JC asks that the following be highlighted and discussed in its own post here at Brock.
@8888 Makes this interesting point about Citizenship Based Taxation
http://disq.us/8o0buo on the Washington Times article.
What is a tax? A tax is a government imposed LEVY on the Treasury account holdings of those who receive benefits and or compensation denominated in the none interest bearing debt instruments of the government’s treasury. This means that although all residents pay taxes not all tax payers are citizens. The only common denominator that obligates both citizen and non-citizen to pay taxes is, residency which gives both direct access to the treasury.
Expats have no such access to the U.S. Treasury because they receive their benefits and/or compensation under the jurisdiction of another Treasury and therefore are not under the taxation supervision authority of the I.R.S. Citizenship taxation is a fiction that exist only in the minds if those who don’t understand this basic principle of taxation. The U.S. is really taxing the Treasuries of other nations. This is something that is illegal under international law because all nations are equally sovereign. And no nation can tax another because that would subjugate one nation to another.If the U.S. cannot tax it’s nonresidents on their foreign account holdings with another treasury then the Foreign Earned Income Exclusion is equally fictitious as is any credit or liability that is connected to the income of nonresidents.In the end all taxation is residency based.
Perhaps we are doing some disservice to the cause by reinforcing the name “U.S. Citizenship-Based Taxation” as that name may get wrapped in the flag by patriotic *Homelanders* – the name including “U.S. Citizenship” triggers a patriotic response.
@8888 points out that in the U.S., anyone resident is taxed and you don’t have to be a citizen. So this “Citizenship-Based Taxation” does not describe what is going on. Something like this may be more descriptive and a better presentation:
America like all other nations of the world practices Residence-Based Taxation – they tax all residents whether citizens or not.
A key difference between America and all other developed countries is that America taxes its “persons” (including citizens and green card holders) resident in other countries as if they live in the U.S.
Makes sense to me — I have benefited from the wisdom of *8888* for several years now. I can add this to my list, the reason our *foreign financial institutions* are searching for *U.S. Persons* (not just *U.S. citizens*).
Revenue neutral. Is there a way to point out other legislation passed that is not revenue neutral? Spending legislation is not neutral but sinkhole. Ok they have this bar on tax changes, resistance to change unless revenue neutral. Rumor was that they tried to saddle expats with extra taxes to support highway funding – that was just a tax grab – nothing about revenue neutral in that.
The package may be proposed to change cbt, and to make it revenue neutral; either include with the package a higher tax on homelanders – I say reduce the threshold for the highest income tax bracket; or include in the package spending cuts – I say out of US government pensions. I think we may then have a good package.
Working against us and all Americans is that in the above “revenue neutral” is that compliance costs are not considered. This is not right. They must consider compliance costs, and they have a duty to not only consider compliance costs but also to make them as minimal as possible – as part of reducing the cost of government that taxpayers pay. With compliance costs I am not only thinking of for individuals, and banks but also FFI (that would really tip the scales on FATCA). That is why I want additions to the Tax Payer Bill of Rights in the area of consideration of and minimisation of compliance costs.
A more relevant revenue gainer to offset revenue loss from change from cbt, would be clamp down on states such as Delaware and force the banks there and other similar states to divulge account beneficiaries and make sure interest, dividends, and capital gains are being reported to the IRS from these accounts. First there needs to be a study to estimate the revenue to be gained.
Wilton Tisdale
“Congress has an approval rating of 9% but get re elected 95% of the time. Go figure!??#*?.<"
They hate congress but like their congressman.
"Actually when fully understood 92% of those educated in its benefits were for the FairTax."
About half of US citizen do not pay any income taxes and a bunch of them have non earned tax credit. They may pay social security but that is really a Ponzi scheme and sooner or later the government will have to fund all those unfunded liabilities. These people taxes would increase under FATCA. Even then social security does have some income redistribution aspect which Obama want to increase.
As an accountant you should now this already,
"The rich do not pay the most taxes, they pay ALL the taxes
Buried inside a Congressional Budget Office report this week was this nugget: when it comes to individual income taxes, the top 40 percent of wage earners in America pay 106 percent of the taxes. The bottom 40 percent…pay negative 9 percent.
You read that right. One group is paying more than 100 percent of individual income taxes, the other is paying less than zero.
It's right there in Table 3 on page 13 of the report. The numbers are based on 2010 IRS and Census Bureau figures. "
http://www.cnbc.com/2013/12/11/the-rich-do-not-pay-the-most-taxes-they-pay-all-the-taxes.html
Please note this was done before the most recent increases on taxes of wealthy.
