Cross-posted from The Flophouse. Also, just for fun (and because my mom bugs me about keeping the bloghouse tidy) I updated the page of Flophouse posts, articles, interview and links on the page called The American Diaspora Tax War of 2012-2014: The fight against FATCA and citizenship-based taxation. Anything up there, folks, is all yours if you want to quote or repost.
I think it is fair to say that the face of American emigration/expatriation today is Eduardo Saverin. That is the name that consistently comes up when I talk with homelanders about Americans abroad and our relationship to the U.S. tax system. This is the face, the poster child if you will, that supports the narrative that Americans abroad have all fled the US to escape taxes. That’s right, folks, American emigration is all about criminal behaviour unless we can prove otherwise to the satisfaction of our compatriots.
How powerful is this narrative in the homeland? Powerful enough that two senators tried to get a law passed based on that one highly publicized case. The bill, called the ex-Patriot act, was introduced in reaction to Saverin’s renunciation and had a very clear objective: it was mean to punish past, present, and future expatriation – to prevent (or at least strongly discourage) Americans from leaving the US for other lands and cutting their ties to the American political community.
The first goal seemed to resonate with the homelanders since they are still talking about how ungrateful Saverin was and how he got away with something. The millions he paid to expatriate (yes, Saverin paid the Exit Tax – the tax on emigration) seems to be either forgotten completely or dismissed as a mere token amount that did not sufficiently compensate the US (and US taxpayers) for the benefits he received as a US citizen.
It was the fact that the Exit Tax and all the other ugly aspects of US emigration policy like the Name and Shame list (1996 Reed Amendment) are not turning out to be a sufficient deterrent that three senators decided to up the ante with a law that would, in addition to the stiff Exit Tax, banish these expatriates forever from American soil. Senators Robert Casey (D-Pennsylvania), Jack Reed (D-Rhode Island) and Charles Schumer (D-New York) introduced the act in 2012 and in spite of all the headlines it generated, it didn’t go anywhere. That didn’t stop them, however, it just slowed them down for a few months. According to AngloInfo they reintroduced their proposal hidden inside a 2013 immigration bill which just goes to show that these fellows are deadly serious and if they can’t get what they want openly, they are perfectly happy to do so by stealth.
With all the anger over emigration and expatriation in the US, why didn’t this bill pass? I don’t think it had anything to do with the right to expatriate that is enshrined in international law since the US Congress has never shown that they give two hoots about that. It was the possible impact on Americans living in the U.S. that I’m pretty sure was the deal-breaker.
Homelanders suffer from a two delusions relevant to our discussion. One is that every American is simply a “temporarily embarrassed millionaire.” The other is that Americans living abroad are all living the good life outside the US. “Good life” is a very nebulous concept but if you listen to the homelanders carefully you’ll hear them place so many of their personal yearnings and desires into that term and it can be anything from security, opportunity and better health care to personal growth and adventure. One way to look at it is that it is an expression of all the things that they think they can’t find or can’t have in the United States.
The vast majority of Americans may never ever leave (many Americans don’t even have passports – the esseential document that makes leaving any country possible) but they still dream emigrant dreams. How else to explain their eagerness to buy books about Americans restoring old stone farmhouses in Provence or life on the beach “Down Under” or retirement in Belize/Mexico/Thailand any of the other autobiographical adventure tales that do very well back in the States? And every American who lives vicariously through these stories feels the tug. “That could be me,” he or she thinks before coming to his senses and listing all the reasons why it just isn’t possible “right now.”
But perhaps, once relieved of the “temporary embarrassment” of limited means, it could happen. In any case, the idea that there might be impediments to leaving the United States (whether that means just taking a trip, settling permanently outside the US or renouncing) just doesn’t sit well with Americans. Is not the “freedom to leave” the very essence of freedom? If Americans couldn’t be mobile (and global) – if they could not become citizens of other countries and choose to attach themselves to other political communities elsewhere – then they would join the captive citizens and subjects of other states who are, most agree, not free at all.
So how to explain the countervailing desires of homelanders to punish people like Saverin (and the unrelenting characterization of American emigrants as suspected tax evaders) while rejecting anything that would close the door (even partially) on their own right to emigrate or expatriate?
One answer, I believe, can be found if we look at the very different reactions to two well-known expatriations. On one hand we have Saverin who is still being vilified for leaving the US and renouncing his citizenship. In fact the anger was so high that Americans lawmakers are still trying to make political hay out of it. On the other we have another very rich citizen who relocated to Switzerland and gave up her citizenship, Tina Turner. Ms. Turner is not as rich as Mr. Saverin but she’s still up there with 200 million USD in assets (which meant that she most likely had to pay the Exit Tax).
