This post appeared on the RenounceUScitizenship blog.
Why I'm Giving Up My Passport http://t.co/c6EdyxZR3T – AKA why it's impossible for #Americansabroad to live under U.S. laws @Jtepper2
— U.S. Citizen Abroad (@USCitizenAbroad) December 8, 2014
The above tweet references an op-ed that appeared in the December 7, New York Times. The “Op-Ed” was interesting, well written and didn’t add any new insights or information. I then researched who this person is. He is a highly accomplished author, fund manager in London. In fact I intend to read at least one of his books.
Q. Does the U.S. really want to lose citizens of this calibre?
A. They don’t care and they don’t care that they don’t care.
“Stupid is as stupid does.”
This sentiment is confirmed in:
Homelander explains why #Americansabroad are not real Americans http://t.co/IBwErsNu1k – I guess t follows that they should not pay taxes
— U.S. Citizen Abroad (@USCitizenAbroad) December 8, 2014
In the words of this Homelander:
I think the real question is what makes you an American. If you don’t live here and feel no responsibility for supporting the country, why would anyone care if you decide to renounce your citizenship? There are plenty of people in the world who WANT to be Americans. Many of them come here, contribute to the country and want to become citizens. Those are the real Americans, not the folks who inherited the moniker but seem to think they have no responsibility for the contributing anything to the country.
The “op-ed” by Mr. Tepper includes:
The I.R.S. doesn’t tax the first $97,600 of foreign earnings, and usually doesn’t double-tax the same income. So most expatriates owe no money to the I.R.S. each year — and yet many of us have to pay thousands of dollars to accountants because the rules are so hard to follow.
The extraterritorial reach of the income tax dates from the Civil War, when the government wanted to prevent Americans from fleeing to Britain to avoid taxes. This outdated and harmful relic has only gotten worse.
It’s one thing if a New Yorker creates a shell entity in the Cayman Islands to evade taxes. It’s another if an American who has spent most of his life overseas, as I have, creates a legitimate company. The I.R.S. doesn’t care about the distinction. Under a 1962 law, it treats the two companies I’ve started as “controlled foreign corporations,” subject to detailed regulatory requirements, though a majority of our employees and clients are foreigners.
Moreover, if you are an American, you can’t invest in foreign mutual funds without paying punitive tax rates. This is a blatantly protectionist measure for American funds, but it also makes saving for retirement very difficult.
Renunciations of citizenship have soared because of a 2010 law, the Foreign Tax Account Compliance Act, which requires foreign financial institutions to report assets held by American clients or face a 30 percent withholding tax. In response, many foreign banks will no longer take American clients and are terminating existing accounts. The Economist says this “heavy-handed, inequitable and hypocritical” law will cost American banks alone $800 million a year to implement. Moreover, the magazine reported, “seasoned tax dodgers are not so naïve as to hold money in their own names.”
Most of us who are overseas long term simply accept the status quo. Some may fear that renouncing their citizenship will put a bull’s-eye on their back with the I.R.S., even if they’ve complied with all laws. It does not help that members of Congress occasionally threaten to bar any Americans who renounce from ever visiting the United States again.
Like many Americans, I didn’t choose to grow up abroad. My father is from New York, and my mother, who died in 2012, was from North Carolina. They moved abroad for work in the 1970s, and ended up in a poor neighborhood in Madrid, where they ran drug rehabilitation centers. I went to an American school in Spain and recited the Pledge of Allegiance each morning. Except for two years in childhood, four years at college in North Carolina, and two years in New York, I’ve lived overseas all my life. At 38, I’ve voted in only one American election and I don’t have much connection to the United States. Almost all my friends are cultural mutts — people with hybrid backgrounds, for whom nationality isn’t the most important part of their identity. If America makes it so difficult to be American, I’ll happily just be British.
The challenges facing expat Americans abroad would disappear if the United States taxed and regulated only those who lived in America. Sadly, American politicians don’t care about Americans living abroad. It is easier to demonize us as tax dodgers than to fix irrational policies that no longer make sense in an interconnected world. The founders agreed on “no taxation without representation.” Why can’t Congress?
I see this morning my comments and a huge number of others have appeared.
