Posted on November 10, 2013 by Tim Posted in Issues regarding US persons abroad 120 Comments From Michael Kirsch who has written in defense of citizenship based taxation before. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2346458 Share this:TwitterFacebookEmailLike this:Like Loading...
Innocente, while I agree with your view that, as a rule, people don’t move around the European Union in search of the lowest tax rates, a clarification is needed regarding the high percentage of non-Belgian EU nationals living in Belgium. This is a result of the presence of the EU institutions in Brussels. European civil servants (better known here in Brussels as Eurocrats) do not pay Belgian or any other national taxes, by the way, only a very low EU tax.
Something is wrong with the site. I see read the newest entry by jane and want to the one before her on the previous page and I get to november 1q comment. Right now I can not bother to take the time to go 9 months foward.
Something Kirsch may want to consider is the number of people who won’t emigrate to the US because of citizenship based taxation. Is being American worth trading your freedom for?
This might help. To get to the last page of comments on a thread, click on the blue “# of comments” link below the title. On some threads (like the “Renunciation” thread) there isn’t such a link but you can still get to the last page by going to the URL (http://) address, deleting everything past the thread title and then reloading or refreshing the page. No need to take the milk run when there is an express route (sort of) to the last page destination.
I tried that…does not work for me…. still go to November 11, 2013
If you have another browser — try using that one instead of the one you are using. Also try resetting your browser (clear cookies, clear cache, clear history, clear everything). If that fails, then try giving your computer a slap (our previous computer responded to that method but my husband cringed each time I did it). 😉
@Jane Doe belge:
Brussels has the third highest per capita income (Eur 60,400: 2007) of any EU city, after London and Luxembourg city, which should be a draw from around the EU and elsewhere. The EU’s ca. 29,000 employees in Brussels appear to be getting a good deal by paying only minimal EU taxes but most other employees would have to pay normal Belgian taxes with some exceptions.
The top 5 countries with the greatest number of residents in Brussels, excepting Belgium, come from other French and Romance language speaking countries (France, Morocco, Italy, Spain, Portugal), which is also a draw for them and helps to ease the transition. Excepting residents of other Scandinavian countries, EU citizens who wished to relocate to also high-tax Denmark, for purposes of comparison, would have language issues.
On another topic, while reviewing statistics on Brussels, I noted that 564 (18.3%) of the 3,083 Americans registered live in five of the poorest areas of Brussels: Molenbeek, Etterbeek, St Gilles, St Josse and Schaerbeek. Although some areas in these communes could be gentrified, this still indicates that some American expats, emigrants, accidentals and other Americans are not doing well financially. This is of course different than the prevailing US view that Americans abroad are floating in money and living the high life.
Statistics on Belgians and foreigners in Belgium, by commune and nationality:
In the interest of accuracy, I’ve changed the calculation on Americans living in the poorest five municipalities (communes) in Brussels District, replacing Etterbeck with Anderlecht. As a result, 380 (12.3%) of the 3,083 Americans registered live in five of the poorest areas of Brussels: Molenbeek, Anderlecht, St Gilles, St Josse and Schaerbeek.
As a proxy for poverty, I used the municipalities with the highest unemployment rates, as reported in April 2013:
A Wiki page on Molenbeek gives some insight into this rather miserable Brussels municipality:
“Attempts at revitalizing the municipality (Molenbeek) have, however, not been successful. The multinational company BBDO in June, 2011 citing over 150 attacks on their staff by locals, posted an open letter to the mayor, Philippe Moureaux announcing their withdrawal from the town.”
The point of this exercise is to suggest that some Americans abroad live in poverty. Using the term “expats”, as Mark Mazur did in his letter to The Economist, does not fit the reality of some Americans existence abroad.
I would like to explore Kirsch’s argument that CBT is justified because, without it, Americans would pack up and emigrate to countries with lower tax rates.
If I were ever to correspond with Kirsch, I would like to ask him just where these wealthy Americans would go. Unlike Commonwealth countries or EU countries, the US has few agreements that allow its citizens to reside outside its own borders. Two agreements that I am aware of are:
a. NAFTA: This agreement allows US citizens who are skilled to move to Canada and Mexico at time of receipt of a job offer. As is well-known, Canada has higher tax rates than the US so this would not be a destination for a wealthy American seeking to pay lower taxes. Mexico, which evidently has lower taxes than the US, could be a destination for these wealthy Americans but NAFTA only allows residence for those Americans (and Canadians) who have a job offer.
b. DAFT: The Dutch-American Friendship Treaty grants Americans the right to relocate to the Netherlands to set up a business. This might have some appeal to American entrepreneurs who owned and ran businesses in the US. The Netherlands, however, has higher tax rates than the US so it would not be a destination for Americans who were seeking lower tax rates. Strike that one off the list too.
Outside of NAFTA, Canada allows anyone, including Americans, to apply for immigration, as do other immigration destinations such as Australia. Some of these countries also have investor immigration schemes (which the US also has). But then we are back to that issue that Canada has higher tax rates than the US while Australia appears to have income tax rates that are comparable to the US, so why bother.
I have not explored whether the tax rates of countries in the Caribbean and thereabouts are lower than in the US but I suspect that at least some do. A wealthy American would have to be at least somewhat adventurous and willing to give up comfort and security, however, to relocate to Antigua, St Vincent or Belize.
Unless you’re an American who is lucky enough to have an Irish or Italian grandparent (allowing you to obtain an EU citizenship), it is difficult for most Americans to permanently relocate to another country, let alone one with lower tax rates than the US. Although your concern that wealthy Americans will pack up and leave for a better tax deal may look good on paper, there are many practicalities that get in the way of finding that elusive low-tax country that will allow the average wealthy American to relocate abroad permanently.
Thanks for that analysis @Innocent. Those inside the US could dispassionately and objectively look at this using actual facts, but they have no interest in doing so. Witness the inability to get a commission funded even to look into the issues facing US citizens abroad. In stark contrast to the explicit promises of Obama’s 2008 campaign to examine those issues. This is about expediency, ideology and politics, and nothing about logic or justice or what is ethical or moral.
Video of the ACA Foundation debate and event held in Toronto this year, would allow us to review this author’s arguments for CBT. I think there are areas which were rationalized because of a particular worldview, and thus weakly argued. For example, there is no ethically or logically defensible basis presented for the US extraterritorially taxing and potentially assessing penalties on the disability benefits, grants and savings of those outside the US. Those funds were entirely generated via non-US residents and non-US taxpayers. The US provides NO thing – no benefits or supports or care or security or medical services to those non-resident individuals deemed to be taxable USPs, and in the case of those deemed legally incompetent, (and of minors) their wellbeing and sustenance is actually and entirely existent only because of the efforts and resources of their family and their native government OUTSIDE the US – where in many cases they were born.
There can be no acceptable or ethical rationale for insisting that these vulnerable persons and minors who inherited US citizenship and who live outside the US, and who have been deemed incompetent to understand the concept of citizenship in order to renounce it, are somehow though at one and the same time deemed by the US to be intellectually competent enough to understand and be aware of a legal duty, to manage money and perform as a competent US taxpayer.
There is NO moral or ethical way of rationalizing why the US should insist that non-resident children’s education savings generated and held abroad, and the savings of those deemed incompetent should be subject to pay for the US national debt – for services and benefits they do not receive and rights they cannot understand or exercise – yet the US Treasury and CBT defenders insist that they OWE the US a duty, fealty and taxes.
US extraterritorial taxation based only on citizenship or quasi-citizenship status is indefensible, unethical and also irrational.
Any government system which rests on institutionalized burdens and maltreatment of the most vulnerable in a society is unacceptable – even more so when it adamantly insists on subjecting those entirely outside territorial borders.
The US is committing a crime against those living abroad, and most especially against the most vulnerable.
Have you been getting hit by all the spam emails on the threads you are following. It is really hurting my desire to follow threads which if others feel the same, drives readers away. The Moderators MUST DO SOMETHING to stop it…. I am busily UNFOLLOWING every thread I can, but still stuck with spam crap on the posts I have done. IBS needs a CAPTCHA regime, I am afraid.
I woke up to 1400+ spam emails from Brock today 🙁
They seem to have dissipated after last night’s attack.
@Bubblebustin…It was the same for me, but I am still getting them for all the Posts that I have done personally. The others, I am un-following every thread that these spams are hitting, which I don’t like to do, but I can NOT put up with it any longer. I have sent an email to Peter and Pacifica, and hopefully there is a solution that doesn’t have me withdrawing from following.