Her renunciation was widely reported but did not generate anything even close to the outrage that followed the news of Saverins’ renunciation. The usual anti-expat suspects in the US Congress like Reed and Schumer were strangely silent about it and the US media bent over backward to say that Ms. Turner had very good reasons to expatriate (renounce) that had nothing whatsoever to do with the US tax system. Nor have I seen (though perhaps I wasn’t looking in the right places) homeland Americans calling Tina Turner a traitorous, ungrateful tax dodger and calling for her permanent banishment from the United States. In a nutshell, Eduardo Saverin was presumed guilty and Tina Turner is presumed innocent. (Or at least that’s the way it looks from where I sit.)
Why?
I will give you my take on it and then I would love to hear your thoughts.
I think Americans at home can more easily identify with Tina Turner. Here is a self-made African-American woman who did not come from great wealth and who succeeded because she is smart, beautiful and talented. She is admired and liked by millions of Americans who grew up (like me) enjoying her music. Her migration to Switzerland is portrayed in the media as something that happened by pure chance (an “Accidental migrant”) and for a wonderful purely positive reason (romance) – both of which resonate with Americans dreaming emigrant dreams. And now she intends to stay permanently and retire in her adopted country with the l’homme de sa vie. All this explains her decision to the satisfaction of homeland Americans.
Tina Turner’s migration story is, well, something Americans can actually identify with. It says that even someone who began life disadvantaged and with modest means can have the American Dream + which consists of succeeding in the US and then moving abroad to do whatever one fancies out there in the world beyond the borders of the US. (And what is even more interesting is that some Americans suspect these days that the only way they can succeed is by leaving America.)
There is just one problem with Turner’s story: it explains her migration but not her renunciation. Tina Turner could have done all of the above as a dual US/Swiss citizen. If those are the reasons Tina Turner emigrated/expatriated then she could have had every single one of them and stayed a US citizen. Clearly there were other considerations that caused her to consider cutting her ties to the US – a process that is not simple and is likely to cost her a great deal of money.
Lex parsimoniae – the downside to living abroad and being a dual US/Swiss citizen is that lifelong relationship to the US IRS that all Americans outside the US are subject to that would have affected not only her but her husband as well. It is simply defies common sense to think that the US tax system didn’t have any effect at all on her decision to renounce.
Homeland Americans seem to genuinely believe her (or her lawyers) when they insist that the US tax system wasn’t a consideration but they don’t find credible Eduardo Saverin when he said of his renunciation: “The decision was strictly based on my interest of living and working in Singapore.”
Two faces of American emigration/expatriation and dare I say it? Deux poids, deux mesures.
Bravo. Well said.
Agreed.
It is ridiculous that people have to put up a show to say that its not about taxes because of fear of being penalized, put on list and/or being audited, when it actual fact it is these onerous ‘obligations’ that are motivating the expatriation. It is a song and dance people need to do just to be free from this political liability that is fatca.
Furthermore, it does not sit well with any critical thinking person to have a country on the precipice of bankruptcy to have a copy and knowledge of all liquid financial assets. They have access and control of you so when you become useful they go after you unless you do their bidding.
“…. liability that is fatca and irs”
And I found this posted on another site the other day:
”
1) The taxes are not worth the value being returned.
I don’t have a problem paying taxes, so long as they go to something worthwhile. I will end up paying around 33% – an entire 1/3rd of my income – in my 2013 tax return. Yes, I am getting a refund, but when I am paying tens of thousands of dollars and not getting the services I should receive for that investment in my country, celebrating the return of a few hundred dollars seems absurd.
Where is my benefit from my government for all of this? Do I have free healthcare? No. Do I have a world class education for my child? No. Do I have any kind of guaranteed income should I lose my job? No.
No, instead, I have a country which is the only one in the world to tax its overseas citizens. A country that bails out banks who prey on those who just want a home to raise a family when they become insolvent – but when it happens to me, and I short sell my home, the IRS is there, ready to tax me on “phantom income” – forgiven debt.
I have a country that spends billions on fighting wars for political gain, but does nothing when there actually is evidence of WMD use against others. A country that hemorrhages so much money on military spending, it must turn around and take loans against my child’s future – her income – in order to continue to pay for programs we don’t need.
2) I’m tired of people being surprised that I’m American because I have manners, common courtesy, and the ability to see the other side of issues.
