Liberty and justice for all United States persons abroad

The Isaac Brock Society

Posted on by Posted in Issues regarding US persons abroad 10 Comments

Introduction: complexity = your best tax planning opportunity …

In the post: “While some Homelanders have a private tax system – USA imposes FATCA and CookvTait on #Americansabroad” I argued that: the more complex the system, the less the possibility of understanding the rules. The less the rules can be understood, the more the rules can be exploited. The super rich are able to pay in order to exploit the complexity of the rules to ensure that they pay a lower percentage of tax. This is the true cost of the complexity of the Internal Revenue Code. It is also why the biggest threat to America is not from outside the borders. The biggest threat to America is a Congress that uses the Internal Revenue Code to do political favors for favored individuals. Remember the story of Mr. Stack (and I don’t mean the Mr. Stack of “It’s a myth fame)“.

Wilton Jere Tidwell commented that:

The Marxist Income Tax lends itself to evasion unless you are honest and then it is so complicated that nobody gets it right. There are more words in the tax code than in the Christian Bible and the code is harder to read and understand.

We really need to go back to the founders idea of a sales Tax on all new goods sold, that way even the pimps and others criminals would pay as they spend and the overseas citizens could live their lives without fear of the Jackbooted IRS. The latest is they port of entry officials will check to see if you are tax compliant and confiscate your passport or revocation if you aren’t compliant.

I am a proponent of the FairTax and until we do it there will just be more hardship and strife.
Congress wants the issue and also wants the campaign funds they get to give special tax breaks to the people with money to contribute to their funds.

As goes the complexity of the Internal Revenue Code, so goes the opportunity to exploit that code for the payment of less tax.

Class warfare: It’s about getting somebody else to pay for you to live …

While observing that his secretary paid a higher percentage of tax than he did, Mr. Buffett famously explained that:

The true motivation for FATCA – Is FATCA an example of class warfare? Hmmm …

The following comment appeared as part of the above Facebook discussion:

Brian Dear The true motivation is because Democrats consider anyone overseas a potential “rich tax dodger.” It’s class warfare at it’s worst. They can “go after” “tax cheats” and thus win the support of their constituencies.. the majority of whom pay very little income tax (or even get free money as the Earned Income Tax Credit.) So FATCA, while hurting Americans overseas, actually let’s Democrats score political points because the average Democrat voter can’t relate to or even care about an overseas American.. thus overseas Americans are a “free” target with no political consequences but plenty of political benefit. Proof of this is the fact that even Democrats Abroad do not oppose a FATCA repeal. So that leaves overseas Republicans and Libertarians… of which there are about 8 worldwide, based on the political attitudes of many people in these overseas American groups. If there is a single person that complains about FATCA and CBT and votes Democrat.. then they’re getting EXACTLY that for which they voted. As certain pundits like to say, “Own it.” Anyone who is voting Democrat OR NOT VOTING at all has earned FATCA.

Before anyone thinks I’m being aggressively partisan, please take a moment to look at the legislative history of FATCA. It was proposed, and strenuously argued by Democrat Senator Carl Levin from Michigan.

Here is Senator Levin that are in the Congressional Record (https://www.gpo.gov/…/CREC-2010-03-17-pt1-PgS1633-8.pdf…

(go to the right side of page 3 for the entire testimony.)

Please note that he mentioned reducing “tax avoidance.” Tax avoidance is NOT a crime. Levin admitted that he didn’t entirely care about criminals, but also “tax avoiders.” That’s a subtle thing, but very significant. Meaning, one of his intents was to cause discomfort and harm to law-abiding overseas Americans. Let that sink in.

Here are some selected experts (please read the entire testimony in the link above..)

“Right now, thousands of U.S. tax dodgers conceal billions of dollars in assets within secrecy-shrouded for-eign banks, dodging taxes…

…But under this legislation, for the first time, foreign banks will be required to disclose their U.S. account holders to the U.S. Government or face significant penalties. This provision will make it far more difficult for tax dodgers to conceal assets and income in foreign banks. With increased transparency will come less tax evasion, less money laundering, and less crime…

…Certainly this legislation will not end tax avoidance or money laundering.

