The deadline has now passed to submit comments to the Ways and Means Committee on Tax Reform. Comments are posted here. There were (and hopefully continue to be) a large number of letters from U.S. citizens abroad. Who knows what will happen? I am hopeful that Shadow Raider’s optimism will “carry the day”. For those who missed his comment:
Shadow Raider says
@Just Me, You can keep your hopes up. The reporters who wrote that article on The Hill probably contacted both chairmen of the international tax reform working group, Devin Nunes and Earl Blumenauer, and I suspect that the Republican aide who responded is the same Devin Nunes’s assistant whom I met last year. Yes, he defends citizenship-based taxation, but he is the only aide that I met who does. His opinion is not representative of what Congress thinks about the subject, so I think we can safely ignore his comments. All other aides that I met were supportive or at least open to changing the tax system to one based on residence.
Speaking of congressional aides, most of them are young, as you noticed (20-40 years old), highly educated, motivated and friendly. Also, most of them have traveled abroad, and they live in or around DC, which has a substantial international presence. Perhaps because of these characteristics, they are open-minded about the rest of the world and are interested in new ideas. A 150-year old policy that restricts international mobility is not something that they support. I think citizenship-based taxation is not going to survive much longer.
Also, Earl Blumenauer responded himself to the article on The Hill, and his response seems positive. I think I finally found the point that makes Congress care about the subject: thecompetitiveness of Americans for jobs abroad. When Bill Alexander proposed expanding the FEIE to all kinds of foreign income in 1992, he titled his bill “Overseas American EconomicCompetition Enhancement Act”. When Jim DeMint and Gregory Meeks proposed making the FEIE unlimited in 2007, they titled their bill “Working American Competitiveness Act”. Earlier this year, Dave Camp wrote that tax reform is needed to make US workers more competitiveinternationally. Now Earl Blumenauer mentioned something similar. The Senate Finance Committee scheduled a meeting on “international competitiveness” for next month, and I don’t think they are just talking about corporations. So congressmen don’t care much about logic, simplicity or fairness in the tax code, banking problems, exports or additional tax revenue, but they don’t want Americans to be undesired for jobs outside of the US simply due to their citizenship. In the past, this problem could be mostly solved with the FEIE, but today, with FATCA and the enforcement of FBAR penalties, even excluding all foreign income wouldn’t be enough. For Americans and foreigners to be considered equally for jobs abroad, Americans abroad can’t have tax or financial reporting requirements to the US either.
The Joint Committee on Taxation should say something about the subject in its report on May 6, and the Senate Finance Committee should also say something after its meeting on May 23. I think we’re in for a pleasant surprise.
Here are some comments that really captured the life of “U.S. citizenship abroad”.
Somebody trying to live an “every day life” in Canada
I suspect that #americansabroad in Canada can relate to this http://t.co/RZX7YCICgO – Accurate portrayal of the burdens of US citizenship
— U.S. Citizen Abroad (@USCitizenAbroad) April 17, 2013
This is an excellent submission from a U.S. citizen in Canada who is nowhere near retirement and is faced with the prospect of trying to live and build a life. What is particularly interesting in this one is that she suggests that many U.S. citizens abroad are afraid to write because they are not compliant.
And from a person at a similar stage of life in Switzerland
Excellent description of how "US citizenship abroad" is a punishment and why #americansabroad must renounce http://t.co/newidh6Qk0
— U.S. Citizen Abroad (@USCitizenAbroad) April 17, 2013
The complete community of U.S. citizens abroad owes a great debt to those who are writing to the Ways and Means Committee.
Not all letters have been posted! (at least yet)
For those who have not been following this discussion, comments on this blog reveal that at least three people have written letters that have not been posted. Hopefully they will show up. But I am beginning to wonder (some were clearly written before some that have been posted). Perhaps those who wrote and find that your letters were NOT posted should post them here.
In any case, many helpful letters have been posted.
“In this analysis, you see that this target family (lving the American dream, overseas) requires 1324 calculated hours of (US tax) preparation time per year, with 132 pages of forms submitted per year, 789 pages of instructions to read. When this taxpayer gives up and says it is impossible, he is subject to fines of $11,190,000. ”
http://waysandmeans.house.gov/UploadedFiles/Engen_WG_Submission_2.pdf
@Mark Twain, reading this analysis which concludes that even though the person owes no US tax he could be subject to some $11 million in penalties for giving up and not completing all of these forms is precisely why I concluded, in the document I submitted to this committee what I did.