Seriously, the number of people I meet who think Americans are rascal-riding land whales (like in the movie Wall-E) with handle-bar mounted machine guns, a sack of Big Macs in the front basket, a clinical addiction to NASCAR, and a passion for the modern day artist that is Jerry Springer – it’s just too much. I’ve been introducing myself as Canadian because apparently I’m so polite, that’s where they mostly assume I’m from.
3) The fact that none of this is ever going to change, regardless of what party is in charge, and the fact that the American government continues to shred the constitution a little more each year, until it doesn’t even matter anymore.
You may not think of America as a police state, but it is. Nobody’s going to come grab you in the middle of the night, unless you’re reported as a terrorist of some kind. At that point, just forget about “police work” and get ready for the SWAT team.
Nobody is going to take your children way from you, unless Child Protective Services is called, and someone decides – for whatever reason – that it’s “in the child’s best interest” to be removed.
Nobody is ever going to interfere with your access to medicine, unless you’re trying to get something that isn’t ridiculously expensive from another country; in that case, get ready for being charged as a drug trafficker.
Nobody is going to freeze your bank accounts, passport, and other means of movement, unless the IRS believes you haven’t given them enough money. Suddenly you have debt to prove isn’t there, and it will all get “sorted out” at the blistering fast speed of government efficiency. Or you could just pay the amount they say and it all ends quickly.
4) The fact that the future for my child in the US is so dark.
All this debt, and it’s going to fall on her and her children. She’s broke, and she doesn’t even know it yet. Disgusting.
Well, I count myself fortunate that I don’t own a home in the US – it affords me the ability to even consider leaving it all behind. There’s so much propaganda about how wonderful America is but, when you look at it without those rosy lenses on, what you really see is horrifying.
“
Let’s not forget that despite Tina Turner’s more sympathetic appeal, it didn’t stop the US government from attempting to cast her as a “tax cheat” the minute she relinquished her US citizenship. You may recall that there was an anonymous administration official in a Washington Post article that said that by relinquishing she avoided paying the exit tax. Of course, that statement was a blatant lie from the administration and the journalist didn’t bother to check it. Thankfully, the article was corrected and, despite the despicable efforts of the US government to slander Tina Turner, the public was not swayed.
http://isaacbrocksociety.ca/2013/11/12/relinquishment-has-same-tax-consequences-as-renunciation-for-new-ex-u-s-citizen-tina-turner-contra-washington-post/
Victoria – to the point. Thanks. Have you read up on Picketty? Your POV in context of this topic would also be enlightening, I would think?
http://www.hup.harvard.edu/catalog.php?isbn=9780674430006
Victoria, excellently written. I willnprint and forward to my friends.
@ghost66
My heart ached reading what you wrote. It is all so true. It made me feel so fotunate I don’t live in the USSA any more. I am still waiting for my CLN, it will be a day of almost 100 percent happines when I get it. There will be a little bit of a grief feeling officially cutting the connection to the country I grew up in. I am grateful to have had a very good education in a Catholic elementary school and a great public high school. I do think education is not same today as my school days back then.
Only one thing my beloved history teacher did not teach my was the unique citizen based taxation.
Of course the poster boy Senators for FATCA would take the view these people who hand in the blue book are scum and the US is ‘the grrrrrrreatest country in the wwwworld.”.
Perhaps they should pause for thought as to why it’s so easy for the individuals to walk into the US Embassy and say goodbye. They should recognise the US’ position in the world is changing and accept it before the USG loses sole reverse currency status.
Ah, the Piketty phenomenon. Yes, indeed, that is on the to-read list. Tim said that he is a FATCA fan and maybe a supporter of CBT too. I’m keenly interest in what he has to say about it and I will do a Flophouse post on it (which I can cross-post here).
For a taste of Piketty (he has a luscious accent just like my spouse) he gave this talk recently about his book.
Also from the Flophouse: many of us have seen this satire before but it is good to bring it back now and then to make the point (and laugh); consider sharing with your local banker and see if he/she laughs too :
http://thefranco-americanflophouse.blogspot.fr/2013/11/a-funny-about-fatca.html
Victoria, you’ve done an excellent job of explaining how resident Americans are of two different minds about expatriation, and even dual citizenship. Clearly Savarins’s been demonized, while Turner idolized. This is indicative of how little home landers understand their emigrants and citizens abroad, when so many assumptions about motive abound. For all we really know, love may have had nothing to do with Turner’s renunciation.
@Ghost66
Also well said.
