Michael DeSombre, Worldwide President of Republicans Overseas just submitted Overseas Americans’ Input on Individual Income Tax to the U.S. Senate Finance Committee, especially how FATCA and CBT impact Americans residing abroad negatively.
April 14, 2015
The State Department has estimated that there are 7.6 million Americans living outside of the United States. If Americans overseas comprised a separate state of the Union we would be the 13th largest state by population. Our purpose at Republicans Overseas is to represent those millions of Americans living outside of the United States. It is in this capacity that we write today to highlight two specific issues that significantly harm Americans residing overseas and can be easily remedied. The examples and problems detailed in this submission have been provided by Americans living overseas who have been negatively impacted by the Foreign Account Tax Compliance Act (FATCA) and citizen based taxation (CBT).
Summary
1. Reporting of foreign bank accounts and financial assets as implemented by the Foreign Account Tax Compliance Act (FATCA) and the Report of Foreign Bank and Financial Accounts (FBAR or FINCEN form 114) violates the constitutional rights of 7.6 million law-abiding Americans overseas and results in the denial of financial services and professional opportunities to the detriment of the individual Americans. The ability of American enterprises to export goods and services is restricted or denied because foreign financial institutions are denying or revoking financial services preventing American enterprises to engage in business outside of the United States. FATCA and FBAR should be repealed.
2. The United States is the only developed country that taxes the global income of its citizens based on citizenship (Citizen based taxation or CBT) when they reside outside of the country. This means that American citizens residing outside of the United States pay taxes both to their country of residence and, additionally, pay further taxes to the IRS. Double taxation treaties do not prevent Americans from being subject to punitive double taxation because many countries tax their residents through mechanisms other than income tax (which are not creditable against U.S. income tax obligations) and America imposes additional taxes (such as capital gains tax and the 3.5% tax for the Affordable Care Act) for which no foreign taxes may be creditable.
3. The United States implementation of CBT results in lower employment for Americans, fails to raise significant revenue and deters successful businesspersons and entrepreneurs from becoming American citizens. It is far more cost effective for any business enterprise (both U.S. and non-U.S.) operating overseas to hire any person other than an American. The extra cost of hiring an American worker hurts not just the employment of U.S. citizens but prevents U.S. enterprises from competing globally and limits any U.S. enterprise’s ability to expand its operations outside of the United States. CBT should be repealed and replaced with RBT.
4. The Senate Finance Committee should investigate the true costs and benefits of FATCA and CBT so that the maintenance or repeal of these provision would be based on accurate information rather than faulty assumptions as to the intentions of Americans residing overseas.
continued on facebook
Music to my ears. Because SO TRUE. All of it. Why wont anybody listen to the facts of FATCA and CBT. How easy it could be to correct a wrong, and how beneficial for America itself.
Thank you so much for such a comprehensive explanation of the problems we are facing. The current laws for non-resident Americans have reached a tipping point, and the USA is losing so much – money, goodwill, faith, trust – that it’s hard to really explain it all. I have met with foreign bankers, high school children that have never lived in the USA, non-American spouses and US expats that are all horrified to understand the system of laws and penalties they face. I am working hard to convince these people to retain citizenship and/or continue doing business with Americans because change can happen, but these people (myself included) feel deeply abused by our government’s actions. This is the best overall explanation have seen to date. Thank you!
This is such a good submission, it details all the problems. I suspect the US Senate Finance Committee will have lots of very good submissions like this one to read. The real question is will they act on all the information and make changes.
@ Polly It is beyond belief that few seem to see the problems of FATCA and CBT. I am with you, it would be easy to correct all this wrong, instead they want to drive the US into the ground.
Much of what RO writes here will be echoed throughout many of the submissions, validating our claims that serious changes are needed if the US wishes to maintain our presence outside the US. In other words, is a healthy, thriving diaspora important enough for the US government?
The best country on earth comment irked me, but I suppose in a subtle way it points out the hypocrisy of a nation claiming such stature when it’s causing its citizens to be treated like pariahs in the world.
What I like best is some actual, believable numbers applied to what FATCA and CBT are costing the US Treasury and economy, the one vital argument missing from many other submissions, including my own.
This is a really powerful statement. I hope that coming from RO, it will have that much more weight with Republicans on the committee, and spur them into unified action. And hope they outnumber the Democrats.
For the first time, I feel a little inkling of hope that sense will prevail.
I read a few sentences and it looks like the quality is low. Foreign taxes can be credited against capital gains. The ACA imposed a 3.8% tax that can’t be credited not a 3.5%.
Looks amateurish.
Michael DeSombre, President of the Overseas Republicans,
All the words about the Personal Income Tax are useless unless you recognize what it really is. First it is an Idead Karl Marx demanded in his Manifesto. Democrats and Republicans alike have embraced this Marxist Idea and they have done it for their own re election. They are, by their actions, Marxists.
