If America truly wanted to tax “rich” expats–expats would simply be taxed upon any income over $x00,000 yearly income at some rate, whilst others would imply not file. Although this method would still be taxation without providing government services, it would at least be honest about only ripping off expats who are “rich”. That method would have been recommendable by any lousy government official after reading my last entries.
After analyzing 86.7% of the expat/emigrant population in those articles, it shows that only maximum 0.293% would owe tax to US according to the principle of “taxing-up” to the higher of residential tax or homeland USA tax, using the existing method of exclusions and credits. But even this level of unexcellence is unachievable to that Washington leadership that doesn’t represent us.
The preceding calculations are made under an assumption that the exclusion/credit process is clean. But it isn’t. We’ve long discussed all the form complexity manufactured by the compliance mafia which rotates in and out of Treasury employment. The mafia has made the paperwork of an expat to be more than double that of a homeland tax return. And, whereas homelanders can have their taxes done by low/moderately priced bookeepers, expats must have their taxes done by $200 / hr accountants.
The compliance mafia has also written in an infinite number of reverse loopholes—where, at every turn, the IRS has an opportunity to screw a taxpayer using the complexity of the rule system. We’ve discussed many of these reverse loopholes at this site in these years. Please feel free to throw in your own.
-PFIC’s–the nightmare–any fund product not purchased in America will be taxed enough to rid the person of any profits
- Double taxation of foreign social taxes. For example, in Norway, the social tax is listed separately from other taxes. Social taxes are not creditable or deductible, hence America double-taxes it.
- Double taxation of renunciants: The exit tax (reichfluchtsteuer) was supposedly designed to capture the capital gains of a human being over its life as an American. If that American had always lived in America, the exit tax might represent a clean (bad) tax. But, a human being living out its life outside of America is already due those capital gains taxes to the country of his residence. The reichfluchtsteuer taxes the gains due to his existence as an American, and the American is later taxed honestly by his country of residence, too. ……… and the list goes on….
These reverse loopholes were left out of the analysis, because their effect upon America’s tax revenue is negligible. The issue to note especially in this article, is that these reverse-loophole taxes are destructive upon the individuals they land upon. These stupid reverse loopholes are what make it impossible for Americans to have financial planning if not living in the homeland.
The IRS and the compliance mafia have been happy to force non-rich expats to file mounds of paper, to punish particular persons with obscure rules, to force Americans to exclude or credit things for which they never should have been charged, and then to create ethnic discrimination tools such as FATCA to enforce bad rules. All of this effort has been made by the IRS and compliance condors to grab money they never deserved, with with even lesser significant revenue than the tax revenue I have been showing in previous calculations.
With that clarification, it should be possible to continue with the calculations.