“Furthermore, it does not sit well with any critical thinking person to have a country on the precipice of bankruptcy to have a copy and knowledge of all liquid financial assets. They have access and control of you so when you become useful they go after you unless you do their bidding.”
Even more frightening when the nations where we live are coerced into facilitating them…
@Victoria —
Piketty seems to desire tax on wealth globally, but with a focus on accumulated wealth, regardless of where it resides, rather than merely income. I am not sure FATCA per say does that. It merely attempts to remove banking secrecy, but this does little to change tax code which remains focussed on income.
That said, FATCA has illustrated through collateral damage (in the form of VD/FBAR penalties), that those living overseas can get their wealth (often just life savings from taxed income earned) nicely chopped off. This is indeed a model which maybe Piketty would like? Though we are speaking penalty rather than tax. I wonder of Piketty would differentiate between the two?
Victoria – nicely presented and well written. I think you have peeled back the onion a few layers to show a little of the underlying pathology behind the visceral reaction Saverin’s story appears to engender (still). I very much enjoyed the “embarrassed” millionaire line!
A rational person might wonder: was the money not his? Had he not earned it and paid all “fair” taxes on it? Does freedom mean anything at all if you are not free to leave? If the US is such an irresistible land of opportunity blessed by God and above all others, why is it that wealthy people seek to flee it while impoverished people line up to slip under the fence or across the river? Besides – Savarin made his pile on Facebook, a company which in turn makes ITS pile selling products around the world. So, in a sense, the money he took off shore arose – at least in part – off shore. Reason and politics are seldom more than accidental bedfellows though.
There is a lot of soul searching America has yet to do if their place in world history is not to be a 70 year flash in the pan. I personally think they have plenty of capacity to rediscover who they are and were, but recent events might give one cause to doubt. Economic freedom had a lot to do with making them who they were – the LANGUAGE of freedom still resonates in that republic even if the practice of it has been so thoroughly subverted. Instead of engaging in an Orwellian 2 minute hate aimed at wealthy people leaving, they should have engaged in twenty minutes of introspection to ask “why”? Perhaps one day they shall.
As for Pickety – well, let’s just say that the French model of 60% of GNP in public hands, wealth taxes and very high marginal tax rates has objectively produced one of the consistently lowest-growth economies in the OECD. I might just be a bit slow to pick up an economic prescription to kick start growth from that doctor.
This is a good article. Thanks. I thought the line about “most Americans think of themselves as temporarily embarrassed millionaires” was pretty funny. The articlte gives the impression that there is a massive outpouring of emigration from the U.S. Does anyone have any trend stats on this? As regards any fuss about Tina Turner, I think she’s been living in Switzerland for at least 20 years. I don’t know when she renounced, but I wouldn’t blame her if she renounced when the IRS started trying to apply Foreign Accounts Reporting accounting to our domestic accounts held in our country of residence, and then started harrassing us with FATCA. Turner’s telling the truth about her original reasons for moving and residing in Switzerland. No doubt her renunciation decision came only in recent years, due to IRS abuses..
Wonderful article, Victoria! Every point beautifully and aptly stated, as always! You are one of our strongest voices and it is always good to see you here.
Susan, on Nov. 12, 2013 Eric did a post about Tina Turner’s renunciation which had apparently taken place not long before. I don’t know how to copy the post here but I did a search with “Tina Turner Renunciation” and Eric’s post appeared.
Great post as usual Victoria.
I have been wondering how Amal Alamuddin, George Clooney’s recently betrothed
will handle her new situation since she’s an international lawyer. Does she know of the impending complications to herself and her practise when she marries the American?
George is Obama’s pal and was recently in the news http://www.huffingtonpost.com/2014/04/24/george-clooney-obama_n_5206329.html for coming to aid of his friend. Would Clooney support an administration that wants to comb through his new wife’s personal business affairs? Would the American poster boy for the “perfect man” renounce to protect the one woman he wants to marry and head off into the sunset to his villa in Italy?
An article with the headline screaming Don’t marry George Amal! would grab the world’s attention and shine a light on the dangers of being or “becoming” an American.
Maybe they’ll be happy as Mr and Mrs Clueless in America.
Just heard on the news that she’s actually a international human rights lawyer! Represents Julian Assange! Doesn’t sound like she’d stand for being Mrs. Clueless.
@Bubblebustin, @Deb
Looks like she works in London. Bound to have an ISA. 30% of Brits do. Nothing like PFIC taxation to change your attitude. Even if you believe taxes should be high I assume you don’t expect them to potentially exceed the gains or to actually be impossible to calculate. Remember that great interview that Will Smith did on French TV. He was all smug about paying his fair share and giving back until he realized it was 75%.