Our founders didn’t like the income tax and the Marxists were not yet born. If they didn’t like it then, why should I like it now? It has caused the collapse of all the democracies of the past and has failed where ever it has been tried.
We are on the verge of finacial collapse because of two things.
1. An unbalanced budget.
2. Excessive taxation of the very people who could and would invest in wealth creation projects.
You need to stop referring to the Income Tax and call it what it really is. It if the MARXIST INCOME TAX.
Every government needs money to operate, so a National Sales tax is what all of y’all should be demanding. It is paid within our borders, so overseas americans won’t pay. Current tax evaders will pay so we cal easily have a balanced budget and avoid collapse of the economic system.
So I am asking overseas Americans to write their congressman (if you don’t have a congressman because of no stateside address the House Ways and Means Chairman is the D.C. Puke to descend upon, with an avalanche of letters)
The statement by RO is subjective, and fails to note the benefits:
1. The folks at Treasury love FATCA … and is a great instrument to exercise unprecedented power at a global scale.
2. The compliance industry (many of whom are American corporations) generate income and jobs. They have no interest to reduce complexity.
3. Perception is reality of sorts, and should not be underestimated! Hence the perpetuation of Stack myths.
That said, Rand Paul has my blessings this time round!
I agree with Neill in that I think a bit more proof reading would have been good but overall this report gets the main points across very well and that’s the main thing for me. I have never heard anyone else before present the fact that 7.6 million Americans amongst 7 billion non-Americans are of little significance to the 100,000 plus FIs around the world. It’s easier and in their best interests for the FIs to drop American account holders rather than keep them, considering the onerous and expensive FATCA form burden involved.
This report, along with the others submitted, MUST be given honest consideration by the committee and then they MUST take action.
When you consider that it took the US more than a century to abolish slavery, a much more obvious, serious, and egregious human rights violation than CBT, I’m not expecting that we will see the end of it in our lifetimes. Women’s suffrage took even longer. It also took a century after the elimination of slavery to actually guarantee some basic civil rights for African-Americans. They’re still working on the details.
The clock didn’t even start ticking on CBT until a few years ago because up until then it was largely unknown and rarely enforced. So maybe somewhere around 2100 they might get around to it (if the US still exists in its present form by then).
Nice report, though.
@Maz57, I want to be more optimistic because there were huge outcries back when the foreign earned income exclusion was abolished back under President Ford. It took several years but my understanding is that the FEIE was restored under President Carter.
Our current problems are far worse, even if mainly because it’s becoming impossible for expats to have normal banking and retirement planning where they live; I thus hope a snowball effect will ultimately result in substantial reform or at least relief! I also feel it would be appropriate for the US to offer former citizens the right to have their US citizenship restored because I’m sure that the bulk of us essentially expatriated under duress due to the impossible circumstances.
Of course many would be too embittered to ever want their blue passports back but there are still many for whom it was a heartbreaking decision who would want to resume citizenship if these issues could be resolved.
This is very good. Click on Comment under the box Republicans Overseas :: AND do read it in its entirety.
Thoughts:
And where is the Democrats Abroad Submission?
I would have put a bit more about discriminatory treatment of US persons living overseas being contra to American ideals such as “liberty and justice for all” and there not being extra US discrimination against people living overseas (as the rights of the US Constitution are not limited to if you live in the US – it does not have this limitation).
Could have been a bit more proof reading, more paragraphs, and use of bolded/underlined subsections.
Any favourite parts?
We should have policies that encourage successful Americans and their children to retain their American citizenship, rather than driving them away from America.
Even if they were to fix this mess entirely and not just apply ineffective stopgap measures (yeah, right!),
Even if I were to receive a signed apology from the US of Arrogance (hardy har har),
Even if I were to be given compensation (LOL),
Even if one day they allow renunciants/relinquishers to get their citizenship back. (not gonna happen – no how no way – that’s not how Murka does things),
I still plan on relinquishing when that becomes possible for me.
I tell people in my country of residence FACTS and gently suggest that it is probably in their best interest not to have anything to do with the US, US businesses, or with Americans in general (parents, DON’T let your children marry Americans! It is dangerous to even allow them to associate with them imo). It is hard going, because the Myth of Murka is strong here (as it is in many places – too many Hollywood movies, I guess)
A big thank-you to Petros, Isaac Brock, and all “Brockers” (I’ve been lurking here for quite some time)
For your viewing pleasure (sorry if this has already been posted elsewhere):
How America Is Like a Bad Boyfriend
So Democrats Abroad has not submitted anything ??
Hard Pressed — great comment and video comparison! Thanks.