Like I will soon be unfollowing this one. 🙁
I was wondering if there was someone trying to mm sabotage IBS
@Just Me, I no longer ‘follow’ posts in that way as I couldn’t keep up anyway. That means I miss things and have to sometimes follow threads backwards, but there was simply too much to follow the way I was doing it before.
I don’t do “following” so my e-mail is just fine but last night I watched as spam completely overtook the “recent comments” column. Nike and all those other miscreants should be aware that some people (like me) get ticked and mentally take note of what products NOT to buy. I’m not familiar with the inner workings of websites so this is probably a stupid suggestion but is it possible to filter out all comments with a linked name? The genuine commenters here who use a linked name (like Petros) would have to unlink but maybe they wouldn’t mind if it meant reducing the amount of spam and all the extra work and vigilance it places on the capable shoulders of our moderators. This mass spamming frequently happens late at night when the moderators rightfully and deservedly should be getting some sleep.
I am going to have to do that too. I had used it as the way to keep up with the conversation on threads I was interested in, but will have to come up with a different strategy. I never see this type of spam from a lot of other blogs I follow, so this is getting to be over the top, and maybe, as Northernstar says, some type of sabotage is being attempted although that sounds too conspiratorial for even me. 🙂
To all who have received so many spams, it’s unfortunate that it was not stopped by the Moderators. We certainly are trying to keep up with it all.
Out of interest, I googled and found:
Here is of CAPTCHA and Askimet (which Brock uses): http://blog.douglasfshearer.com/post/17495293610/reducing-comment-spam-akismet-or-captcha
AND, others as well discussed here: https://managewp.com/best-anti-spam-plugin-for-wordpress. Some mentioned one called AntiSpam Bee in conjunction with Askimet as a good alternative unless the site uses JetPak.
Our problems are not unique but likely more volume with all the traffic that Brock now sees. One commenter said:
I just unfollowed everything, every last thread from the beginning of time, so this notice was the last I will see in my email. Hopefully, I will find a way to check in via “recent comments” but if it is filled with spam like last night, I probably won’t bother. I think Captcha is an alternative that might work, not sure. I see that FrancoAmerican Flobhouse (as one example) has some version of a Captcha type of bot stopper. I truly believe that IBS needs that now, as Askimet from my perspective is failing. But then maybe I don’t know enough other than to say I have had enough. :).
Thanks for reading my analysis/analyses and for your post. My CBT analyses address and attempt to refute Kirsch’s assertion that, absent CBT, Americans would flee the “high taxes” of the US for low tax havens elsewhere. There is some evidence that EU residents are even willing to move to higher tax EU countries and take cross-border jobs even though they incur higher taxes in the process. I believe, but did not demonstrate, that this is job-related. People move for a job or for a better job and work cross-border for the same reason. The tax rate is a secondary consideration.
I believe I raise a legitimate question in another comment by wondering where the 1%-ers (3 million Americans) would immigrate to since most would not have a right to residence in any country outside the US. Also, two of the three countries where Americans can move with reduced bureaucratic hurdles have higher tax rates than the US.
My comment on 12.3% of American citizens in Brussels District living in its five poorest communities – which doesn’t necessarily belong in this thread – attempts to refute a common US view that Americans abroad are short-term expats on a corporate benefits package with housing and international schooling for the children. The fact of the matter is that the vast majority of Americans abroad work in the local/ national job market and receives prevailing market wages and pays normal taxes in that country. As has been previously posted, in an article called “Canadian data doesn’t support stereotype of the wealthy U.S. expat”, Global News’ Patrick Cain analyzed the correlation between Americans in Canada and wages and did not find that having American citizenship resulted in higher incomes:
Data exists for at least some countries that shows where American citizens live and their incomes, or it might be possible to assign a reasonable proxy to their income. Additional analyses would likely further refute the myth that Americans abroad have high incomes and/ or are wealthy.
Analysis of Unemployed North Americans in Germany:
The 2011 German Census shows that not all N. Americans living in Germany were expats with those famous corporate packages. In fact, some were unemployed:
Total N. Americans in 2011 German Census: 108,480
Total N. Americans classified as employable: 66,240
Total N. Americans classified as unemployed: 3,570 (5.4% unemployment rate)
a. The German census data uses North America rather than USA and Canada for its employment statistics.
b. N. Americans had unemployment rates that ranged from 3.5% in Schleswig-Holstein to 17.3% in Brandenburg, in the former East Germany.
c. Several German states with N. American populations less than 1,000, mostly in East Germany, did not report any unemployed N. Americans. This may be due to throwing them into an “Other” catch-all category and would mean that the unemployment rate of 5.4% is somewhat understated.