Registered with NYT, none of my comments are showing up! (It is not a waiting for moderation problem, I posted one last night that still isn’t there….grrrrrrr) It is of concern that two out of four of the “editors picks” support the US position.
Many comments on the NYT article this morning, but perhaps many from those here still are not appearing?
There is one comment represented there that I often see but can never understand — it was certainly NOT my experience when the time came (my OMG moment) to *get compliant* in order to file my 8854 to certify my compliance for my most important Certificate of Loss of Nationality. “Homelanders” reading and believing that it is an easy and inexpensive process to file from overseas (and, of course, to believe there is no such thing as double taxation) surely think we are whining. The reality of the complexity to file from *abroad* vs filing inside the *homeland* needs to be emphasized in media articles. Or, perhaps I’m deluded.:
@Calgary411
You don’t understand the comment because the author of the comment doesn’t understand the full extent of his or her tax and reporting obligations to the U.S. Government.
For now, ignorance is bliss.
For later, Boo hoo!
@Whitekat, I know! I am a mutt!
This is the comment I submitted. Maybe it will appear. Maybe it won’t. But I did have to vent.
To the people saying “boo hoo” or “it is just some paperwork”, I’d like to suggest that you really don’t understand the situation. As a long-term US non-resident and dual citizen, the US tax code is an impediment to normal financial planning for non-residents. Examples: The US imposes a taxes on foreign mutual funds that is intended to stop US citizens from investing in them. But, US mutual fund companies will not sell to non-residents of the US. Normal tax-deferred savings accounts in foreign countries aren’t recognized by the IRS. So, to file in the US you need to report the income from these, yet you likely don’t have access to that info, since they are tax deferred. Scholarships, disability payments, maternity benefits are not considered as income, hence aren’t subject to the foreign exemption. Foreign sales tax. VAT, etc is not deductible. And all of this applies to a US citizen whether or not he EVER lived or worked in the US. So, just send in your passport you say? OK, most countries charge about $100 to renounce and allow it by mail. The US charges $2350 and two appointments. The waiting time to renounce in Toronto has gone from a few weeks to over 6 months. Amazingly, rather than considering with an open mind that MAYBE there is a problem, the response of many seems to be to question the patriotism of people who are responding in the only means left available to them.
@ Calgary 411… I don’t think they understand their reporting obligations. I say this because I attend a Baptist church. We have many dual citizens within the church. Yesterday, I found out that the church secretary was born in the US. She also has signing authority on the church accounts. She is doing a tax return, but didn’t know about FBARS. Out of the 14 individauls, only two are doing FBARS. One couple who have only recently come to the church form Texas and work for one of the big oil companies. They aren’t staying. The other an older couple who have owned Remax and lived here since 1967. They recently applied for Social Security and are now in big trouble ! We actually have more than 14 individuals with US taint in the church, but the others were born to one US parent and a Canadian. Their births weren’t registered. Another couple told me that H & R block told them that they didn’t have to do the FBARS because none of their accounts exceed $10,000.00. I told them that it’s the sum of all accounts, not individual balance of the accounts and in US dollars, not Canadian.
For a lot of these homelanders it just comes down to them thinking of dual citizens as having some kind of advantage over them. Perhaps we do in many ways, but just differ from them on if and how we should be compensating the homeland for it. Instead of fondness from their compatriots, they’ll just have to satisfy themselves with disdain. The US has made its decision on how we are to be treated. Act how any reasonable person would under the circumstances.
Most of the US ex-pats living abroad who ‘don’t’ mind filing taxes or being accountable to the IRS most likely only hold US passports.
They’d feel different if they held another passport and being reduced to second class citizens.
These ex-pats probably plan to return to the US someday and want to remain compliant with the IRS non-sense.
From the NYT:
BC_Doc
British Columbia, Canada15 minutes ago
I was born in Boston and spent my first 25 years working and living in the US. During these years I was happy to file and pay taxes to the federal government as well as the state I lived in at the time.
In 1993, I moved to Montreal to study medicine expecting to be gone from the U.S. for four years. Life happened, though, and I fell in love with Canada, had four kids here, and decided to make my life here. In 2001, I took out Canadian citizenship. Officially, I am a dual Canadian-US citizens. In my heart, the Canadian pull becomes stronger every year and my U.S. identity fades.