You still really have not answered why your hero Reagan (who I like as much as any modern USA President) allowed complete double taxation of corporate dividend and capital gain. Even a leftist like Trudeau allowed lower taxes rate on these items.
Sounds like some knowledgeable tax people here perhaps with economics degrees. May I redirect your attention to: preparing a revenue neutral proposition for ending cbt on US Persons overseas, then what offsetting tax or budget cuts should this include?
@badger, Thanks for the link, it’s a great and updated article.
@JC, Congress enacted various tax cuts between 2001 and 2003. They had “estimated” that revenue would not decrease because the economy would grow and compensate, but that didn’t happen. Another example, which helped Americans abroad, was the elimination of the limit on the foreign tax credit under the alternative minimum tax. This change surely resulted in lower revenue (although insignificantly), Congress justified it with fairness, declaring that the foreign tax credit should not be seen as a “tax preference”, which is the target of the alternative minimum tax. However, as we know, things only got worse after that: FEIE “stacking” in 2006, exit tax in 2008, FATCA in 2010.
Back to the original topic: RBT can also be called extraterritorial taxation, since the country taxes income generated outside its territory. And I don’t think that US residents would really care about “extraterritorial”. If you want an alternative term for CBT, I suggest something like “unilateral taxation”, since the person being taxed cannot benefit from what the tax is funding.
“Corporations do not now, nor have they ever, paid any taxes.”
Some do. Some go bankrupt because of it. In fact one of the “reforms” that Japan’s current government wants to make, when not busy circumventing its constitution to impose censorship and enable going to war, is to increase taxes on money-losing companies because money-losing companies didn’t have to pay income taxes on their negative incomes. To some of us non-Marxists, progressive income taxes are as fair for corporations as for people, while regressive taxes (such as taxes on payrolls and expenses) are as unfair as they are for people.
“Here is what we need to do: 1.Repeal the 16th amendment to the constitution.”
Not when 99% of the world’s countries have income taxes that are more fair than the US’s system. Income taxes don’t need repealing. Let’s get back on topic to ways in which the US is tormenting its diaspora.
===
“Alexander Graham Bell was one of. Canada’s greatest”
I’m not sure if that counts. He was brain drain from Scotland, but his entry into and exit from Canada net to neither drain nor gain.
“Facebook’s new office has a one-year lifespan. It’s a pop-up boot camp for training local software engineers and then shipping them to the U.S.”
Yes that is sad. However, the really sad part is that Canadian companies are the ones persuading Canada’s best brains to move abroad.
On the other hand, considering how well Canada treats corporations now, I wonder why Facebook wouldn’t benefit from doing what Burger King did.
“The Canadian government tries to say that third world university are producing the same quality student as Canadian university.”
Some do. Not most, but some. I don’t see how that relates to this discussion though.
“Trudeau was a Nazi and Fascist supporter”
So was Canada’s King Edward VIII. Disgusting, yes. Ought to be disbarred, yes. Relevant to this discussion, no.
===
“All he wants to do is drink, smoke cigars, and hang out with his buddies.”
Nah, smoking wasn’t the best thing he did with his cigars. We can praise him for not FATCAing us, though FBAR was already troublesome.
“RBT can also be called extraterritorial taxation, since the country taxes income generated outside its territory.”
That looks like an unnecessary word game. An RBT country taxes income of its residents (independently of being an SBT country, taxing income generated inside its territory).
Everyone who buys anything pays the taxes a corporation adds into their product, so even the poorest schmo pays those plus the most lied about tax of all, the self employment tax, the payroll social security tax and they are the least able to pay the tax.
Under the proposed FairTax, we stop pretending that corporations actually pay taxes, along with the working poor getting a break on their purchases, when companies no longer collect taxes for the government and the prebate sent to every resident in the U.S. who registers,(a refund in advance of money you have to pay in taxes on purchases up to the poverty line) So with the prebate and companies not charging the 30% premium for goods and services, the poor gets about a 37% raise in pay.
Now the rub====THE FAIRTAX STOPS THE CONGRESS AND THE SENATE FROM EXTORTING CAMPAIGN CONTRIBUTIONS FOR THE ENACTMENT OF ”TAX EXTENDERS” FOR PEOPLE WHO HAVE GIVEN A CAMPAIGN CONTRIBUTION AND PASSING THE EXTENDER EVERY ELECTION YEAR FOR ANY CONTRIBUTOR WHO GIVES TO THEIR CAMPAIGN. There has been over 9000 of these tax extenders added since 1986 and each time a congressman gets a contribution. It is tantamount to a bribe, but congress has made it legal.