…I believe our tax enforcement regime could be strengthened by provisions of the Stop Tax Haven Abuse Act, which I introduced with Senators MCCASKILL, NELSON, WHITEHOUSE, SHAHEEN, and [Bernie] SANDERS. For example, Treasury should have authority to prohibit U.S. banks from participating in wire transfers with or honoring credit cards from overseas banks that impede U.S. tax enforcement.”

There’s much more.. but take note: the three senators partnering with Levin on the Tax Haven Act were ALL Democrats.
Here’s the roll call from the House: https://www.govtrack.us/congress/votes/111-2009/h408

235 Democrats for
8 Against
24 Republicans for
149 Against

Obama signed it.

So as far as “true motivation” — Carl Levin’s own testimony will tell you exactly what you need to know.

Punishing those who both comply with the law and “avoid taxes” by complying with the law

I bolded the following excerpt from Mr. Dear’s comment:

Please note that he mentioned reducing “tax avoidance.” Tax avoidance is NOT a crime. Levin admitted that he didn’t entirely care about criminals, but also “tax avoiders.” That’s a subtle thing, but very significant. Meaning, one of his intents was to cause discomfort and harm to law-abiding overseas Americans. Let that sink in.

In previous posts (here and here) I argued that when it comes to people like Senator Levin and the spokespersons for “Tax Justice Network”, compliance with the law is completely irrelevant. Completely irrelevant. They simply want to punish individuals or entities who are engaging in conduct that they don’t like. In a previous post, I suggested that Americans should ask whether they want “a government of laws or a government of Levins“? That post included the following poll:

Should the U.S. be governed by law or by Levin?

As a reminder – straight from Senator Levin’s mouth …

The issue according to Levin: The Opening Statement

Tuesday, May 21, 2013

Today the Subcommittee holds a second hearing to examine how U.S.-based multinational corporations use loopholes in the tax code to move profits to offshore tax havens and avoid paying U.S. taxes. In September, we examined two case studies: (1) a study of how Microsoft Corporation shifted profits on U.S. sales to U.S. customers from the United States to an offshore tax haven; and (2) a study of how Hewlett-Packard devised a “staggered foreign loan program” to effectively repatriate offshore profits to the United States without paying U.S. taxes that are supposed to follow repatriation.

Today the Subcommittee will focus on how Apple effectively shifts billions of dollars in profits offshore, profits that under one section of the tax code should nonetheless be subject to U.S. taxes, but through a complex process avoids those taxes.

Our purpose with these hearings is to shine a light on practices that have allowed U.S.-based multinational corporations to amass an estimated $1.9 trillion in profits in offshore tax havens, shielded from U.S. taxes. One study has estimated that offshore earnings stockpiled by S&P 500 companies using these techniques have increased 400 percent in the last decade.

It’s clear that Apple is acting according to and in compliance with the law. Yet, Carl has a problem with the fact that Apple is compliance with a tax code created by Congress in response to special interests. U.S. democracy is a marketplace where the creation of laws are bought and sold. The Levin’s of the world are completely responsible for the laws of the country. Yet, Levin is upset about the effects of Apple’s compliance with the very laws that the Levins have made. How insane is this? Really, has this man gone completely out of his mind? With Carl, you just can’t win. There are two types of corporations – non DNA persons – that Carl has a problem with.

Type 1: The U.S. corporation that DOES NOT comply with U.S. tax laws.

Type 2: The U.S. corporation that DOES comply with U.S. tax laws.

The law be dammed! The test of good Americanness is now whether you do what Carl wants.

How do Senator Levin and his fellow Democrats get away with this?

The answer is that the complexity of the Internal Revenue Code means that it cannot be understood. This creates situation after situation where “strict compliance with the law” leads to results that were not evident to the legislators, not anticipated or intended. For those results that were:

“Not evident to most of the legislators” – the Internal Revenue Code can be used to hide pure evil intent (the story of Joe Stack)

“Not anticipated by the legislators” – the complexity of the Internal Revenue Code can be used by corporations and wealthy individuals to significantly minimize their tax bill (the story of U.S. multinationals)

“Not intended by the legislators” – this is really the story of Americans abroad. In 1986 the Reagan administration enacted the PFIC rules. In 2009 the IRS began to use those rules to confiscate the assets of Americans abroad.

