Solution
This article was written in response to a request for a step-by-step explanation of FATCA that would help Americans understand what it is all about. I would like to conclude with an illustration similar to the one with which I began. If you were born in California but moved to Massachusetts in your 20s and lived there the rest of your life should you have to pay state taxes to California until the day you die? If you lived in Denver at one time and then moved to Atlanta should you have to keep paying municipal taxes to Denver for the rest of your life? Your answer to both questions, I’m sure, would be a resounding, “No! That’s ridiculous!” Of course it’s ridiculous and so is having to pay taxes to a country in which you no longer live.
FATCA is actually only the “second worst law nobody has ever heard of”. It is but a symptom of the real disease. CBT (citizenship-based taxation) is the issue that needs to be addressed by the American people, their Congress and their President. CBT is un-American at its profoundest root. The Revolution that created the United States of America was, to use modern terminology, an anti-CBT revolt that threw off the yoke of taxation by the mother country. Not long after she lost her colonies, Great Britain (and, later, most of the rest of the world) adopted the principle that residence in a country is the only criterion upon which an income tax can be fairly imposed. Only residents receive the benefits of the tax dollars they pay. Differently put, this is why you pay taxes:
- to pay your fair share of the cost of services that the government provides to you and your community. My services are provided to me by the government of Canada. I have chosen to live in Canada and to become a full-fledged member of Canadian society. As such, my community with whom I share my tax dollars is Canadian. Although I am considered by virtue of the 14th Amendment to be an American citizen and am happy to be associated with the United States as the land of my birth and heritage I am not a member of American society. Since the age of 10 I have not spent more than 30 consecutive days in that country at any one time.
Conversely, this is not why we pay taxes:
- for some possible potential use of services that one is highly unlikely to ever require.
- to qualify to exercise one’s rights. Rights are free and available to all at no cost. They are not privileges afforded only to the few who can pay for them.
In short, FATCA without CBT could actually work. If foreign financial institutions were asked to report only on accounts held by customers with US addresses the IRS might catch the real tax evaders at far less cost to all involved. As it is, FATCA has already managed to waste billions of dollars worldwide as well as an incalculable measure of human energy that would have been put to far better use some other way in this sorry world. The upheaval of innocent lives through financial loss, marital discord, emotional stress and loss of health is FATCA’s legacy to the community of “Americans overseas” and those they love.
In the 1960s I was taught that prevention from leaving one’s country was one of the most infamous hallmarks of everything that was wrong with Communism. Yet America has effectively adopted a very similar and practical application of the same principle. CBT is an invisible ball and chain around the ankles of every American. FATCA is its enforcer. The solution is simple. The United States needs to abandon CBT and adopt RBT (residence-based taxation) as its principle of income taxation like the rest of the world. This, and only this, will allow Americans to have real freedom in the 21st century mobile world.
[This four-part article was written by a 60-year-old retired woman who has lived in Canada since the age of 5. She has been a Canadian citizen for 41 years and is a dual citizen with the United States by virtue of her birth there. She has been married to a native-born Canadian for 33 years.]
Resources for Further Details, Links and Commentary
https://www.democratsabroad.org/sites/default/files/2014%20FATCA%20Research%20%20Stories%20of%20FATCA%20-%20Affecting%20Everyday%20Americans%20Every%20Day.pdf(Read these testimonials from ordinary Americans who live outside the United States.)
http://www.repealfatca.com/(This resource contains much information about why FATCA is bad for the United States itself.)
http://waysandmeans.house.gov/taxreform/workinggroups.htm (The submission by Jacqueline Bugnion is a “must read” for anyone new to this issue)
http://americansabroad.org/files/5513/3589/8020/taxnotes.pdf
http://americansabroad.org/files/9013/3589/7793/fatcapp.pdf
http://americansabroad.org/files/2813/6456/7161/final_arawg2.pdf
http://americansabroad.org/files/6513/6370/3681/finalsubrbtmarch2013.pdf
http://isaacbrocksociety.ca/wp-content/uploads/2013/11/FATCA-Fact-Sheet-2013.11.21.pdf
http://taxprof.typepad.com/files/76ti0147.pdf(Click on this link for background and clearly explained information about FBAR.)
http://thefranco-americanflophouse.blogspot.ca/2014/10/lee-and-bopp-chance-to-turn-tide.html(Click on this link to read about legal actions against FATCA being taken in the United States.)
http://www.adcs-adsc.ca/(Click on this link if you would like more information about the lawsuit being launched against the Canadian government for acquiescing to the demands of FATCA.)
Thanks for this excellent series of posts. Have you considered forwarding it to some media outlets? You’ve clearly put a lot of effort into this and it would be great for it to get more attention.
My only suggestion is that if you plan to have a wider distribution for these 4 parts is that with each part you define the abbreviations like CBT, RBT etc. There are many who are not familiar with these terms. Thanks.
The power to tax is the power to destroy. The IRS does not have the authority to tax the Right of Return–which is an unalienable right and universal human right.
But ultimately that is what citizenship based taxation does: it taxes expat American’s right to return. In order to escape that abuse one exercise one’s right to relinquish US citizenship, and the IRS taxes that right as well.
What an awesome 4-part series, MuzzledNoMore! I’ve enjoyed reading it, and hope it gets published far and wide!
