough to pay off his back U.S. taxes. Elizabeth Taylor, who renounced her U.S. citizenship in Paris in 1964 to take her father’s British nationality, denies it was for tax reasons, although it saves her huge sums in U.S. taxes.
In reality, Huston’s motivations were far more complex than this one-sentence summary gives him credit. His wealth and fame weren’t enough to protect him from political persecution: his private correspondence was read out before the Senate Committee on Un-American Activities during hearings on “Communist Front Organisations” in 1948, and he emigrated to Ireland in disgust in 1952. As his History Channel obituary put it, “John Huston is known for courageously standing up to the House Un-American Activities Committee when it began persecuting suspected communists. He helped form the Committee for the First Amendment and eventually left the country as the practice of blacklisting suspected communists spread.” He had lived in Ireland for more than a decade by the time he turned in his U.S. passport to take the Irish citizenship of his great-grandfather in 1964.
Taylor, similarly, did not just drop her passport in the rubbish bin for tax reasons in a flight of unpatriotic tax-evading fancy. The first time she tried to swear the Oath of Renunciation (in 1965, not 1964), she couldn’t even bring herself to say the words “abjure all allegiance and fidelity”, and crossed them out; I guess she thought of herself as a child of the nation and not of the State. The State Department didn’t like this, of course, and it took her another year to build up the courage to swear an unaltered oath. A couple of years after Ms. Zyda’s article was written, Taylor married rising political star John Warner, and some time after that applied for accelerated naturalisation as the spouse of a U.S. citizen; there was speculation that Warner could go as far as the presidency, and as columnists at the time noted it would be rather awkward for the U.S. to have an “un-American” first lady.
Conclusion
These are the Americans who abandon their rights as citizens. Those who renounce their U.S. citizenship often drop from sight and merge with the citizens of their new land. Authorities in foreign nations say their figures on American renunciations have sharply increased over the last 10 years. For example the number of Americans becoming Australians has gone from a low of 15 annually to 201 each year. A Times survey of 17 foreign consulates in Los Angeles shows that inquiries on elsewhere run more than 5,300 a month. Several consuls general noted that their countries tripled the number of offices in the United States last year to handle such questions.
A recent Gallup Poll says one in eight Americans, or an estimated 16 million Americans, would like to pull up stakes and live abroad. College educated people have the strongest desire to leave the homeland.
Other famous ex-Americans who relinquished citizenship in the 1970s include Bollywood actor Tom Alter, Honduran activist priest James Carney, sumo wrestler Jesse Kuhaulua, Canadian writers Gary Wright and Jane Jacobs, and of course Queen Noor of Jordan. Some were friendly or indifferent to the U.S., while others were actively opposed, but no level of anger at the U.S. government would have pushed them to take the step of giving up citizenship (and to stick to it) unless they had the crucial prerequisite of feeling at home in the societies where they actually chose to live — an aspect of the situation which modern-day commentators screaming about “tax dodgers” fail to understand.
I’d like to have belated thanked Ms. Zyda for a well-written and fair article, but sadly she passed away at the young age of 40 in 1992. As her obituary clarifies, she worked for the Los Angeles Times as a student intern, and would have been just 21 or 22 years old at the time she wrote the above article. And yet she managed to cover all the bases in a mostly-balanced fashion in her article, a task at which the so-called adult professionals today fail. May she rest in peace rather than spin in her grave in fury at the decline of American coverage on this issue into demagogic soundbites.
And for the rest of you, remember that we are part of a long, honourable, and growing tradition of people who leave the U.S. to seek better lives abroad, no matter what the Homelanders say.
@Neill
I had a TFSA for a few months as I’ve wanted to simply set aside some money for a rainy day. I didn’t learn until later that TFSA accounts are considered ‘foreign trusts’ under IRS rules. Not only would I have had to fill out some seriously God awful paperwork on that, but I also would’ve had to take a different form to the bank and have them fill it out as well.
What could I do? I ended up closing the account! To get a tax profession to figure that crap out would’ve been far more money than what I would’ve saved, and I’m not even counting taxes that would’ve went to the IRS yet! Ridiculous!
@mjh49783: the problem is, there’s a bunch of US Persons abroad who haven’t heard of anything besides 1040 and 2555 either. All over the internet you can see newly-minted expats gushing about their “great tax break” that they get just by filling out “one extra form”. No clue even about the little box on 1040 Sched. B, let alone 3520, 8621, or 8938.
@Brilliant and @MJH, my 2011 tax return came to 280 pages…and even after consolidation, my 2012 tax return was still over 80 pages long!!! My accountant charges a minimum of $1500 and that’s only if a 8938 isn’t required. That form alone adds another $300. FBAR, another $200-300…plus, if one also had non-US mutual funds and foreign trusts (forms 8621, and 3520 and 3520A), one could easily be looking at $5000 in annual tax preparation fees!!
Another thing that I have learned while filing, is that if you’re a Social Security recipient, and you have a foreign spouse that you don’t to have to get an ITIN number for, as you don’t want her income to be the business of the IRS, you have to file ‘married filing separately’ and you lose essentially all of your deductions – all for living outside of the US.
It is repugnant to me that I would have to make a choice of either, inviting the IRS in my wife’s business, or, having to ‘fall on my own sword’ in order to protect her. But fall on my sword I will, rather that give the IRS any info on her!
@monalisa1776
I am relieved that I didn’t have to contend with 80 pages of returns at least, and thousands worth of preparation fees, but looking at the 3520 / 3520A for five minutes, along with the threats of confiscatory penalties was enough for me to run, not walk, to the bank to close my TFSA. I don’t have $10,000 USD to throw away just for screwing that form up by accident! 8^O
I was born in Canada, received my US through my parents being in the Us before coming to Canada many years ago. I worked in the USA and receive Social sec.If I renounce my USA citizenship do I cancel my monthly SS income and how much trouble do I bring upon myself?
After moving back to Canada H&R Block said there was no need for me to file USA income tax as my income was so low so have not filed for several years. When I read all the posts about accountant fee, fines etc, I would like advise on what to do. Thank you
Jane Without more information I would say that you don’t have to change anything. Carry on. By treaty, US social security is declared on your Canadian tax return. CPP and OAS are exempt from reporting on a US return. As H&R said, you may well be below the us filing threshold. If you renounce, you are supposed to file 5 years of tax returns. Some people can do that themselves but it probably isn’t all that easy. It is also an option to neglect to file those 5 years. Don’t rush into anything. Don’t fret and don’t waste a lot of time or money.
I just want to thank Eric (belatedly) for this fascinating piece! I came back here to alert Brockers about yet another nonsense article about FATCA (in the BKK Post) and happened to stumble across this much more intelligent review.
Ms. Zyda is indeed to be commended, as well.