A “Wake Up Call” for U.S. Tax Policy – Inversions, Planning & Corporate Tax Rates http://t.co/xI9Qg2qY1r guest post by John Richardson
— U.S. Expat Canada (@USExpatCanada) October 9, 2014
Although U.S. tax rates are important and must NOT be uncompetitive, the recent discussion of “inversions” and of Americans abroad “renouncing citizenship”, should prompt a rethinking of how the U.S. tax system should work. Who should be subject to U.S. tax? For what reason? On what kind of income?
This article is a must-read as it draws interesting parallels between the plight of American corporations abroad and American citizens abroad. Commenting gives us an opportunity to bring attention to our situation. You can read and comment here.
Here is an excerpt from this ingenious article:
What “inversions” have done is to have drawn attention to BOTH the problem of high U.S. corporate tax rates AND the reality that the U.S. claims the right to tax “foreign profits” that are NOT earned in the United States. Yes, the U.S. is the only country in the world that claims the right to tax profits that are earned in other countries. In the same way that the U.S. requires American citizens who do NOT live in the U.S. to pay U.S. tax on earnings outside the U.S., American Corporations are required to pay tax on profits that are earned outside the U.S. Significantly Americans living abroad are renouncing their citizenship in unprecedented numbers. (In fact the U.S. Government has just increased the “renunciation fee” by more than 400%.) President Obama has implied that “inversions” are the corporate equivalent of “renouncing citizenship”. U.S. companies are performing “inversions” – renouncing citizenship – at an unprecedented rate.
It is important to note that these “renunciations of citizenship” (whether personal or corporate) are NOT the result of high U.S. tax rates. They ARE the direct result of the uniquely American policy of claiming the right to levy taxes on money earned in other countries and (at least in the case of Americans abroad) on people who are NOT residents of the U.S. (Because U.S. citizens abroad also pay tax in their country of residence, they may be subjected to significant double taxation.) Once again, the United States of America is the ONLY modern country that has such a tax policy.
Brockers may want to weigh in over at Wall Street on an article titled “Tax Officials Express Doubt About FATCA”.
Ann: Thank you – I just commented.
Well-written. Makes even an economic ignoramus like me understand the problem with US corporate extra-territorial taxation, and its parallels to citizenship-based taxation for individuals.
And many thanks to Kelly Phillips Erb for selecting this as a guest post, as well as the previous one by Dominic Ferszt.
Wall street journal has a paywall, oftentimes you can get in by googling and then ciicking
Tax Officials Express Doubt About FATCA
The tactic didn’t work with bing, only google
First of all, who said we a modern country. We are trying our best to return to the condition Russia was in, in the early 1900’s, when Lenin and Stalin were trying to make the population dependent upon government, so they could turn the democratically elected government into a one party dictatorship.
We now have about 20% of our citizens depending on government for a living and they almost all vote to keep it coming. We take tax money from taxpayers and give to corporations and when it stops and it will stop, the government will nationalize them, much as they did the car companies, but too soon to be able to keep them.
We borrow over 40% of our National Budget, with no ability to ever repay the loans and when we default and we will default, either directly or by inflating our money until we repay with worthless dollars, the world will view our money about the way we look at Russian Rubles or Argentinian Peso’s.
Unless we get a strong man elected who has a plan to turn us around, we’ll be a Banana Republic who cannot even grow bananas.
President Obama is the equal of Juan Peron, Salvador Allende, or Joseph Stalin. The damage he has done or will do, will give him a place in history exactly opposite George Washington. One created the country and the other has destroyed it.
Would the last substancial person to renounce and leave, please turn out the lights?
There is a glimmer of hope—On October 14, 2014–find a movie theater playing the Movie “UNFAIR” and see the only solution to our tax problem and perhaps if we can solve the income problem, we can start working on the spending problem and even though it is just a glimmer, a glimmer is better than the darkness we will see if we refuse to use the glimmer. To all Americans living abroad—PLEASE BOMBARD WASHINGTON D.C. WITH MAIL ASKING THEM TO PASS THE FAIRTAX. A national Sales Tax paid by those who live inside our borders on all new goods. If they get a lot of mail they act, but no mail no action.
