I just became aware of the article http://www.financialtaskforce.org/2013/01/23/four-questions-for-jack-lew-obamas-pick-for-treasury-secretary/#comment-777179702 via Maple: http://maplesandbox.ca/why-congress-doesnt-get-it/#comment-3892 and posted a comment to Financial Task Force site. Calling all Brockers: please go to the FTF site and hammer them with comments. My comment was as follows:
US persons (whether US nationals or green card holders) living abroad are taxed in their country of residence. Taxes may even be higher in their country of residence but things like the Alternative Minimum Tax, Medicare surcharges, and US self-employment tax may make it impossible to deduct all foreign taxes using foreign tax credit (FTC). Furthermore, there are many countries where income tax is much lower, but other costs are much higher than in the US (example Switzerland, with higher fees for government services, higher cost of living in many countries, and higher VAT on retail purchases as well and very expensive excise tax on fuel).
The Foreign Earned Income Exclusion (FEIE) rules mean that persons who receive retirement benefits, welfare benefits, disability benefits, or unemployment insurance compensation cannot use the $90,000 exclusion for these because they are “unearned income”. Such persons may be in a situation of limited income, where their local country taxes are not that high in recognition of their situation, and hence can be bankrupted by US surcharges on their so called “unearned income”. The situation is further exacerbated by the depreciating value of the dollar in the past few years: forcing persons abroad into ever higher US tax brackets.
Many of the US persons abroad who are not tax compliant with the IRS are so because of lack of knowledge about US extraterritorial citizenship-based tax polices, and/or have been told in the past by local banks and tax authorities that their income in the country is taxable only by that country, and/or they simply do not have the financial or time resources to deal with very complicated tax and asset reporting requirements.
The capital gains taxes on foreign real property are also at issue, especially because they can result in negative effective return on investment whether property is sold at a loss in local currency or not. The diminishing value of the dollar means that US taxes on the sale of property could exceed any profit and even eat away at the initial capital used to purchase the property.
Mandatory and optional pension schemes in other countries lose the locally mandated financial incentives legislated by the local jurisdiction due to US double taxation of contributions and proceeds. A tax deduction in the local country only results in increased US extraterritorial tax burden. This is discriminatory: US persons living abroad have to deal with both the advantages and constraints of the foreign jurisdiction. The double taxation also serves to effectively deplete the treasuries and economies of the foreign country in question. Residents of foreign countries should be free to spend their after tax income in the local country if they wish, not pay part of it in additional taxes to the US, for which the US person receives little or no direct services from the US.
Many US persons abroad hold another nationality, and often the nationality of the country they live in. Many are married to non-US persons with no other direct US-ties who would be adversely affected should the US person spouse become compliant. In many cases divorce has been threatened or sued for, and the US person may be forbidden from compliance due to communal property laws, local bank secrecy, professional secrecy to one’s employer or business partners, or other local issues in the foreign jurisdiction to which the US person is directly subject.
There are even stories on websites such as the Isaac Brock Society and Maplesandbox about US persons abroad who have gone mad and are in psychiatric treatment because of the recent IRS and Treasury crusade that attacks not only rich frauders living in the US, but also normal working and middle class families abroad who are only trying to earn an honest living, raise their children, save for retirement, and fulfill their tax and civic obligations to the countries they live in. Rumours of suicide or attempted suicide are also circulating.
FATCA, while advertised as a method to prevent US residents from exiting capital from the US and hiding the capital and interest abroad, is threatening to make the lives of innocent persons abroad who respect their local tax laws into living hell.
US citizens living abroad are not counted in the decennial census mandated by Article 1 Section 2 of the US Constitution. Thus the House of Representatives is not proportionally constituted to represent their interests (5-7 million US citizens abroad=larger than some states in the US). Many US citizens abroad cannot vote because no county will accept them as a virtal resident for electoral purposes. Many in Congress pay little attention to letters and other contact from US persons abroad, as even those who do manage to be registered voters are diluted over the 50 states and form only very small minorities in each congressional constituency.
For this and many other reasons, the authority of Congress to pass such intolerable acts is undermined.
For anyone who is interested in these issues and injustices, please look online for Isaac Brock Society, Maplesandbox, and American Citizens Abroad websites.