I haven’t filed a US tax return since I left in 1993. At first because I had no income. Then, because I had a low income. And, now that I do have a generous income, for philisophical reasons:
1) I don’t live there– why would I pay taxes there?
2) I earn my money in Canada. I use Canadian services. I want my tax dollars staying here.
3) I won’t fund the U.S. war machine.
To those who would say I should renounce my U.S. citizenship, I say no. The U.S. needs to end citizenship based taxation– CBT came out of the Civil War. It needs to be tossed into the dust bin of history. End FATCA too– U.S. law ends at the U.S. border. FATCA is unprecedented global overreach by the U.S. What would the international response be if Iran passed a similar law?
FATCA and a renewed focus on CBT has created the exodus of US ex-pats at embassies and consulates. The law needs to be changed.
And an earlier comment published too:
BC_Doc
Coldstream, BC4 hours ago
Thank you for your well written piece Mr. Tepper. These are sad, sad times for the US ex-pat community. I suspect the number of renunciations being reported is a low-ball figure. I don’t believe the official number includes the much broader category of those who “relinquish” their US citizenship. I know when I attended the US consulate in Vancouver earlier this year, the Consular Officer told me they were seeing “too many people to process.”
One comment. I have read many pieces over the past year about the toxic effects of FATCA and citizenship based taxation. In each of these articles, one or more US ex-pats are interviewed about why they gave up or are considering giving up their US citizenship. I have yet, however, to see a politician or State Department official interviewed about FATCA, citizenship based taxation, and the the current exodus of U.S. ex-pats. Perhaps the NYT could ask Secretary of State Kerry for his insight on this topic?
Thanks, Ann #1, for your sampling of one Baptist church (yours) in Canada and the unrecognized incorrect US compliance of your fellow *US Person* parishioners. Multiply that by how many *even just Baptist* churches in Canada and know the mis-mash of ignorance on the part of *US Persons* in Canada then extend that to other countries around the world. A coffee-klatch after Sunday services for all who need to know the real facts on their US tax and reporting compliance requirements?
PS: H&R Block did my daughter’s US taxes one year — she got a $10,000 penalty from the IRS for something H&R Block reported incorrectly. H&R Block did not assist her in correcting their error. Instead, she had to hire another account, a Canadian CA this time, to clear up the mess and get the penalty removed. I, myself — nor my daughter, would ever recommend H&R Block. So, it’s try to do it all yourself (which I certainly couldn’t do correctly OR turn yourself over to the US tax compliance industry if you have enough, as I did, in retirement savings to cover the cost — but, hey, what are those who don’t have that little luxury of retirement savings to fall back upon? No one has yet been able to tell me what they are to do!).
Smart aleck consular officer: nearly 60 responses to this asinine comment; all of two agreed with her (had no trouble getting a comment in)
This, my favourite response to her
Oh my! Last night when I went to bed there were 7 comments and now there are over 1100. I don’t think they were being blocked by moderation; they were blocked by constipation. It’s going to take me quite awhile to read through all those comments and I’ll be watching for obvious Brockers. I do note that of the 12 NYT Picks (so far) I would count 10 as positive and only 2 as negative. Now I’m off to see how far I can get into the rest of the comments before I simply have to do some more chores.
@EmBee
Good luck. There’s simply not enough time in the day………..
I agree that US persons overseas who don’t find the process of filing with the IRS difficult either a) they don’t know their actual reporting obligations (although this is about to change, thanks to FATCA!) or like Don says, they don’t hold another passport and plan to return to the U.S. in several years.
For example, my American nephew teaches English at a school in China (mainly to Koreans). He doesn’t own a Chinese passport nor any property, knows hardly any Chinese, and is under age 35. He files with the I.R.S. like other American teachers at the school, and doesn’t make enough to ever owe any taxes. So, for him, it’s no big deal to live with this system for several years. For people like my DH and myself who are much closer to retiring, who work our entire lives outside the U.S., had our kids born here, pay local taxes, own a house, save for retirement — it’s a whole different ball game. Canada is our home.
Patricia makes it sound like it’s as easy as getting a cup of coffee at Starbucks.
She forget about the 5 years of tax returns, and an exit tax. She’s either trying to conceal the truth or doesn’t understand the renunciation process fully.