That being this is primarily a Sin Tax:. A punishment meted out to those US citizens with the audacity to commit the non-crime of living outside of the United States.
@Roger
Well said. Expats are meant to be punished for committing the unforgivable sin of living outside the US.
I posted my submission 2 weeks ago and then again last week and it hasn’t shown up yet. I mention that I am currently in OVDI and am disappointed that after 16 months still haven’t hear a peep from the IRS, illuminating the need for tax reform.
There may be evidence that censoring is going on. A Brocker on another thread mentioned that their first submission of a more allegorical nature which wasn’t posted, then decided to rewrite it. Only the latter was posted by our elves. It’s not uncommon for individuals to have two or more different submissions posted, but not in this Brocker’s case. (Sorry I can’t remember who this Brocker is-there’re too many threads on this subject now to retrace where I saw it).
Schneider paper brought up by Eric last December:
https://isaacbrocksociety.ca/2012/12/08/virginia-tax-review-article-attacks-us-fiscal-imperialism/
@Bubblebustin. From what Marvin advised yesterday, from a telephone call he made to the Committee, they still had about 1000 submitted documents that are being posted as fast as they can post them. They were flooded with last-minute submissions and are working hard to get them all posted.
@Roger
I hope they check their junk mail folder too! Really enjoyed your submission, btw. Apparently you and others driving home the difficulties Americans working for US companies encounter while living abroad have made an impression. Tell me though, since Blumenauer says the ““point of departure” for his working group was corporate tax issues, not the individual code””, and adds, “We don’t want to be in a situation where we’re forcing companies to hire foreign nationals because it’s not cost-effective for Americans to take those jobs,””…is it possible that Congress in an act of US corporate protectionism, will decide to extend a territorial taxation to individuals only when those individuals work for an American company abroad, and only on a temporary basis, in an effort to deter other Americans from joining any foreign company that competes with a US one?
Sometimes you have to be careful of what you wish for.
@Bubblebustin. I have no idea, but I sure hope not. My last tour of duty abroad was with a foreign company that was selling US made exports.
That would be another kind of discrimination if the did what you suggested.
This battle is far from over. In fact it hasn’t really begun.
I really can’t see how it would make Congress’s corporate masters happy if they extended a residency based taxation to ALL USP’s abroad 🙁
@bubblebustin,
Good questions. The US corporate lens is apparently the only one they see out of. And the tax code is full of patches, bandaids and deliberate punitive exceptions (ex. the IRS ‘marriage penalty’ imposed on those married to a non-US citizen who file separately from ‘abroad’) already. We’ll see. Perhaps Shadow Raider may be right that there will be some type of positive change – and one that helps ordinary US individuals and families outside the US, not just General Electric, Apple, Microsoft, Google, Pfizer, Johnson & Johnson, etc.
It may very well come down to a fight for the rights of individuals over the corporations.
The submission from the Center for Freedom and Prosperity, asking for the repeal of FATCA, has been posted.
“FATCA is devastating for Americans abroad
Instead of targeting individuals suspected of tax evasion, FATCA treats all Americans who live, work or bank overseas as criminals. FATCA’s reporting requirements furthermore eviscerate privacy rights and make a mockery of 4th Amendment protections.
Many Americans abroad have reported being turned away by local financial institutions, having their banks accounts closed, being denied mortgages, and being unable to participate in pension funds all based solely on their American citizenship. As a result, the number of Americans renouncing their citizenship is growing rapidly. This is an unnecessary and unacceptable loss of talent.
Not only are American expatriates and multinational companies more likely to purchase US made goods and raw materials than are foreign individuals and companies, but by example so to do foreigners with whom they come in contact. Americans who live and work overseas thus serve as ambassadors of goodwill, and often times represent the most direct contact foreigners have with the United States. Alienating these individuals and hounding them out of the country is pure folly.“
American Women’s Clubs is showing up in 4 submissions. I remember that the first one I saw had been misclassified, it had just been sent in as a member.
The censor trolls are still chewing on my comment, which focuses on the most important and basic element of taxation — the address. I haven’t read through all the other submissions, but so far I haven’t seen any other mention of the simple fact that Americans living abroad do not live at a US postal address.
A very good submission posted by an expat living in Holland:
I just called the number Just Me left. A very nice young man picked up the phone after only one ring. After leaving me in hold for awhile, he was able to tell me that they are back logged more than 2 weeks and if it’s not posted by tomorrow then to call back.