So, what does it all mean?

Well, at a bare minimum the United States of America – that great citadel of freedom and democracy – is ruled by the IRS and an Internal Revenue Code that nobody can understand.

Who are the beneficiaries of this sad state of affairs?

1. The compliance industry

2. Politicians of all political stripes who profit from confusion

In an earlier post, Milton Friedman explains how the politicians and the compliance industry make it so difficult to effect tax reform.

Who are the losers?

Everybody.

Renounce and rejoice!! – It’s the only thing you can do.

10 thoughts on “The #FATCA is that: The Internal Revenue Code is the greatest weapon on the battlefield of class warfare”

  1. Reading Joe Stack’s letter now has such a different feeling than 3 yrs ago. Especially noticing Marcio’s comments.
    I remember thinking that I could understand his frustration but that what he chose to do about it seemed extreme, far more than I could ever.

    Now all I see is the unnecessary destruction of a human life.

  2. I don’t want to defend Democrats, especially since FATCA, but despite their innumerable shortcomings they do, overall, a more competent job of running the country (less incompetent, maybe) and are generally slightly less in the pockets of the oligarchy. Just thinking 15 years back, Al Gore made me nauseous and I neglected to vote, thinking there was no real difference between parties. The subsequent catastrophic W presidency made me ponder what 8 years of a Gore presidency might have been like. Probably a lot less deficits, less tax cuts for the super-rich, probably no Iraq invasion, and perhaps more environmentally friendly policies. And note that W now appears, in contrast to current GOP candidates, quite the moderate.

    I think everybody agrees how corrupt(ing) the tax code is, and that GOP language is sometimes more reasonable in this respect than Dems’. But in practice the GOP will probably, bar another Reagan, do absolutely nothing to simplify the code.

    As for flat tax and consumption tax, I also think there is room for a progressive income tax. That’s a question of viewpoint, I respect people who disagree. But that progressive income tax should be simple and without loop holes. Maybe something like Reagan tried to do when simplifying. 4 or so easy to understand tax brackets, 10%, 20,30,40%. Yearly indexed according to inflation. Nothing else.

  4. @Fred

    It seems to me that the question is whether you vote for the Party that:

    1. Has made it very clear that it intends to destroy Americans abroad (there is absolutely no doubt at this point that Americans abroad ARE THE TARGET OF FATCA); or

    2.The party that does NOT intend to destroy you (but may do nothing to save you).

    Let’s imagine a ballot that asked the above questions and did NOT put the name of the party beside the answer. Which way would/should you vote?

    Your comment reminds me of a 2012 interview given by Charles Adams (not the tax historian but a spokesperson for the Obama campaign) which appeared at the following post:

    https://renounceuscitizenship.wordpress.com/2012/11/02/charles-adams-on-fatca/

    Here is the video for your viewing pleasure.

    Pick this up at the 3:00 minute mark:

    https://youtu.be/u5foXDWnv18

    What you will see is the same argument that one should stick with the Democrats because the Republicans might not be better.

    What follows is a synopsis of the post at the RenounceUSCitizenship blog.

    A few points I’d like to highlight. The beginning of the video is good and he explains well FATCA and its consequences. The end is more interesting. Charles Adams says:

    4:50 – american living overseas have been heard, resulting in the delay of FATCA implementation, and he hopes that it will be further delayed until the entire concept is revisited.

    6:08 ”the aim of the US administration, and this is not particular to the Obama administration – it was the case already with the predecessor adminstration – it will be the case tomorrow with whomever is elected to the presidency of the United States, is to pursue delinquent American taxpayers who owe money to the Federal government on unreported income from undeclared bank accounts“.

    He seems to infer that that does not only include mainlanders, but Americans living abroad as well. He fails to mention that this whole thing impacts immigrants, and that FATCA or not, the chase of undeclared foreign accounts is going to continue.

    And he continues on by:

    “The undeclared bank account are not only in Switzerland – in fact they’re not even principaly in Switzerland. They are in various offshore jurisdictions. I will share with you a simple fact, which is that by large, people with undeclared accounts offshore… like to have their money in places where they can go and visit it over a weekend, say. And that would suggest that most of the undeclared money belonging to American citizens are not at all in Switzerland, nor in Singapore. They are in places that are within easy reach of the American mainland.“

    So here, he seems to talk mainly about tax evaders living in the US, obviously. He failed to mention that the main problem is citizenship based taxation.