Try this WSJ Link:
http://blogs.wsj.com/totalreturn/2014/10/08/tax-officials-express-doubts-about-fatca/
Wouldn’t it be nice if as Americans living abroad were only taxed if we tried to “repatriate” our earnings to the US? I might even trade the use of tax credits for that.
Very strategic and deft exposure of the downside of US CBT and extraterritorial taxation for US domestic interests; addressing both the effects on individuals (and their rational response – which is to renounce) and on corporations ( re corporate inversions). And amazing coup to get it published in Forbes.
Thank you!
Super! Excellent! IMHO- these facts are the only reason why homelanders would consider change.
I remember what America was like under Prez Ike. Corporations were not people. My blue collar dad worked a union job and my mom was a stay at home mom. I was one of four kids. We had one car. What were taxes like then?
Marginal tax rates were close to 90% for high wage earners during the Eisenhower years. Part of post-war consensus that was obliterated by the neo-liberal Washington Consensus in the mid 1970s.
@Wilton Tidwell
First, thank you for taking an interest in our cause. I think you are a homelander and your zeal does warm my heart.
But second, and I hate to say this, the dream of what America may have been is either gone for good or it was just a dream. I really hate to say that as I not just left the plantation, I left the masters house.
The financial position of the US is no longer something that can be fixed. The US has crossed the rubicon.
The Frasier Institute has just published the index of economic freedom and the US is collapsing……
http://www.zerohedge.com/news/2014-10-08/land-free-ranks-36th-world-respecting-property-rights
There is about to be a major amnesty after the election, that will change the outlook further.
Twenty years ago I could have never imagined that the wait to get an appointment to renounce US Citizenship would be NINE MONTHS.
It took some time for the British to come to grips that the Empire was gone and they no longer ruled the waves. I have learned from that lesson, the American Era is over.
I say this all with a tear in my eyes….
The American media seems to be in denial.
According to the IMF China has now overtaken the US in terms of purchasing power as the world’s largest economy.
http://www.dailymail.co.uk/news/article-2785905/China-overtakes-U-S-world-s-largest-economy-IMF-says-economy-worth-17-6trillion-America-falls-second-place-time-1872.html
A quick glance of some US mainstream website not one mention on any homepage.
JC: Thank you for the WSJ link. That is probably the finest collection of comments to any article on this subject that I have read to date. Well done, commenters! Fantastic!
“Muzzlednomore
Just to make clear. I think you are talking about the comments to http://blogs.wsj.com/totalreturn/2014/10/08/tax-officials-express-doubts-about-fatca/
not the John Richardson article that is the subject of this thread.
I agree that these comments are a superb collection. I have made a copy for my permanent records. The JC comment on John Richardson’s article is also excellent. John RIchardson’s is an article that I think I can share with my homelander acquaintances and which should have a positive impact.
The sleepers sent to the U.S. by Russia in the early 1900’s to produce families and use the capitalist system to destroy it, have done a superb job. Their job was to capture all the institutions of higher learning and the every day employeement of the U.S. Government. Our children are being taught Socialism by the descendant Professors and the IRS is equal to the KGB.
Saul Alinsky was a first generation child of a sleeper Russian. He wrote the hand book for Socialists to use titled, ”Rules for Radicals”. Obama said in his last book that he has always read and used that book with an outline of how to collapse a capitalist country. A job well done Mr. Obama, A job very well done.
A recent interview of a Harvard student revealed his belief that all the evil in the world is because of and caused by the U.S. policies of the past. Beliefs become reality if acted upon.
