Cross posted from RenounceUScitizenship
#americansabroad Does the Schumer bill provide incentives to renounce or incentives to remain a US citizen? Converse: isaacbrocksociety.com/2012/05/22/ex-…
— U.S. Citizen Abroad (@USCitizenAbroad) May 23, 2012
Schumer bill provides strong incentive to NOT pay the expatriation tax – isaacbrocksociety.com/2012/05/22/ex-… – but it’s stupid for other reasons too #FBAR
— U.S. Citizen Abroad (@USCitizenAbroad) May 22, 2012
The following comment from the Isaac Brock Society about the Schumer Casey Ex-Patriot Act is deserving of a separate post and discussion:
Interesting to see the various responses to the new bill on how it will affect renunciations.
@Eric: you quote Simon Black saying: “More importantly, this bill is also a major deterrent for people who are thinking about renouncing US citizenship today. The passage of this law will undoubtedly cause many people who were considering expatriation to abandon the idea altogether as the thought of being permanently barred from entry is too much to bear.”
@Gabriel says: “Previously I was conflicted about renouncing. I have no need of my citizenship, but it seemed foolish to close a door unnecessarily. Now the message is loud and clear – get out while you still can.”
Both are undoubtedly true. This will cause major anguish to people whose future will be profoundly altered by this bill in ways they are utterly unable to predict. Even the threat of banishment is cruel and unusual punishment. It has placed many many people, myself included, at a clear fork in the road of our lives.
I hear tell that many conservatives are furious about the bill and are letting Boehner know it. If he backs off his support for the bill, it won’t pass. Wouldn’t it be nice if we could all just put this catastrophe behind us and go back to the mere nightmare we were living in a few days ago?
Your thoughts and comments?
@Michael J. Miller
Thanks for your note. Can you point to a definition of a “tax home” in the US?
My interpretation of the pre-exit tax rules — and now the proposed Ex-PATRIOT rule — was that the US would (try to) assess tax on capital gains made on any US stock held by a covered expatriate. So a non-resident non-citizen with no other US connection but who is a covered/specified expat buys AAPL at $100, sells at $200, and faces $30 tax to the US. Is this not right?
The applicable regualtions generally provide that “an individual’s tax home is considered to be located at his regular or principal (if more than one regular) place of business or, if the individual has no regular or principal place of business because of the nature of the business, then at his regular place of abode in a real and substantial sense.”
But the term “tax home” was not relevant to the pre-exit-tax expatration rules (section 877). Those rules specifically referred taxed (among other things) gains arising from “sale or exchange of stock issued by a domestic corporation” during the 10-year period following expatriation. No one ever would have thought an expatriate had a tax home in the US.
@Michael, but couldn’t the IRS argue that any holding in a US-stock, even if held in a non-US brokerage, be deemed US-sourced and thus still liable to US capital gains taxes?
@monalisa1776,The IRS could certainly make the argument, but since there are detailed rules governing source, I think the argument would be an exceptionally poor one — at best. At the end of the day, though, it probably wouldn’t matter. If the proposed legislation actually gains some traction, I would expect the language to be corrected to solve the source problem.
It seems Schumer threw a hissy fit today in response to blog coverage of his proposed law:
One other thing that I haven’t so far seen mentioned in coverage of this — the definition of “wealthy”. There’s buying your own island rich. And there’s letting your kids order anything off the menu rich. Schumer’s idea of wealthy seems to include folk who have simply saved diligently over a lifetime of work and paid off their homes. There is of course one easy way for him to avoid being compared to a Nazi, and that’s to stop behaving like one.
From your little hissy fit, it seems like you’re reading Isaac Brock:
“The United States has become a totalitarian empire. It behaves towards its own citizens in a manner similar to countries of which it has historically condemned e.g. The Soviet Union, Nazi Germany, East Germany, Apartheid South Africa, Communist Cuba, North Korea, Eritrea etc.”
Well Schummy old boy, as the old saying goes, “if the shoe fits, wear it.”
What a hypocrite!
On December 14, 2008 the New York Times published an article on Schumer’s role in the Wall Street meltdown. The article stated that Schumer embraced the industry’s free-market, deregulatory agenda more than any other Democrat in Congress, even backing measures now blamed for contributing to the financial crisis. Schumer took steps to protect industry players from government oversight and tougher rules, a review of his record shows. Over the years, he has also helped save financial institutions billions of dollars in higher taxes or fees. He succeeded in limiting efforts to regulate credit-rating agencies. This article also charged that Schumer blocked ratings agencies reforms proposed by the Bush Administration and the Cox SEC. [Wikipedia]
Grover Norquist is right on target on Schumer’s Ex-Patriot Act:
“I think Schumer can probably find the legislation to do this. It existed in Germany in the 1930s and Rhodesia in the ’70s and in South Africa as well,” said Norquist. “He probably just plagiarized it and translated it from the original German.”
“The East Germans had the position that if you wanted to leave the country you had to pay them back for all the wonderful Communist education they gave you K through 12,” he said. “Schumer’s effort has a really distinguished history.”
“Persecution is the first law of society because it is always easier to suppress criticism than to meet it” – Unknown
Chuck Schumer, this one’s for you!
On Bloomberg: Joe Henchman’s got it right!
Here’s more. http://venturebeat.com/2012/05/24/senator-eduardo-saverin-tax-dodging/
“When you renounce your citizenship to swell your bank account, you’re un-American,” Schumer said. “What Saverin is doing is free-riding on America, and dodging taxes from an IPO.”