Hard Pressed…your and other’s use of “Murka” or “Murika” implies that our struggle is with a few southern rubes from Hee-Haw or Dukes of Hazard. Don’t be fooled…how about Charles Schumer…Carl Levin…Robert Stack…Barack Obama? It makes one feel good to be derogatory sometimes…I get it. But if someone called you a dumb Canuck it wouldn’t feel so good. Stereotypes always alienate in the end. Our struggle is not with people who have a southern drawl…Rand Paul is from Kentucky after all. I am from Wisconsin once upon a time. Call me a cheesehead if you will. It may make you feel better but moves this cause ahead not one iota.
@Lake Superior Guy
Ha ha, me fooled by MURKA? – not likely (been there, done that). Perhaps you didn’t read the rest of my comment, but I certainly wasn’t trying to argue a fine point with homelanders or get them on my side. Actually you may note that I wasn’t addressing homelanders in any way. In fact, I hope any homelanders reading it ARE offended. Frankly, I’ll call that hellhole (oops, sorry, did it again) whatever I feel like – sorry if that offends your sense of political correctness. In the future, please feel free to simply ignore my comments.
So, are the Homeland Republicans actually listening to Republicans Overseas about emigrants’ issues? And do they actually care?
240 House Republicans just voted in favour of estate tax repeal, but their bill leaves Section 2801 in place. I.e. they think the only people in the world who should have to pay tax in order to pass their property on to their children are those who renounce US citizenship or green cards. And they’re willing to put their political capital on the line and punch a hole in their own budget which is twenty times bigger than the JCT’s absurdly-optimistic estimates for FATCA, but couldn’t even get Wicker’s FATCA repeal budget amendment to the floor for a vote.
http://www.bloomberg.com/politics/articles/2015-04-16/parties-clash-over-wealth-as-u-s-house-votes-to-kill-estate-tax
https://www.congress.gov/bill/114th-congress/house-bill/1105
And the sad thing is, Republicans don’t hvae to care about overseas Americans to get their votes. Every time Democrats Abroad open their mouth another bunch of ex-Democrats go make a renunciation appointment (net gain of one vote for the Republicans) or switch to voting Republican (net gain of two votes) because no matter how much the Republicans ignore you, it can’t possibly be any worse than voting for the Democrats.
please explain section 2801
@Hard Pressed
Like I said whatever makes you feel better. But some of us can distinguish between the people who brought us FATCA and FBAR and the millions of Americans who are wonderful people and will one day become aware of this evil and overturn it (like Rand Paul and Mike Lee and Republicans Overseas). Have nice day!
@Eric
I didn’t even know about the GC holders & renouncers situation for estate taxes… so basically… ones with no vote or say… gets screwed every which way…. maybe the illegal immigrants have the best deal… Better yet… immigrants should head to other countries who treat their *guests* better and avoid the US cause the US seems to take in the poor & support them for free… and hard working immigrants/renouncers who take nothing from the US other then what they put in, are punished by having every thing they worked for taken by the gov’t because we are taxed when its made… punished for rules we knew nothing about then they take a big chunk when we drop dead and no one will help the legal immigrants or renouncers….
@Mark Twain
Re: S. 2801
http://citizenshipsolutions.ca/2015/04/13/part-11-s-2801-of-the-internal-revenue-code-is-not-a-s-877a-exit-tax-but-a-punishment-for-relinquishment/
A big takeaway for the SFC and homelanders? The difference between Canada, with its departure tax, and the US which has an exit tax, is that you have to renounce your citizenship to release yourself from your tax obligations to the US. Canada doesn’t force its citizens to renounce in order to live a normal life outside of Canada and therefore doesn’t subject its citizens any stigmas related to tax and renunciation. Generally speaking, Canadians don’t renounce for tax reasons because we don’t have to – a much more humane treatment the US should learn from.
If I understand this correctly, S. 2801 has got to be one of the dumbest sections of the Internal Revenue Code I have seen yet. It tells someone who is considering renouncing:
“If you are going to renounce your US citizenship, do it now, before your net worth increases to the point you become a covered expatriate. If you dilly-dally and allow that to happen, later when you die if you try to leave anything to a US citizen heir, the IRS will take 40% of it. The US is so angry over the fact that you decided to ditch their precious citizenship they are willing to strongly discourage any of that money from ever returning to the US, even though normally the US likes capital flowing into the country and takes active steps to prevent it from leaving. Punishment trumps common sense here.”
Of course, being serially dumb, Congress neglected to mandate a process whereby the IRS would even KNOW whether or not that person was a covered expatriate if that person declined to fill out a Form 8854.
This is the best argument I have seen yet for self-expatriation. Better yet, an ex US citizen should strongly encourage any potential US heirs to get out of the US and renounce their US citizenship themselves before any of this is even becomes an issue. That might be the best inheritance of all.
Bubblebusting There is more to it than that. Canada’s departure tax only taxes capital gains accrued while in Canada. Let’s say I decide to move to the Bahamas to reduce taxes; any capital gain accrued while in Canada would be taxed. But not my RRSP or my house. A huge difference. This was put in place largely because of the Bromfman interests who moved assets offshore before the departure tax was in place.