A new working paper tax proposal is now posted at the American Citizens Abroad (ACA) website with the recommendation for fundmental reform of the US tax law affecting Americans resident abroad.
ACA will be sending this document to members of the House Ways and Means Committee and Senate Finance Committee, and urges all Americans overseas to contact by phone the tax staffer of their Representative and Senators in D.C. to inform them of this proposal and to encourage them to consider supporting legislation to move forward with this concept.
Please distribute this information as widely as you can in the US Expat community.
The proposed change outlined in this working paper from citizenship-based taxation to residence-based taxation is revenue neutral and brings major economic advantanges to the United States.
ACA proposes two complementary changes to U.S. tax laws as they apply to overseas residents:
1. Eliminate citizenship-based taxation and replace it with residence-based taxation.
2. Collect withholding taxes on all U.S source passive income (including dividends, interest, royalties, pensions, et.) of overseas Americans on the same basis as the U.S. collects witholding taxes from non-resident foreigners on U.S. source income.
ACA proposals apply only to Americans and green card holders with an established overseas residence. In no way, do they affect U.S. residents with assets overseas, whether taxed or untaxed. The issues addressed by ACA are not related to tax evasion.
Read more about the advantages of this fundamental change here.
The related Press release is located here. Please send this PR to all your media and press contacts.
A representative from ACA will be in DC in the coming weeks to lobby for these changes.
Noting to do with me. I am a Canadian. I still will be hassled at the border and Canadian banks will still be violating Canadian laws by trying to find me. Won’t happen anyway. Most Amercans hate anyone who wants to live abroad.
This is who we are dealing with.
But if this leads to me being able to relinquish without filling out all those tax forms, count me in!
I agree with the ACA, but unless you’re going to resort to the tactics of Carl Levin and quietly slip it in as an amendment on some obscure bill, and cross your fingers Carl Levin and Charles Grassley have been out on an all night bender on the morning of the vote and won’t notice, it probably won’t pass.
These guys will see this as lost revenue to the US Government and funding the ex-pats lifestyle of sipping pina coladas on the beach which they just paid 20% VAT on to enjoy!
These bone-heads won’t see it our way.
The safe bet is continue to build foreign government resistance towards this bill and hopefully when it comes time for the US to start withholding 30% on US-sourced payments, a foreign government will stand up and scream foul !
A lot of short-term corporate expats with most assets in the US (like the female character in the Switzerland video that Petros posted :)), or retirees who worked in the US and plan to go live in South America with their SSI + US dividends, may not be too fond of filing as non-residents — especially the ones headed for non-tax-treaty countries. This plan would mean their capital gains and qualified dividends while living overseas would get taxed at 30%, rather than the present 10/15% rate. It depends whether the increased tax on US-source income is balanced by the decreased tax on their local-source income.
While the ACA’s effort are admirable, a 14 page document justifying why we should keep our own money is overkill.
Here’s the position simple terms –
– As ex-pats who earn only overseas-sourced income and do not have any US property or investments, and do not use any of the services of the US, we feel as if we owe the US nothing (and no the blue passport isn’t worth the hassle). Cut us loose and let us get on with it.
– For some of us ex-pats still owning perhaps a house or have investments in the US, but earn all our income abroad, please just tax us on the US portion of our financial lives (as residence based taxation countries do) – it would make things a lot easier (and on the IRS) and we’ll deal with our local tax authority on the worldwide picture. If we divest fully out of US assets we then get put in the category above – ex-pats with no US income or assets.
That’s it in two paragraphs (I’m sure there will be minor exceptions) but that’s how most people feel and would accept as fair.
@John — and really just common sense for all concerned. Cut us loose (if we want that!) indeed. Thanks.
Well said. I bet them trying to collect on foreign income ends up costing them money versus making – as unless you are in a high income bracket you do not owe versus the paperwork and some little IRS nim wit that has to go through the form. They could probably eliminate a few of them as a cost savings:-)
Spend your time collecting money for those that still are using the benefit of being an American and leave those of us alone that want nothing more to do with carrying a passport, living there, investing there….etc. All we want is to live our lives in our country of choice and visit and spend tourism dollars only that they are missing from those of refusing to go there now based on what they are doing.
@john, calgary411, & Proud Canadian: well, remember that the average Homelander is utterly assured that (1) America is already the fairest country in the world and changing it to be more like foreign countries means making it more unfair; (2) America is the only place in the world where anyone can invest or earn money; and (3) the only reason you would leave America is to lower your taxes.