Congress has a 9% approval rating but get re elected at a 95% rate, because they have the money and you don’t.
contributions added to the
It is a good thing your dog cannot read or you’d have to hospitalize him!!
@Normand Diamond With RBT taxes are on global income, so tax is also on income generated outside of the country of residence if there is any. With CBT the assumption of US taxation is that one is resident in the US and taxes apply in this regard, yet also country of residence will tax as if resident, with tax treaty in the middle giving “source” country right of first taxation under the tax treaty.
If this confuses us then little hope of explaining more widely.
google
economics.uwo.ca/undergraduate/wuer_docs/2003/1_Uhm.pdf
To read full article on Canadian brain drain it is pdf
The Brain drain from Canada is real.
Of course Wilton can use the other 2 article I included in regarding that immigrant from other 3rd world countries are a net economic drag to the economy.
I still think there is no way that electorate will accept Fair Taxes. The vast majority want free stuff. They are by his definition socialist. The NDP even won an election in Alberta which had a flat tax and was business friendly. The Greeks voted not to pay their debts.
@Wilton J. Tidwell,
Whatever the merits of the Flat Tax, the chances of it ever getting passed are much smaller than the chances of changing the current income tax system to RBT. I know of no country that has ever abolished the income tax and replaced it entirely with sales tax (which is what Flat Tax basically is), whereas there are numerous working examples of countries that have abolished CBT and replaced it with RBT.
Another argument for RBT is that it makes it easier to harmonize tax treatment between the US and other countries if the US uses the same system those countries do. Flat Tax would make the US’s tax system even more dissimilar to other countries’ tax systems than it is now, creating even more cross-border frictions and inefficiencies.
Hong Kong has been hinting for years about replacing income tax (paid by something like fewer than 10% of the population) with a VAT. Every time they send up a trial balloon about the “fairness” of such a tax system, it is loudly shouted down…including by a significant number of income tax payers, almost none of whom ever complain about HK’s 15.5% maximum tax rate being burdensome or unfair. HK always runs a multi-billion dollar surplus (largely from HK’s own version of property taxes and stamp duty on stock and property purchases). Few if any voices among the 10% who do the paying ever complain about this.
If you can’t sell a flat tax to the most mercenary, money-grubbing society on earth, even among its top income earners, I find it hard to imagine that you can sell such an idea in the USA.
In any case, whatever the merits of a Flat Tax, I’d hate to see it creeping into the conversation we’re trying to have with Homelanders about Extraterritorial Taxation. It’s asking for way too much cognitive shifting at once. As much as I agree with many of Wilson’s points, I wish he’d save this for a separate battle.
This is on and off topic. The DemsAbroad recently posted on FB that they condemn the RO and Rand Paul law suit as irresponsible and driven by greed. They proposed their counter approach which is to tweak the FATCA so as to harm less – I suppose in much the same way that FEIE squelches the voices of dissent with targeted complacency. People responded that the real problem is CBT and DA further stated that this is not the issue at hand, but for the record they have been opposed to CBT since 1992. After 23 years of opposition with less than nothing to show for it (the Dems are the greater evil of the two parties against US Persons Abroad), the DA have just proved that they are irrelevant in their own party.
Their only purpose is to get-out-the-vote. The party will patronize them at its pleasure.
Meanwhile, the RO have seized an historic moment with the lawsuit by taking an unorthodox and bold approach to reach out to US Persons abroad to say to them “we support you”. This is not “we hear you”. It is much stronger. But even “we hear you” would be a first for us. Which brings me to my appeal:
There is a web site that tracks public opinion about pending legislation in the US called popvox. I was told that it gets the attention of members congress, especially when there is a large volume of activity around a piece of legislation.
There is a bill H.R. 3078 proposed by Caroline Maloney (D-NY) and Mike Honda (D-CA) for congress to study the impact of legislation on Americans Living Outside of the US. This was recommended to a friend on Facebook and when I went to the site, it had only 4 votes; 2 for and 2 against. I asked my friend to post an appeal on FB to get people to go to the site and vote for it. It is now 35 for and 3 against.
One of the myriad excuses that Congress, their controlled press and the US Govt use against US Persons Abroad is that the problem is isolated and small: e.g. 3,000 people renouncing each year out of 7.6 million is nothing; and 376 stories of pain and tragedy over “is no crisis”.