I am old enough to remember those marginal rates on taxation. Nobody ever paid that rate unless they made so much money they just didn’t care. There were so many tax deductions and credits for social engineering that when I was a young high earner, I actually paid less than I pay now as a semi retired person.
What we need is the FairTax, which is a National sales tax with a provision that essentials up to the poverty line are not taxed for anyone and only new goods are taxed. Even the evaders who never paid taxes, such as taxi drivers, barbers, beauticians, food service workers and any other criminal eneterprise with cash incomes, would pay as they spend. HR25 is the bill we want passed…. write congress and ask for its passage.
Wilton Tidwell,
Are you painting all US taxi drivers, barbers, beauticians, food service workers as criminal enterprise tax evaders — making the gross mistake of painting all with the same brush, just as *US Persons* Abroad are painted with that same ugly and exceptional US brush? Almost anyone who has a small business? Many tradespeople? Musicians? Artists? People who serve the more affluent of the US with their services? There are those who will evade their taxes and those who won’t. I find that quite insulting to those groups of people.
Great post, Trish, of John Richardson’s “guest” Forbes article.
To my Canadian government representatives re the WSJ article:
I happen to know the rich trade things and work to avoid paying taxes for a lot of things. Most middle and lower class people pay sales tax on the things they need to buy. Ontario has a high sales tax. I would have been bankrupt if I had lived in the USA when my two loved ones were fighting cancer.
I would much rather live in Europe, in the Scandinavian countries especially. They pay a high tax but there is a lot less crime and a better quality of life. Education and health care available for all.
Funny this morning, I was just looking at you tubes of the TV series The Newsroom.
I love the opening episode where the anchor Will is asked why is Anerica the greatest country in the world. He said it was not, and proceeded to explain why.
Free at last! The cost of renunciation (rounded in Canadian dollars): legal fees $15 000, company evaluation $10 000, 6 years tax form prep for IRS $12 000, Renunciation fee $2500, Amount of tax owed to the US government $0.00. Obtaining a CLN and peace of mind… Priceless.
Renunciation done in Calgary – took one apt – 15 minutes max not counting waiting time. Staff was very friendly.
Have to say that whoever did the fee analysis for the renunciation process must have been smoking something funny. Even with postage and an estimated 3 hours of processing documents, I do not think the increased fee is justified. It is just another kick in the **** on the way out.
@Happy Canadian
I congratulate you. It is sad it was so expensive for you. Now you can have good sleeping at nights. I too am happy I no longer have my American citizenship. I do sleep better at night.
John Richardson
Thak you for writing the Forbes article AND all your good advice all the time I have known you since me finding IBS.
All my Brock friends, thank you for all you have done to fight FATCA.. I will still be contributing to ADCS. I already have and will continue.
LOVE YOU, JOHN! You are doing such a superb of education people all over! Hopefully, people upset about inversions will connect the dots to FATCA, too!
Why the U.S. continues to punish people–or corporations–in a global economy for being American makes no sense. (Not to mention that how regular people are paying for the greed of American Wall Street CEOs and banksters.) Such a sad state of affairs.
Love this quote:
“The answer to this question depends on whether the U.S. believes that it is PART of the world or whether the U.S. believes that it is THE world.”
Congratulations on your freedom, Happy Canadian, although it was at great expense 🙁 Would you please express how you feel about the renunciation fee hike here?
http://www.regulations.gov/#!documentDetail;D=DOS_FRDOC_0001-2956
Thank you Bubblebustin, I sent my complaint on the day the fee hike was announced. My appointment had already been booked and the fee hike was not welcome news. I feel like it was done solely as a monetary deterrent to being able to choose one’s citizenship. Many people in my family cannot afford to come into IRS compliance and pay the new fee in order to renounce. How would everyone the USA feel if there was a fee to vote? Right on the documents at the consulate it state a person’s right to Relinquish citizenship. How can a right enshrined in the constitution cost a person money?? Those were my thoughts anyway…. really don’t think things will change though.