The Senator also called out the Wall Street Journal for labeling him a vocal spokesperson in the “age of envy”, and scalded republican opponents of his legislation, saying “they make Eduardo Saverin into their patron saint.”
Here’s the author’s conclusion:
“So to summarize, Schumer wants to tax people who give up their citizenship as if they were still citizens. And if they refuse to pay these taxes, they can’t come back into the country.
I highly doubt this is going to prevent people from giving up their citizenship. I do, however, think the Ex-PATRIOT act (if passed into law) would end up driving investment into Europe and Asia in the long run.”
I personally hope it drives investment into Canada as well. That’s where mine will remain.
particularly noted this paragraph from the Huffington Post article (by Swaminathan S. Anklesaria Aiyar ‘Hearkening Back to the USSR’ Posted: 05/24/2012):
…….”Communist states viewed human capital embodied in their citizens as state property, to be kept at home or clawed back through taxes on exit. The U.S. seems to regard the financial capital of its citizens as a sort of state property, to be kept at home or clawed back through taxes on exit.” ….. http://www.huffingtonpost.com/swaminathan-s-anklesaria-aiyar/eduardo-saverin-us-citizenship_b_1543493.html
And, the US aggressively reserves the rights to any potential future social and financial capital of those it holds onto – even those who, like the duals and accidentals, and longterm permanent residents of other countries, who have had their entire education, healthcare and other social services paid for or subsidized entirely by non-US funds – by their non-US country of permanent residence – services funded and consumed entirely outside the US. How can other countries sit by and passively view this intrusion into their borders, and into their economies – with the US asserting claims to the social investment and capital built up entirely through non-US taxes and contributed to by fellow non-US citizens?
Many, if not most ‘expatriates’ owe their social and physical well-being entirely to the non-US countries where they live (or were born) – with absolutely no (or de minimis) contribution by the US. Witness the million or more in Canada – many of which inherited US status, but who have been educated and cared for entirely with Canadian originated taxes – not one dollar has come from the US. Yet, the US claims their human capital solely on the basis of accidental parentage, or place of birth – no matter how nonexistent or brief the presence within it’s borders – and in spite of the substantial investment in their persons by their permanent or dominant country of residence.
The Schumer / Casey Bill could also be aimed at stopping the trend of young Americans moving away from the Homeland in search of opportunities abroad. Severin serves as a convenient justification to threaten young people with never seeing their loved ones again.
The USG has known for some time that Severin renounced. So the bill didn’t just pop up out of nowhere.
More on this from Peter Schiff:
Americans would like to go somewhere and work? Not so fast, you need permission!
“The Slave Card Stampede” by Jeff Berwick:
I’d just like to remind people to take a peek at Victoria’s blog. There’s some excellent writing going on there and you can even take a photo tour of her garden. 🙂
Great blog and a very nice garden!
“No occupation is so delightful to me as the culture of the earth, and no culture comparable to that of the garden.” – Thomas Jefferson
I posted that for “Just me” a long time ago.
@all, the Ex-PATRIOT Act has a new co-sponsor: Ben Cardin (D-MD). He hasn’t made a press release on it yet but his name now shows up now on all the legislation tracking sites (GovTrack, THOMAS, OpenCongress, etc.). Here’s his contact page with all the addresses and phone numbers. He’s also on Twitter (@SenatorCardin).
@badger thanks for the link, left a comment.
Note also that Cardin (along with Schumer himself) is a member of the Senate Finance Committee (and specifically the Subcommittee on Taxation and IRS Oversight which will probably be the first to look into this bill). Another Subcommittee member to be worried about is Tom Coburn (R-OK); see here for more about his anti-expat views.
@renounceuscitizenship, really wonderful post! And, as always the comments are great. Thanks to all who posted other links. Yep, I voted that it will increase renunciations. I also believe it will substantially decrease naturalizations. When you can do just about anything a citizen can in the U.S. with just a legal residency permit, who in their right mind would bother naturalizing? A case like Saverin’s is good in the sense that it forces full disclosure and brings media attention to the disadvantages of coming to the U.S. Not the first time the U.S. has tried to pull a “bait and switch” on immigrants. When I was doing research for a post I put up today about Canada, I found this wonderful quotation:
“Another grievance frequently aired by Canadian agents was that American agents engaged in misrepresentation of both their own country and Canada. It was alleged that they desseminated false reports of the rigours of life in Canada as a way of diverting people to the United States. Similarly, Canadian agents claimed that American agents provided a deceptively false picture of their own country, promising abundant employment opportunities for workers of all descriptions.”
Plus ça change plus c’est la même chose…..
@victoria: “When you can do just about anything a citizen can in the U.S. with just a legal residency permit, who in their right mind would bother naturalizing?”
Just a note… these anti-expat tax laws all apply equally to both citizens and “long term” permanent residents. Anyone who has held a green card for six to eight years or more is already in the same unpleasant situation as full citizens. Because of this, both naturalization and taking out green cards will decrease. Immigrants will either work for short periods only in the US on a more normal work visa — H1, L1, and so on — or, increasingly, simply bypass the US and go to a more welcoming country instead.
Here’s an intelligent new article in the Washington Post that is open for commenting.
Facebook co-founder Saverin was U.S. taxpayer, not a traitor
Looks like I got the link wrong by linking to the 2nd page of the article. Here’s the correct one:
With the shackles of US citizenship removed, Eduardo is now free to invest in countries all over the world including the country of his birth Brazil.
Facebook Co-Founder Saverin Wants To Invest In Brazil, Veja Says