As we all know, we are not part of the US community and makes us fair game (“if you are not at the table, you are lunch” — Billy Tauzin). Even when we make our voices known, the very same people who admonish that the US is a democracy and its people have the right to change the laws, minimize and crush our voices.
If this simple legislation is approved, it will force the USG to do an evaluation of the pain inflicted on families all over the world with data that they, themselves commissioned and vetted. It would take away the convenient excuse to look the other way while continuing the infliction. Unless, of course, the legislation is used to prove that the disenfranchisement is indeed insignificant. But if the legislation is never passed, the American people can return to the hollow comforts of their willful ignorance.
A total of 38 voices seems nothing and can easily be swept aside by Congress and their allies in the US press. I note that at this point, the H.R: 3078 has the highest level of the participation and our appeal on FB is not even 24 hours old. On top of that, it has not yet seen the familiar faces of the IBS.
My dream is that the site will see 7.6 million votes (up or down – it does not matter). It will be the loudest voice that web site has ever seen. The message is clear – “we are here”.
Here is the link:
https://www.popvox.com/bills/us/114/hr3078
Unfortunately, you have use a US address to register – irony indeed… If you don’t have one, then use the address of your representative’s office and say that you’ve done this and why, so that they will not see it as a prank.
Please, do your best – use e-mail, friends, social media, to appeal to the few in the homeland know that we exist, who care about us and know our suffering. After you make your appeal to your friends, thank them when the numbers go up and then give them periodic updates to let them know how we’re doing.
I know – this vote does not mean anything either. It will be so easily dismissed because there is no validation of identity or authenticity. However, just the fact that we blew the roof off the site will get attention.
@ Orwell
It would be safer for some people to ask a friend or family member in the USA to proxy vote for them. I think that’s what we’ll do. I’d like to see your dream come true too.
STATUS
PopVox says:
Let’s see if we can (with a little help from our US friends and family) use this voice to push H.R.3078 forward to a vote.
“Here is the link:
https://www.popvox.com/bills/us/114/hr3078
Unfortunately, you have use a US address to register – irony indeed… If you don’t have one, then use the address of your representative’s office and say that you’ve done this and why, so that they will not see it as a prank.”
Yes it’s irony indeed. But if you don’t have a US address, how do you have a [mis]representative whose address you can abuse?
@ Norman Diamond
Do you know anyone in the USA who could register your support on PopVox for you — like voting by proxy? If you do then send them a sweet, please, please e-mail to ask this favour of them. Include the link and a small explanation of why you are asking (i.e. this bill is very important to me but PopVox requires a stateside address). The bill is simply asking for a committee to be formed. I can’t see why too many people would find that objectionable.
@Norman
None of us really have a representative and a very few have a meaningful “last domicile”. My neighbor has not lived in the US in 50 years and his last address was demolished and turned into an office park decades ago. Get as close as you can. For PopVox, the (sad) truth is that it does not matter because there is no real verification. The parties will throw this data out just like they have always done. However, it will get attention if there are 7 million votes for one obscure proposal on a site that does not get much more than a few dozen votes per issue.
@EmBee
I agree with your point. If you look at the comments so far, these are from sympathetic and concerned Americans on-shore.
To reach such a lofty goal as 7 million votes, we need a simple personal objective:
1) we must each (without fail) register and cast our own voice, and
2) get 5 more (unique) people to do the same.
If each person does this and cascades the same objective successfully, we will reach 7 million in just 10 cycles. i.e. 5^9.8 ~= 7 million
Each person might have to reach out to 20 people to get 5. If some of your 20 have already been reached by other people, then it becomes a drumbeat to action for the indolent or reticent. Another challenge is that the “newly abroad” may not yet feel the pain of those who were abroad before 2009 and they may lack motivation. Also, sadly, among my long-term abroad friends, more than 1/3rd have already renounced or live in fear that speaking out would jeopardize their on-going efforts to renounce.
A cycle could take a day or a week. There is time. But do the math – in just 3 cycles, each of us could have 125 people voting and that would blow the doors off of the current numbers. In five cycles, we would have almost as many people voting on popvox as there are people renouncing each year. The magic would come at 6 cycles – 15,000 people would open eyes. How long could 6 cycles take?
But we could not possibly stop there. They would say 15,000 unidentifiable voices is irrelevant compared to millions abroad. At 7 or 8 cycles, the numbers would approach or reach 6 figures. Then we tell the journalist to have a look. Wouldn’t it be great if the Guardian published an article linked to Boris with the observation about “the crisis denied”?