Excellent series, MuzzledNoMore! I would like to see this consolidated into a single PDF file that could be easily forwarded or printed. Be sure to include all your citations. As Cheryl suggests, it might be useful to include a glossary of terms and acronyms for the benefit of first-timers. This is a great example of pamphleteering for the modern age!
You mean This and only this will allow America to SURVIVE in the 21rst century. All empires collapse, each and every one of them as history has allways prooved to be True.
FATCA is the proof of how weak the United States is today. They are up against the wall and don’t know where to find the money to pay the gigantic debt that they have contracted on our heads, the crummy two cents bastards.
Just by gold coins with your money and hide them far out of reach of any bank. That’s what the Chinese are doing.
“CBT is un-American at its profoundest root. The Revolution that created the United States of America was, to use modern terminology, an anti-CBT revolt that threw off the yoke of taxation by the mother country.”
@MuzzledNoMore
A really great series of articles! They need to be circulated far and wide.
MuzzledNoMore,
Looks like this law firm blog has a link to your first and second installments (and likely soon the rest): http://dukelawfirm.wordpress.com/2014/11/08/fatca-an-introduction-for-americans-to-the-worst-law-nobody-has-ever-heard-of-part-i/. There you go, spreading of the good work you’ve done. (This site, however, looks like it is not this ‘Duke Law Firm Blog’ http://dukelawfirm.ca/blog/)
@MuzzledNoMore Bravo! Excellent summary including lots of careful thought and review.
@Petros. Great points. I left the U.S. 20+ years ago to come to Canada. I was basically penniless when I arrived. I haven’t filed tax returns to the U.S. since I left. Why would I? I don’t live there any more, after all.
In the years since I left the U.S., Canada has treated me well. Now in my late 40s, my net worth has grown thanks to a career spent in my adopted home. Because I’ve been a bad boy– I’d be the first to say willfully non compliant– even if I wanted to (I don’t), I can never move back to the U.S. as my wealth would be considered illegitimate, undeclared booty in the U.S. and therefore subject to government plundering.
Even without forcing a formal relinquishment, the Right of Return is taken away in a de facto sense by the USG as return would trigger confiscatory taxes, interest, and penalties on savings earned during a career spent outside US borders.
@BC-Doc, just remember to insure that your relinquishment is documented with your own records in a file with a sworn statement that you voluntarily intended to relinquish.
Always best to be prepared regardless of prior bumps in the road.
All of your wonderful suggestions are duly noted. As time permits I intend to implement them all.
Deckard: I already have a Word-document of the entire article which could easily be turned into a PDF. It was my original hope that a PDF could be saved as a resource in the sidebar. But since it was such a lengthy article it was suggested to me that for purposes of publishing on Brock it would be better to split it up into four linked sections. The installments ended up being kind of fun but, indeed, the article really should be read straight through. The links between the articles help, but it would be nice to have the entire thing in one place also.
As Cheryl pointed out, the split up caused the divorce of the acronyms from their full titles (i.e. CBT and citizenship-based taxation) which normally only need to be defined the first time the acronym is used. I didn’t anticipate that and I will fix this.
I continue to hope that, in one form or the other, the whole article will be preserved as a resource in the sidebar. I believe one of the administrators needs to do that.
In the meantime, the great response so many people have given to the article has encouraged me to look into seeking an additional place to publish this. Thanks so much, everyone!
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@MuzzledNoMore,
I put a link to this series in the sidebar under Important Information. Clicking on “FACTA: An Introduction” brings up a page which is a table of contents (each part with your chapter titles) with links to each to each part. If you send a PDF, I’ll link directly to it. If you send a Word document, I can convert it to PDF.
This is an terrific overview of the issue. It must have been a lot of work to boil this complex topic down to something so clear and concise. Thanks very much!
@MuzzledNoMore Thank you for writing this series. I think it will be helpful for many people to understand. It is written in plain language and uses good examples that people can relate to. Great work!
@ MuzzledNoMore
Haydon Perryman has linked your series to his blog. It’s getting out there.
http://haydonperryman.com/2014/11/07/fatca-an-introduction-for-americans-to-the-worst-law-nobody-has-ever-heard-of-part-iv-conclusion-gatca/
Excellent work MuzzledNoMore
Pacifica: The link in the sidebar is fantastic! Thank you *so* much! The Table of Contents is a great idea.
I’m also delighted to see the series linked to on a couple of other blogs. Thanks Calgary and Embee for posting the links. Much appreciated!
Amazing work @MuzzledNoMore! haven’t read all the parts yet and digested them as I am trying to catch up by back-reading threads at IBS (unfortunately haven’t had much access to internet or time recently) but you’ve done wonderful work.
I noted that it was referred to by Prof? William Byrnes http://profwilliambyrnes.com/2014/11/07/fatca-an-introduction-for-americans-to-the-worst-law-nobody-has-ever-heard-of-part-i-gatca/ via the Perryman link.
Badger: I just looked at the Byrnes link and he gave it 5 stars no less! Gosh! Thanks for including the link. 🙂
JC: If you’re checking in here, thanks so much for quoting from the article at Forbes. It was great to see that! Now I just hope the letter and all the comments hit the President’s desk!
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