So instead of trying to argue against those ingrained assumptions, the ACA’s 14-page proposal actually flatters them: they estimate that every American abroad has $100,000 of assets in the US (I seem to have misplaced mine. I’ll go back to my grandma’s house and check under the couch again.), and then they massage the numbers until they can claim with a straight face that our taxes would actually go up if we were taxed like non-resident aliens.
Which is actually an interesting tactic. At least, it’s a much better idea than their last proposal from back in February, where they tried to propose some estate-tax phase-out based on the number of years overseas. I’m still nervous about the fact that this proposal mentions “territorial taxation”, though — territorial taxation is just as touchy a political issue as the estate tax.
What would it take for homelanders to realize that citizenship based taxation hurts the US economy?
You need shoes on the pavement to sell your products, the US has been punishing its citizens who were willing to go overseas to that.
Major american companies earn most of their profits overseas, because of the toxic tax regime for expats, these markets are developed by non USC`s. Increasingly the leadership that understands how the corporation works are foreign nationals It is from these persons that the next CEO`s will be selected.
This may happen sooner than many realize.
The current CEO of GE, allowed that the next CEO would likely be non-American.
Assume that s/he will be German. Would that person move to the to US and expose all of their financial dealings to the IRS?
If s/he remains in Germany, corporate governance
will be by German law. The world headquarters will be in Germany, as will all associated jobs.
Gee, I guess if this goes through, US expats in Switzerland will no longer be able to count on seeing a US aircraft carrier sail up Lake Geneva to rescue them if anything bad happens in Switzerland …
Many American CEOs of Canadian companies in the past have legally worked out of the US. I am thinking both of Potash Corporation and Canadian National who had US citizen CEOs that worked in both companies cases out of their Chicago offices. One of the more interesting cases I found was that of tobacco company RJR Nabisco whose Canadian CEO F. Ross Johnson(famously depicted in the movie Barbarians at the Gate never became a US Green Card holder and returned to Canada(now living in ritzy Caledon Ontario) after being ousted from the company in a 1980s style corporate power play. Everyone should watch the movie when you have free time.
Does anyone know if ACA sent their “Residence Based Tax Proposal” to any of the US Congressmen and Senators who have historically been supportive (allies) of US Expats?
For example, the Working American Competitiveness Act – to eliminate the cap on FEIE, was introduced several times (but died). It was supported by the following people:
Rep. Ron Paul (R)
Rep. Paul Ryan (R)
Rep. John Campbell (R)
Rep. Jeff Flake (R)
Rep. John Gingrey (R)
Rep. Walter Herger (R)
Rep. Mike Pence (R)
Rep. Joseph Pitts (R)
Rep. Samuel Johnson (R)
Rep. John Culberson (R)
Rep. Jeff Miller (R)
Rep. Gregory Meeks (D)
Sen. Jim DeMint (R)
Sen. Rand Paul (R) would also most likely be supportive of Expats.
An interesting, but old, article in the WSJ by Newt Gingrich: “Our taxed Expats:”
Sending proposals to NOT ATTACK US EXPATS to the Levin brothers, Grassely, Baucus, Rangel, Geithner, Shulman etc. is like sending proposals to the NEO-CONS to NOT ATTACK HALF THE MIDDLE EAST.
Perhaps ACA needs to reach out (if they aren’t already) more to allies of US Expats rather than spending so much energy trying to convert hardened enemies like Levin, Grassely, and company.
I checked with American Citizens Abroad for you, and this was the response that I got…
ACA will be systematically contacting all offices in Congress susceptible to help promote the “Residence-based tax proposal”.
Initial attention has been focused to members of the House Ways and Means Committee and the Senate Finance Committee, who have most influence in introducing tax legislation.
It would be most helpful if all concerned readers send the ACA tax reform proposal link http://www.aca.ch/residencetaxproposalapril2012.pdf to their representatives in Congress. There is a massive educational effort required to change the long-established thinking patterns of members of Congress about the misguided citizenship-based taxation.
The major merit of the ACA tax reform proposal is that it provides a win-win solution for all parties – the U.S. Treasury (revenue neutral), the IRS (major reduction in administrative cost), the U.S. tax code (significant simplification) and Americans and green card holders residing overseas (elimination of the heavy, costly compliance burden and renewed access to foreign financial institutions).”
Thank you for referring my entry to ACA. Their proposal is very constructive and fair for everyone.
Hopefully the powers that be will have enough wisdom to embrace it.
Roger just pointed out to me that the ACA proposal has been put on a Company’s blog which peddles Immigration Services. It is titled..
Alternatives to Citizenship-Based Taxation for US Citizens Living Abroad
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