1) N. Americans in Germany are like other immigrants and accidents and also experience unemployment.
2) The positive news is that the 5.4% calculated unemployment rate for N. Americans in Germany was lower than the US unemployment rate was in April 2011, which was 9.0%. (The 2011 German census was apparently taken in April 2011). Also, I was able to find Canada’s unemployment rate for April 2012 which was 7.4% but could not locate it for April 2011.
US-born persons in the UK not holding a US passport:
According to 2011 UK census data, of 32,242 US-born people living in Southeast England region (London), 20,551 held a US passport and the difference of 11,691, or 36.3%, did not. Extrapolating the 36.3% non-US-passport rate to the 203,276 US-born persons in the UK in 2011 (source: Eurostat) suggests that 73,789 US-born persons in the UK do not have a US passport.
Although a US passport is required for USCs for travel to and from the US, these people are not obliged to maintain a US passport if their travel outside of Britain does not involve the US. Still, USCs living outside the US who do not have a US passport could include USCs who do not consider themselves to be USCs. These 73,789 USCs are potential IRS non-filers as well as candidates for renunication, if they have not already done so. FATCA should help to identify them and force them into compliance.
See Figure 6 for US-born persons who do not have a US passport:
Average wages for Americans in the UK:
Compared with other immigrant groups in the UK, Americans do reasonably well earning an average of £17.48 (male) and £14.63 (female) per hour. Only Australian and UK males earn more than American males and only Australian females earn more than American females in the UK.
See Table 2:
On the other hand, Americans in the UK show a lower labor force participation rate than Australians and British. This indicates that the earned incomes of Americans in the UK are on average farther below Australians and British than the average hourly wage rates suggest. See Figure 3 at the same link above.
Once again there is evidence that the average American abroad is not an expat with gold-plated corporate compensation package.
Analysis of Unemployed North Americans in Germany (cont.):
I recalculated the unemployment rate for N. Americans in Germany at April 2011 and it was 5.9% (not 5.4% as indicated above). The actual percentage is probably slightly higher as several German states with small N. American populations, mostly in E. Germany, do not show the number of unemployed N. Americans.
Even if it is slightly higher than 5.9%, this compares favorably against the unemployment rate for EU-27 country citizens which was 6.6%, but noticeably higher than the unemployment rate for Germans at that time of 4.6%. (The unemployment rate for all foreigners in Germany was 19.7%(!)).
On the other hand, N. Americans’ participation in the workforce, at 61.4%, was lower than the participation for EU-27 citizens which was 65.3% but higher than the German citizen participation rate at 53.5%. I believe that a partial explanation rate for the high EU-27 workforce participation rate is an average lower age for EU-27 citizens and an average higher age for German citizens. Also, I suspect that the average age of N. Americans in Germany is lower than for Germans.
In a nutshell, N. Americans seem to be able to compete fairly well with Germans and other foreigners (especially non-EU citizens) in the German employment marketplace. N. Americans have a higher unemployment rate than German citizens but a calculated lower rate than EU-27 citizens. But, once again, there is no evidence that N. Americans in Germany are a pampered expat group.
An interesting statistic is the 71.9% labor force participation rate for N. Americans in Berlin. This is higher than for any other German state and probably is related to the age of N. Americans who live in that vibrant city-state.
Unlike the UK, I have been unable to locate statistics on income by nationality for Germany.
The German Statistics Office (Statistisches Bundesamt) published a study on the likelihood of immigrants falling into poverty. The risk of becoming impoverished can be related to such factors as unemployment, marriage status when raising children and lack of educational degree (school “drop-outs”). These statistics could possibly be used as a proxy for financial success, i.e., income.
According to this study, the risk that the 182,000 North Americans resident in Germany will fall into poverty is 12.2%. Although this is unfavorable compared to the 11.7% for Germans without an immigration background, it is better than all other non-German groups in this study, e.g., 16.5% for EU citizens.
Although North Americans living in Germany may not on average do quite as well as Germans, they appear to be able to compete. The slightly unfavorable poverty risk statistic may also suggest that North Americans’ incomes are somewhat below that of Germans, and may be a sign that North Americans living there are rather ordinary and not expats on corporate relocation packages:
(See p. 559 for North America statistic)