Thanks so much, Victoria, for cross-posting this here.
The over 10,000 comments in this weekend’s Adam Geller, AP story at Yahoo.com reflect what you say: http://isaacbrocksociety.ca/2014/04/24/associated-press-adam-geller-interviews-persons-who-dont-fit-the-stereotype/
@Deb
She’s marrying a staunch supporter of an administration that’s done more to hurt US persons abroad than any other in the history of the US. If she’s even clued in to these issues, she may frame it as a tax issue, rather than a human rights one. Could make for lively conversation at the Clooney dinner table should she recognized it as a human rights one, though. Maybe we could write to her about taking up our cause and see?
@Neill, it seems that she worked in New York.
According to this article from Forbes, http://www.forbes.com/sites/gregorymcneal/2014/04/27/international-lawyer-and-scholar-amal-alamuddin-engaged-to-george-clooney/
“she holds a Masters of Law (L.L.M.) degree from New York University School of Law (where she earned the Jack J. Katz Memorial Award for excellence in entertainment law). She practiced for several years at Sullivan & Cromwell LLP’s New York office, where she was a member of the Criminal Defense and Investigations Group. There her clients included Enron and Arthur Andersen.”
So we can assume she probably is already familiar with FBAR and international taxes. She must have had to declare all her foreign accounts when she was working in New York. The question is did she do it right and filed her FBAR 🙂
If she does not have a green card, then she would not have had to continue doing it when she went back to the UK. The question is where are they going to live and are they going to share accounts.
If she doesn’t move to the US and they don’t share accounts, I don’t think she is impacted.
If she moves to the US and gets a green card, then that’s another story. But again, with high net worth people like that, they just pay tax lawyers and accountants to do their taxes and don’t really care.
But it would be interesting to reach out to her and point the abuse that is going on in that area.
@noone
From the article you point to:
>In her current position as a barrister in London (Bar of England & Wales, Inner Temple)
Knowing to file the FBAR is something you can expect any tax professional to get right (even so there are many who have missed this). Knowing that an ISA isn’t protected by a tax treaty or asking a client is a much higher barrier for a tax pro. The PFIC taxation appears to be another level above that.
Avoiding the ISA while working in London would be painful. Cutting one of your ways to save tax efficiently off. Advisors could easily have gotten her into these things without knowing the pain that would come later.
@ Deb
Maybe George is marrying Amal for her international lawyering expertise (he needs it being an American mostly living abroad) and she is marrying him for his looks, charm and fame. I hope she doesn’t want/need his fortune because the annual tax-free gift from US spouse to non-US spouse ($143,000) is a pretty paltry amount for people in their tax brackets. They probably won’t hold joint accounts or properties. Anyway good luck with that FATCA’d up marriage.
@ Victoria
I enjoyed reading your “Two Faces” posting yesterday at the Flop House. Great analysis. Great writing.
@Victoria
I know a fair few experts in the study of economic equality. They like FATCA because they have a very deep understanding of the problems created by inequality and a really shallow understanding of the details of FATCA. They see FATCA solely as the battering ram that opened up the bank secrecy jurisdictions, something the OECD had been trying to do for years. Like a lot of people, they hear FATCA and think FATCAT.
They are decent people, but I don’t think in their wildest dreams they could imagine how badly FATCA has been implemented. Here in the U.K., there is a crackdown on offshore accounts and the government has put out loads of ads raising public awareness that they need to come clean IAs for FATCA, I can’t ever remember seeing anything even in the international arrival halls from the IRS. My mother has never seen any ads in the Wall Street Journal. As for the scope of the law, Richardson has done more to make U.S. persons abroad aware of the scope of their tax obligations than the IRS has done!.
If the equality experts understood that the U.S. tax law affects far more than the 1% and can take money from foreign benefits, scholarships, and savings plans for disabled people, they would be shocked. If they understood that middle class people without access to workplace pensions had lost their gains because of the treatment of PFICs, they would be appalled. They just don’t know FATCA’s full effects yet as well as we know FATCA. FATCA is a badly written law. It hasn’t really hit Britain yet (still running into people who don’t know what’s coming 1 July). I give it a year tops before attitudes change,…
I’m not sure if this article got posted somewhere at Brock but it ties in with Victoria’s posting.
http://personalliberty.com/expatriation-soars-approach-fatca-deadline/