    Note that he implies that a large number of these illicit accounts must necessarily be in Canada.

  5. It’s beyond evident that the US extraterritorial citizenship-based tax system seeks to force people living outside its borders, who’ve already paid their ‘fair share’ in full (and possibly higher that US taxes) to the country where they actually live, work, earn, hold their assets and enjoy ACTUAL benefits (ex. Canada) to pay unconscionable and useless sums to US tax lawyers and accountants to prove via complex (and dangerously labyrinthine paperwork fraught with bankrupting layers of penalty structures) that they owe zero annually to a foreign offshore tax and financial crimes enforcement agency (IRS and FINCEN), for the rest of their lives, and to twist or forgo or lose the legitimate enjoyment of their legal, local disability and other government derived benefits, savings and ordinary financial arrangements (e.g. avoiding anything the US levies punitive tax and penalties on – like Canadian mutual funds)is clearly immoral financial and economic warfare. It is also an unjust impugning of individuals without cause or proof – deeming them criminals before the fact (FBAR and FINCEN) which is forcing us to fend off aggressive assault and injury from afar. The assault and injury includes ALL of the NON-US taxpayers and NON-US citizens living in NON-US countries who must now pay via their local NON_US taxes to implement and defend the misguided and immoral local implementation of foreign US laws on their local institutions, agencies and fellow residents.

    The fact that the compliance burden falls heavily even on people whose assets, income and means is ordinary and even BELOW the median or average – and who have no political voice or influence demonstrates that there is definitely a class component. There is nothing ‘progressive’ about it.

    There is also a definite and clear US bias and added layer of assault against those with disabilities and minors living outside the US – via the US tax and penalty structures imposed extraterritorially on the disability benefits and grants and education savings, grants and other benefits provided by our local government and fellow taxpayers to provide for the material support and education of those who cannot provide for themselves.

    We are under direct assault from the US – who is actively and WILLFULLY pursuing a path which destroys or seeks to decimate our legitimate activities and local savings, family homes (often our largest single nest-egg asset), ability to engage in normal financial roles as individuals and as family units, threatens our ability to act effectively as an executor, hold employment or voluntary roles with any signatory or co-signatory capacity, etc.

    And, laughably and ironically, it is only those with the most significant means and thus significant opportunities, that have the resources and access to specialized assistance and avenues to work around US laws no matter how punitive and stringent they become for the ordinary masses.

    The now ubiquitous fee of 2350. US dollars – both now imposed whether to renounce or to relinquish, and the denial of even that avenue of ‘relief’ to minors (until the US judges them ‘mature’ enough) and those deemed legally incompetent (denied by the US forever), or to those who cannot pay the fee, has created a burden that falls far more disproportionately on those of lesser means. The 2350. is a bigger burden proportionately to those who have less ability to pay. A family may face multiples of the 2350. in order to free all of its members.

    That does not include all the compliance and financial planning costs and forgone opportunities and now growing potential denial of travel (via the newest passport restrictions passed) in order to exit in the manner that the US – with growing collusion by the State Department, demands.

    May we be successful in defeating both the US extraterritorial assaults, as well as the Canadian government’s collusion with the destruction of our Charter and Constitutional rights and wellbeing by a foreign government.

    This is not ‘just’ about taxation per se – as USCitizenAbroad has said, this is about ‘life control’.

  6. I think FATCA is supported mainly by two things: (1) ignorance by most people in the U.S. that some of their citizens actually choose to live abroad and are hurt by CBT and FATCA, and (2) cynical exploitation of U.S. expats (and of other countries) for financial purposes by the few U.S. politicians and bureaucrats who are not ignorant of the effects of CBT.

    I see little evidence that the press is making sufficient efforts to overcome the ignorance, and I don’t expect the cynical exploitation to end by itself. So I feel I must continue to support financially the ADCS court challenge of the FATCA IGA. to the extent that I can. I will make my next contribution early in the new year.