@just me
It looks like they miscatagorized yours.
@Bubblebustin…
Thanks for that alert…It just have just gone up. As I checked an hour ago. I called them, and they said they would correct, and very appologetic… That is the 4th contact I have had with the aides. This one a girl, and everyone of the calls has been answered on first ring, and invariably polite. Again, the number is… (202) 225-3625
PS, I wished I hadn’t procrastinated, as I see all kinds of things I would have liked to say differently, but that only comes later, when you have time for reflection after the rush (cram) to get it in before the deadline. My fault! 🙂
Anyway, it probably will not get read, as there are a lot better scholarly submissions. At least it is another one in the RBT and Repeal FATCA column.
@ Just Me
I just found your submission (almost passed it because I was word searching “International”). I haven’t quite finished reading it but we all owe you a big thank you for taking the time to put together such a great document. I noticed you referenced the length of your submission at the end but that’s part of the problem with this problem. It just cannot be contained to a few words. US tax tyranny is so darn complex. Nunes and Blumenauer need to read every word of what you wrote.
@Abused Expat, So absolutely correct. And citizens of Germany. Britain and Cuba don’t have to make an appointment with the Consulates of their countries in the United States to formally renounce their prior citizenship when they emigrate to the United States, any more than New Yorkers have to do anything other than just “move” when they relocate to California.
It should be as easy tax-wise for a US citizen to get off the IRS tax rolls when they move to another country as it is for foreign citizens to get off the tax rolls of their countries of citizenship when they relocate to the US.
And it is not that the US has no experience in this area. When a US resident relocates to Puerto Rico and it becomes his permanent residence for a full calendar year, he no longer is subject to US taxation on his Puerto Rico source income. He then becomes subject to Puerto Rico income tax. Give me one good reason why it should not work the same for any US resident who terminates his residence in the US and becomes a permanent resident of another country. It works well when persons move either way between the US and Puerto Rico. The only exception is for employees of the US Federal Government residing in Puerto Rico who are taxed by the IRS on their Federal Government income. They, however, can claim a “foreign” tax credit against their Puerto Rico income tax obligation for what they pay to the IRS.
Puerto Rico is currently the only place in the Universe where a US citizen can reside and not be subject to US income tax.
@Roger Conklin, doesn’t the US have a residency-based tax system with all of its territories? This is what I understand from reading this:
Filing Requirements for Individuals in U.S. Possessions
http://137.227.242.48/pilots/Taxmap/pubs/p570-002.htm
The number of submissions is growing every day. Congress can no longer pretend it doesn’t know about the impact of its policies on Americans living and working abroad. Below are some highlights from a few of the submissions I was able to read through. There are many more really good ones worth reading — a real goldmine of anecdotal stories for a journalist.
From Canada:
From Switzerland:
From Israel:
From Switzerland:
From Canada:
From Switzerland:
From Australia:
From Somewhere:
From Australia:
From France:
From Finland:
From Germany:
From Switzerland:
From Switzerland:
From Switzerland:
From Switzerland:
From Somewhere:
From France:
From Canada:
From Somewhere:
From Switzerland:
From Hong Kong:
From the UK:
Here are some more:
From Australia:
From France:
From Finland:
From Germany:
From Switzerland:
From Switzerland:
From Switzerland:
And more:
From Switzerland:
From Somewhere:
From France:
From Canada:
From Somewhere:
From Switzerland:
From Hong Kong:
From the UK:
And more:
From Canada:
From Somewhere:
From Switzerland:
From Hong Kong:
From the UK:
Thats enough reading for one night………
There are similarities but Puerto Rico is different as a result of an agreement excuted between the US and Puerto Rico, I think it was in 1917, shortly after Puerto Rico was ceded to the US by Spain by the Treaty of Paris which ended the Spanish-American War.
In the other territories residents pau US income tax but file their tax returns with the tax authority of that Territory. Puerto Rico has a totally separate tax system of its own. It is totally separate from the IRS. They talk to each other and exchange information, but they are totally different systems.
Here is one of several links on this subject:
http://en.wikipedia.org/wiki/Taxation_in_Puerto_Rico
I lived in Puerto Rico for a while and became acquainted with the tax system there. Tax forms and instructions are in Spanish, although now they also have them available in English. It was Spanish only when I lived there in 1954.