Someone wrote me that, ‘FATCA is a problem for residents of Canada only because the United States sticks to its outdated policy of citizenship-based taxation.’” Although there has been some political movement to end the worst effects of citizenship-based taxation, a recent article from American Expat Finance by Helen Burggraf, suggests that the politics of changing U.S. tax policy for Americans abroad may – with the possible retirement of Congressman Holding – become more difficult.
Democrats Abroad has been questioning prospective nominees about their positions on each of FATCA and citizenship-based taxation. It has phrased its question in a way that assumes that a move to citizenship-based taxation to residence-based taxation would result in no loss of tax revenue to the United States Treasury. John Richardson, Karen Alpert and Laura Snyder explain why they feel this is an inappropriate and dangerous assumption in the following article, reprinted with permission of TaxConnections.
Democrats Abroad (DA) recently reached out to the Democratic presidential candidates to ask them about issues relevant to Americans living overseas. The questions DA posed and the responses it received can be accessed here.
We strongly applaud DA for this valuable initiative. But we believe that it is important—indeed, vital—to call out the framing of this question:
“Most Americans living abroad think that the time has come for Residency-Based Taxation, the principle guiding all other countries’ tax systems and a fix for numerous unjust burdens on Americans living and working abroad. There are bi-partisan, revenue-neutral proposals to implement RBT that include robust provisions to protect the law from abuse by tax evaders. All we need is a moment of leadership to get this done. Will you be that leader?”
We believe that it is a grave error to condition a move to residency-based taxation (RBT) upon a demonstration of revenue neutrality. Doing so would serve to perpetuate the immoral and unjust system in place today.
These are the reasons why: