The Committee for a Responsible Federal Budget (CRFB) is currently having a nice little chat about how it can best use the Foreign Earned Income Exclusion to double-tax non-US economies.
The Foreign Earned Income Exclusion, it says, “is designed to prevent a US taxpayer who moves to a high-cost country from paying more taxes than a similarly situated taxpayer in the US, since the standard deductions are not adjusted for a higher cost country.” Oddly, it makes no mention of compensating individuals who pay more taxes in other countries so that everyone pays the same.
Since they allow comments and might publish mine, I contributed my 2 cents, for what it is worth:
In 2001, during the dot-com crisis, I couldn’t find work in the US and thus moved to Switzerland to work instead of collecting unemployment checks or food stamps. I did not move because of taxes or to pay less or more in taxes, but rather to earn money to pay debt interest, to buy food, to buy clothing and to buy shelter. I migrated to acquire the basic essentials required for survival.
11 years later, local banks warned me that they were rejecting Americans due to US policy, preventing me from refinancing my mortgage. In America, this is known as national origin discrimination and national discrimination is a US federal crime. Nevertheless, the VA and HUD stated that they do not assist Americans living outside of US jurisdiction who become victims of US federal crimes caused by US policy and American politicians showed no interest or concern in American issues beyond US borders.Both of these mentioned issues are unknown to both sides of the argument and yet both are the core subject. Foreign policy like this should be created or heavily influenced by Americans living abroad who understand the issues. Stateside Americans will never understand the issue well enough to make fair judgments since they lack the foreign exposure. The great lack of expat influence on US foreign policy is the reason why the US continues writing foreign policy with damaging impacts.
The idea of opposing national origin discrimination is to prevent the creation of 2nd class citizens by treating everyone equally. When living in a country, one generally attempts to integrate to be one with country so that one will be treated equally as anyone else. With this policy, one is focusing on treating individuals unequally, discriminating against them in their jurisdiction due to their national origin. This creates a huge conflict for expats who want to be viewed and equally treated as locals. Unfortunately, I lack the words in explaining this conflict properly. The best way for a stateside American to understand this is to move outside of US jurisdiction so that they can then learn to understand the practice of national origin discrimination through its implementation by US policy. It is fun to say that everyone should be taxed equally, but impracticable on a global scale since no jurisdiction is equal to US standards.
The idea of migration is generally to work instead of relying on government aid. Dual citizenship, commonly misunderstood by the US government, simplifies this process by making it easier for individuals to work where their skills are needed. I saved the US government money by moving to a low tax jurisdiction which needed my skills that America didn’t want. Yet, the US government wrongly views this as being a “cost” since it doesn’t understand the core issues of migration and citizenship. This “cost” view of citizenship conflicts with the popular “good riddance” opposition against dual citizenship which commonly argues that expats are not worthy Americans. The services that Americans abroad provide to America are invaluable and generally not recognized by the homeland.
Living outside of America, I do what any migrant to America does or should do, and that is to integrate, being a part of the nation who’s services one uses and who’s protection one needs. Being a part of one’s habitat nation means opposing 2nd citizen status, which requires opposing national origin discrimination, just as such is opposed by US federal laws. Integrating and respecting US federal laws thus requires one to oppose discrimination caused by US policy and such opposition, under existing conditions, obligates one to renounce US citizenship since one cannot be a 2nd class citizen in violation of federal US laws prohibiting such. A local of a jurisdiction must treated the same as any other local of that jurisdiction, regardless of national origin/citizenship.
Thus, I am no longer an American citizen today because I obeyed and respected US laws while complying with the interests of US policy makers who do not understand the true consequences of US policy outside of US jurisdiction. Several days ago, my son, with his near 500 years of American heritage, was born without US citizenship due to this confliction of US policies.
Something like this should never happen. No real American patriot would allow this if they understood the situation. America must make every effort to support and assist its citizens living abroad, especially when renunciations are irrevocable, when they have no representation, when they are discriminated against by US policy, when they are not treated the same as any other American, when it seeks to double-tax their earnings, prevents them from migrating with exit taxes, burdens them with filing complications and even threatens them with banishing.
Let’s face it, folks. US policy makers are just not qualified to discuss US foreign policy. This whole discussion is a joke. My advice to US politicians is for them to become expats so that they will gain a better understanding of this topic. Until then, abolish foreign policy and focus on local matters.
“All animals are equal, but some are more equal than others”
George Orwell (Animal Farm)
Very well written. Your anger only comes out at the very end. But well – we should be enraged.
Dear SwissPinoy. congratulations onthe birth of your son. I share your sadness that he has not a passport share of the nearly 500 years of American Ancestry but rejoice that he is not to be saddled with a lifetime of onerous form filling and ever present threat of penalties. thank you so much for this post. I am in awe of what you achieve with keeping Brockers up to date. thank you for your valuable time.
I also share your rage at the way we have been treated. I mourn the loss of my Citizenship frequently [received my CLN this year – AKA “freedom pass” ] mostly when I think about not having the possibility to go Stateside for longer than 3 months if my elderly parents need me or if one of my friends needs me…… and in odd moments when I have to stop myself saying “home” when I plan to go across the pond….it’s a conscious and continuing effort to say “Stateside” instead of “home”.
I despair at the way a once proud (for good reason) nation that I loved is making itself a laughing stock through imperial bullying tactics. what Bush began, Obama has completed and the betrayal by the Democrats is more egregious than that of the republicans because the Democrats “pretended” to understand. you are so correct that the politicians in DC are intellectual pygmies.
Thank you again for your continued care for Brockers.
@ Swiss Pinoy
I share your anger and you are so right in what you wrote. Soon there will be no US expats abroad. They will have renounced or gone back to the USA. There will be much less immigration to the USA snd less investment in the USA. Noone will want the FATCA chains to carry around for their lifetime.
The US believes if they ‘export’ unemployment to another country they in turn have the right to ‘tax’ anyone who finds success outside of her borders. Nonsense.
@Swisspinoy You live a few km away from me and have the impression that you have done more to help bring awareness to this situation than all the homelanders stateside put together. Many thanks. Unless there is a sign of change I will also have to try to extricate myself out of this mess. Just selling my house would make me bankrupt.
SwissPinoy,
Another committee that needs to hear the stories of expats. I hope the comment giving your point of view gets published at Global Tax News and great for someone there to have it passed to the Committee for a Responsible Federal Budget (CRFB). Maybe we can find a way to contact them. And, of course, it sickens me the punitive ways toward ‘expats’ of the US government.
Again, they should be looking at Residence-Based Taxation as one of the sensible alternatives.
Who finances the CFRB should be the main question.
By the way, the OECD members are now explaining their tax treaties as an effort to prevent double non-taxation—the ultimate doublespeak.
I tried to post a comment but it is not showing the comment – perhaps it is being moderated and will show up later. I am traveling now but believe it would make a lot of sense for IBS members to post comments, and also if someone can send the link to the ACA they should also submit comments as they did for the House Ways and Means Committee. On a separate note I read Treasury’s comment after the signing of the Cayman Islands how FATCA is becoming the world standard to eliminate ‘tax evasion’ – it has just become obvious hasn’t it that we are just talking to a wall. Or more aptly put would be to say it is like trying to reason with the Terminator….no feeling, no emotion, and it will not stop until we are all financially dead.
Steve,
A comment from you doesn’t show in the last batch of spam that I just went through and deleted.
FATCA is evil. But if the discussion centers upon first the evilness of the FBAR form the resistance should not be there. Citizenship based taxation is the real evil but it is a tougher argument
@SwissPinoy…
Just checked tonight. Your comment is not showing yet…
The only comment I see is….
Submitted by Anonymous on November 18, 2013 – 7:31am.
This whole thing is utterly medieval and unworthy of a country that claims to be the land of the free and the home of the brave.
The intelligent thing to do before passing a law or before making any move that affects millions of people would be to understand it in practice. They can’t do that since they haven’t met with anyone affected! There is no working group to present the issues of expats. Americans Abroad gets to make submissions AFTER the law is already a law.
Now congress says they want to make a working group but, only after the most damaging law is passed, FATCA and while at the same time allowing congress persons to come forward again and again with laws that affect expats. This should be stopped completely until the working group has been up and running for at least two years. No introducing bills that eliminate foreign earned income exclusions, no FATCA, no not allowing renunciants back into the U.S. NOTHING until this working group has a fair and good grasp of who these laws are being passed AGAINST. And it’s always against, they never pass any laws that are helpful to expats. Why is that?
CBT was made a law as a punishment. It was to punish those who fled the Civil War.
The Civil War has been over for ages, but the punishment continues.
How does that even make any sense?
I commented also. Doesn’t show
Besides there is COLLUSION by host governments. This for the first time in 50 years, the Israel government charged me a tax on my US income, using the copy of my US tax form as a basis to charge me again.
Has this happened to anyone else?
DS
Thanks all for checking – perhaps the comment just did not send properly although I did it twice. Perhaps ACA can make a submission.
@dvora shurman, I read of a new tax law which will tax US trusts, but that won’t be implemented until January:
Israel: Israel Changes Its Tax Law To Include The Taxation Of Many U.S. Trusts
http://www.mondaq.com/x/275272/tax+authorities/Israel+Changes+Its+Tax+Law+To+Include+The+Taxation+Of+Many+US+Trusts
@Steve Klaus, @Just Me, they might not work on the weekends. So, maybe our comments will appear on Monday.
@Southerner, thanks. The purpose of my effort here is so that you and others, including my daughter, won’t have to change their citizenship status in the future. However, this will likely take decades to have a noticable Impact.
@Thanks everyone. Your words are greatly appreciated. 🙂
@Crystal London, my son’s citizenship is something that my son can discuss with the US government at a later date if the interest for such exists. It is a matter between him and the US government, which is none of my business. My duty is simply to make him proud of his heritage and ancestry, but not to define his citizenship. I could have forced him to become a US citizen by forcing my wife against her willl to give birth in the US. Yet, such force would conflict with the laws.
My concern is more with my daughter who might feel pressured to renounce her US citizenshp in a few years. The other day, I was teasing her that I could get a job in the US and that we would then have to move there. Her response was to protest leaving her home and friends. Stating that she should be excited since she is the only US citizen didn’t help.
I don’t really have any rage about this situation and I’m not angry. It is unfortunate that I renounced and such shouldn’t be necessary, but my personal situation has never been better, so I can’t complain.
I fear instead of dying CBT might spread.
An article I read after Chrystia Freeland’s win in Toronto Centre mentioned that she is big on the idea of repatriating income of “wealthy” Canadians. This is troubling as she is likely to be JT’s Finance Minister someday and it speaks loudly about the US mindset creep in Canadian politics and culture.
Let’s not underestimate the impact of the erosion of fiat currency and our govt’s dependency on the illusion of perpetual growth rather than fiscal responsibility to keep themselves in office.
CBT may have begun for political reasons but it remains and the idea is spreading due to bad economic ideas that have run their course and need replacing.
There is far more going on here and we are simply the first wave of collateral damage.
@dvora shurman
It is called copy cat taxation. Up until a few years ago, NZ did not tax overseas holdings either, but now they are going after it just like America. The only difference is you can leave NZ tax residency behind if you return to the U.S. like the U.S. wants you to… 🙂 Maybe this is Israel’s way of saying go back home!
@YogaGirl, global CBT is a good thing. I don’t agree with it, but it is a good thing because the US won’t allow it. A long time ago, it was posted on IBS that the US has some old rules which punished dual citizens living in the US who were taxed by non-US jurisdictions. Basically, the US would be the first to reject global CBT and thus this growing interest in taxing US earnings is a good development because it will force the US gov to take more hypocritical measures to combat CBT.
It should be no surprise that that particular site is blocking commenters. It calls itself bipartisan, but looking through it, it is obviously not.
It has a related site to link to, called stimulus.org, where they criticize everything that extends tax break plans and such type stimuluses. It says nothing negative about spending increases in bills such as the HIRE Act.
The next site goes on to hammer all of the Repugs platforms, not mentioning anything about the incumbent.
Then, there are articles containing such mumbo jumbo as
“We can grow/recover our way out of debt. It is true that today’s deficits are bigger as a result of the economic downturn. However, even after the economy recovers, the deficit will still remain and will be growing. According to the Congressional Budget Office, less than one-third of the 2012 deficit is due to structural weakness; and despite CBO’s projections that the economy will recover by mid-decade, their current policy projections still show debt growing by decade’s end. After the recovery, fasterthan-projected growth would certainly help the fiscal situation; but because the largest spending programs – Social Security and Medicare – tend to grow as the economy does, and even at faster rates, there is no plausible level of economic growth that can get us out of our fiscal problems.
• We can solve our debt situation by cutting waste, fraud, abuse, earmarks, foreign aid, and/or the
tax gap. The real drivers of the debt have little to do with these issues, and instead are the result of growing entitlement costs and the failure of revenue to keep up. Improving government efficiency and better targeting discretionary spending can help improve the situation on the margins – and should be
pursued in any event – but should not be seen as a panacea.
• Medicare and Social Security are earned benefits and therefore should not be part of deficit
reduction. In reality, Medicare and Social Security are structured such that the taxes paid by
participants are nowhere near sufficient to pay for the benefits they are scheduled to receive. In other
words, beneficiaries receive far more than they ever paid in, even adjusted for inflation. Since current
promises made by Social Security and Medicare are unsustainable, leaving these two programs
untouched would require neglecting other important government priorities in areas such as education,
defense, and infrastructure.
• There is such a thing as a free lunch. ”
The site seems to match the Obama/Reid agenda.