What is also offending is she mentions the $2350 like it’s nothing.
The trouble is when you work at the embassy, interact with Americans all day, don’t have to engage the local country’s tax system, you really don’t become part of the local community. The posting is more of a jolly on the US taxpayer’s bill.
As Renunciations mount the need for Citizen’s Service will diminish. The embassy will just have to deal with political issues, but not ex-pats.
Would Patricia like to answer this question? Does the US Embassy in London process more US citizenship requests or Renunciations currently?
We’ll never get an answer for that one.
@EmBee
I used a different pseudonym. ProudAussie would have been a little too inflammatory to use with that crowd.
@Bubblebushtin – Homelanders may think dual citizenship is an advantage, however, I reckon if only 15% of Americans have foreign born parents or grandparents, there are probably at least 30 to 40 million Americans who could get second passports.
Heck if you come from Boston, Chicago or NYC, how many people would be eligible for Irish passports alone? There’s plenty of people of German, Polish, and Italian descent in the US.
If Homelanders could get beyond the ‘we’re the most powerful nation’ mindset and the ‘best country in the world’ thing, they might be surprised you could carve yourself a nice little lifestyle in some Kleinstadt in Germany for example with low crime, good infrastructure, schools, and health care system.
On the BBC ‘Our World’ report highlighted how China is actually building an island out in the middle of the South China Sea to use as an airbase. The US is losing its grip and China’s rise as a regional superpower will change the US forever along with the US dollar’s reserve currency status.
Perhaps it is necessary to start making a distinction between “US expats” and “US emigrants.”
With “expats” living outside the US for relatively short periods (a few years) and intending to return to the Homeland to live again. Many of these people probably maintain significant connections to the US which may even include receiving US source income and maintaining a home there.
“Emigrants” on the other hand are people who move out of the US and build their lives (homestead) elsewhere. They do not have US source income or significant ties other than perhaps having relatives in the US who they would like to visit from time to time.
Its just an idea but from what I can gather, the vast majority of people on this blog would be “US emigrants” or have never lived in the US to begin with.
Making such a distinction may make it easier for “Billy Bob the Homelander” to understand that there are people branded as “US persons” who really don’t have any desire whatsoever to live in the USA. this is traditionally very hard for most Homelanders to swallow due to all the “Land of the Free” propaganda they’ve been fed throughout their lives.
Food for thought anyway.
I’m actually impressed at the comments that were called out.
Someone at the NYT gets it.
Jonathon Tepper wrote:
“The founders agreed on “no taxation without representation.” Why can’t Congress?”
Because most people in Congress haven’t got a clue about the principles upon which America was founded.
@Don
re: “Patricia the US Consular Officer” who commented at the NYT– Again, we have a US-ex pat who is willing to risk things and put it out there (Jonathan Tepper)– one of us who is being detrimentally impacted by FATCA and CBT. Thank you Mr. Tepper and others at this site who have put your name out there on the record. Then we have “Patricia” the anonymous consulate staffer who isn’t willing to go on the record. Millions of ex-pat USCs are getting screwed due to FATCA and CBT but no U.S. politicians, State Department officials, or IRS bureaucrats are willing to go on the record, have a camera and a microphone shoved in front of their face, and explain publicly how the spike in renunciations and relinquishments is a good thing for the Homeland. They can’t, so they shrink into anonymity.
re: Irish citizenship. My grandparents all came off the boat from Ireland. I have an Irish passport sitting in my lock box at home which I have held for 25 years now. I renewed it a couple of years ago. Although I have never lived in Ireland, there is absolutely zero down-side to holding it. It is zero-maintenance.
My US passport, on the other hand (I was born in Boston but left in 1993), is the biggest PITA. Indigenous Australians may have invented the boomerang, but the US government perfected it with the “boomerang passport.” You can try as hard as you can to throw the damn thing away, but it always comes back at full speed aimed right at your head.
@Everyone –
Recommend articles. Even if you are not commenting.
Those numbers who recommend add more weight to certain comments.
@BC_Doc
For most of us, CBT was a ticking time bomb activated by FATCA.
@FromtheWilderness
I view expats as people who’ve left somewhere, and emigrants as people who’ve gone somewhere.