  7. Thank you, badger, for this description of what we are up against in Canada and other countries around the world. With your permission, I will use this for follow-up to my government representatives, additional information to Office of the Alberta Public Guardian and Trustee, and for any donor-related conversations.

    Best to us all for the New Year!

  8. Best to you and all of us @calgary411, for a Happy New Year!

    May 2016 bring us the relief and justice that we have been looking for since 2011 (and which for some will come so very very late, looked for decades before this, who were aware and active on these issues before we here at IBS had ever heard of them). I am thinking of those who have passed away without ever seeing a resolution or remediation.

    I am also thinking of those who are even now learning of this jeopardy, or who are about to enter even further into the lion’s den, either in ignorant bliss, or still thinking that ‘pish, twill all be well’…. that the US could not possibly be so draconian or so insane as we describe. Have just tried to warn a Canadian only citizen – whose Canadian-only retiree parents have bought Arizona property and don’t seem to sufficiently understand US tax laws as applied to even those whose permanent home is Canada, or then there is a related Canadian born dual young adult about to move to the US for sake of a Canadian-only spouse’s career, but who has been dismissive and cavalierly unconcerned about all this since first listening to me raise it as far back in 2011 (and who as far as I know is still non-compliant and hasn’t renounced). I’ve given up on trying to warn some, because they think I am exaggerating the complexity and the threat needlessly.

  9. “Maybe something like Reagan tried to do when simplifying. 4 or so easy to understand tax brackets, 10%, 20,30,40%. Yearly indexed according to inflation.”

    Reagan didn’t simplify anything. We can be grateful that he brought back the FEIE but the interaction between FEIE and FTC is so complex that even IRS lawyers and DOJ lawyers don’t understand it.

    We can be moderately grateful that he did some indexing for inflation like Canada did except for a few years of Trudeau senior. But Alternative Minimum Tax isn’t indexed. I don’t recall if I had to do AMT computations once or twice, and luckily it still came out to $0.00, but it was yet another compliance pain.

    The one time I invested in a limited partnership[*], there was one additional line item on a Canadian return but an additional ton of forms for a US return, so complicated that the IRS couldn’t even figure out which forms to send me.

    The reduction in quantity of tax brackets is just about irrelevant. If you can use the Tax Tables it’s already built in, just look up your number. If you have to perform a computation, or a few dozen self-contradictory computations due to the interaction between FEIE and capital gains/losses, the problem isn’t the quantity of tax brackets.

    [* Warning: If a non-resident Canadian invests in a Canadian limited partnership, it might become impossible to figure out the amount of that one additional line item on a Canadian return or which Canadian form it goes on. Of course that’s still pretty trivial in comparison to the effects on a US return, but it’s still enough for me to learn not to repeat that mistake.]

  10. Lenin said: “The way to crush the bourgeoisie is to grind them between the millstones of taxation and inflation.”

    Lenin and his band of bloodthirsty Bolshevics went on to murder tens of millions of white Christian bourgeoisie. The FDR administration was also packed with closet Bolshevics. They called themselves “Progressives”. They still do. They covered up Lenin’s and Stalin’s genocide from 1922-40 (see Here ).

    The Obama administration is clearly just the latest incarnation of those Ur-Progressives, the Roosevelt cousins. Just like Marx and Lenin, the current Progressive leadership despises the white Christian bourgeoisie and are busy destroying it. You can see it everywhere around you from the banning of Christmas to George Soros’s “Black lives Matter” to the continual trans-sexual brainwashing of our children.

    US expats are like a German teenage boy trying to escape from the Rheinwiesenlager . The Progressives are certainly not going to let him escape unscathed. They will make sure that all the other “disarmed enemy forces” (not POW’s as per the Geneva Convention) see that the would be escapee is punished so that all the internees realize that they had better be fully compliant.

    Homelanders always say the same things: “Do you think I enjoy paying my taxes? why can’t you just pay yours”. They too are suffering in the war on the whites Christian bourgeoisie. And just like most contributors to this Blog, they are too brainwashed to see where the real problem lies. So I have a question for you Brockers: Did the Marxists murder millions of white Christian bourgeoisie for reasons of political philosophy and class, or for race and religion?

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