My wife has reached her goal and more in just 24 hours. I am not yet half way to five. Today, I will ask my 14 year old daughter and her friend to register and vote because both are talking about what they will do when they turn 18 and are allowed to renounce.
My son missed the renunciation window because the waiting list is too long, so now he has to pay the 2,300 USD, so he’s stuck with US citizenship until we can raise the money to free him. He will register his vote.
My 92 year old neighbor is a USP who has not visited the US since the 60’s. He has had to hire a law firm to handle his US filings for his pension income. He’s now blind and, so my son goes over to read his letters and email to him. This has left my son with a profound sense of fear. He will ask our neighbor allow us to register his vote.
“My son missed the renunciation window because the waiting list is too long, so now he has to pay the 2,300 USD”
But he could try for a job as a poll worker in the next election, report his relinquishment, and save the US$2,300, right?
Actually I wonder why nearly any resident of Canada has to go to a US embassy or consulate to renounce. Why not just get a ride to the border, walk across the bridge, present their Canadian passport, and report their relinquishment?
If the 14 year old is really brave, do the same. Follow it up by not filing FBARs. When penalized for failing to file FBARs, try to get the court to rule on how it’s possible for a 14 year old to be too young to relinquish with informed willing intent but old enough to be penalized on FBARs. This really requires bravery because the court will most likely refuse to explain and just uphold the contradiction.
HR 3078 is reincarnated HR 597 that did not go anywhere. Nice overall aim of studying impact on government policies on US persons overseas. Yet the terms of reference are highly limited – out of touch – such as to help US persons overseas vote in US, and help US persons overseas register their children as US persons. What would one expect from a Democrat dominated caucus. I mailed a few members of the caucus a lengthy tome a over a year ago, nada.
https://honda.house.gov/news/press-releases/americans-abroad-caucus-members-maloney-honda-new-commission-needed-to-study
A mission is to get them to scrap their, IMO, within the beltway terms of reference, and use the Senate Finance submissions, without ignoring them, as the basis for a new terms of reference.
Back to the topic:
I like @ShadowRaider ‘s:
to which I may add “without consent”: Unilateral taxation without consent may be one way of explaining.
About needing a US address for PopVox. Come on, people–choose a town at random in the Homeland and find the address of a Starbucks or Burger King. You can simply open Google Maps and zoom in close on any neighborhood, and businesses will pop up.
Do you really think anyone is going to cross check those addresses, or write to you there?
Using such an address is no different than some of us using our “last domicile address” (in my case, from 24 years ago!) Somebody else lives there now. I could have as easily used the address of the Krispy Kreme down the street.
Get on there and vote for the bill. I did.
Voted. “My” reps have gotten an earful from me before, to no effect, but what the heck, one more can’t hurt.
A flat tax is as bad as a progressive tax. Those who cheat and evade the regular tax will evade the Flat tax. The only fair to all tax, is the FairTax. This is a pure sales tax with no other federal taxes,not a VAT, no social security tax and not a chance any politician will vote for it because it rakes away the politicians ability to extort campaign contributions. A 9% approval rating and a 95% re election rate. Go figure. They have the extorted money and a challenger simply cannot compete. Our congress is a bunch of criminals who exempt themselves from the laws they have passed.
i was not advocating a flat tax. I and millions of us on shore taxpayers want The FairTax, a simple sales tax on all new goods and services. Not a VAT either. All taxes except the FairTax are simply evaded by anyone who has the chance such as cash transactions.
The FairTax doesn’t have a chance as long as it is legal for congressmen to extort campaign contributions as they now do. No Contribution on an election year, no extension of your ”tax extender”. congress is a den of thieves who with a 9 % approval rating get re elected at a 95% rate because they hav exempted themselves from criminal arrest for their criminal acts. Just try extorting money from your neighbors an boom, jail time. Congressmen do it all the time and call it voluntary campaign contributions. Each large check is for something. I think the phrase is ”a quid pro quo” (something for something) give me money and I will get you a tax break. A Hideous system.
Sorry, Wilton, you are right, I mis-typed. What you are promoting is called the Fair Tax, not the Flat Tax. Still, what I said (and you seem to agree) applies: it will never fly.
Not that I want to discourage you. You should fight for what you believe is right. Just don’t expect much support from around here, where our objectives are, admittedly, a bit more limited. (I, for example, just want the pain to go away, for me and my progeny — and the Fair Tax, I have to say, does not seem the most likely way to get there.)
since it abolishes all other taxes, it makes all off shore people get what they desire–no IRS, No tax forms–Only people present on shore pays, but even the pimps and drug lord pay.