US expats given hope of lower tax bills
Republicans edge towards eliminating need to pay levies overseas and at home
published in the Financial Times
by Demetri Sevastopulo and Barney Jopson in Washington
You can read the article by answering a simple question that appears when the page loads. I cannot post the entire article due to copyright restrictions.
Here are some excerpts:
Millions of US citizens working overseas could see their tax bills lowered by an overhaul of the tax system as Republicans edge towards eliminating a requirement for American expatriates to pay taxes both overseas and in the US.
Kevin Brady, the Republican head of the House ways and means committee, which is drafting a tax reform bill, said lawmakers were considering the measure, which has been the focus of lobbying by Republicans Overseas, a group of party donors around the world.
“It is under consideration. They have made the case,” Mr Brady said in response to a question from the Financial Times at a Christian Science Monitor breakfast. “Lawmakers representing that area of the tax code have made that case.”
The US Chamber of Commerce, a business lobby group, has urged policymakers to consider US-only taxation for individuals, too, arguing that taxing foreign income hurts American managers at the overseas affiliates of US exporters.
Mark Mazur, who was the top tax official in Barack Obama’s Treasury department, said he supported the change, arguing that it was necessary to address the “inequity” of an expat paying tax on the same income to both the US and a foreign government.
“If you take two people, one works in London, one in New York, working for the exact same US multinational — if they make the exact same amount of money you might think they should be taxed exactly the same,” said Mr Mazur, who heads the Tax Policy Center.
Solomon Yue and Michael DeSombre are also mentioned in the article.
There are quite a few comments with JC doing Yeoman’s Duty.
Norman Diamond:
”
However, 26 USC 2(d), Nonresident aliens, says this:
‘In the case of a nonresident alien individual, the taxes imposed by sections 1 and 55 shall apply only as provided by section 871 or 877.’
So it would be easy, technically, to delete the words “aliens” and “alien” from section 2(d).
All non-residents would become subject to Form 1040NR instead of 1040. If the person has no US-sourced income, or if US withholding is enough to pay US tax on the US-sourced income, then the person doesn’t even have to file Form 1040NR.”
Then “nonresident” would have to be defined, and the definition would need to agree, or at least not conflict, with all the other uses of “resident” / “nonresident” throughout US law. Starting with the section that makes all citizens resident in DC if they’re not resident elsewhere in the US.
Touch the damned mess in one place and worms sprout everywhere. Chop a worm, you get two worms. That’s probably why the Republicans clung to Koskinen so long – hoping he would know what to do.
A carve-out would be easier. But not good for expats, as it would inevitably have to be applied for, and made less attractive than renunciation.
I hope I’m wrong.
Back to my nit picking ways.
“1. Totally Unjust: It’s extremely unjust. Why should people be taxed just based on “place of birth”:?”
My children were not born in the US yet have the same requirements as their USC parent. Place of birth is one facet, bloodline taxation is another.
Allowing expats to choose annually whether to invoke USC benefits (i.e. saving clause) or NRA benefits (non-saving-clause) could be a workable carve-out, but it wouldn’t address the filing/reporting burdens.
Japan T – I agree, but where you live and degree of US connection also comes into it. My children weren’t born in the US and never travel to the US. Their parentage doesn’t cause them any problems. In a different country, it might.
“It’s not the taxes, it’s not even the reporting. It’s that U.S. tax compliance means that one cannot integrate into the retirement and financial planning programs of other countries. And then (as you point out) there is the constant fear and anxiety.”
Depends on the individual. Long before learning of all this, I came to realize that I can never retire. Without out any savings, and bills and taxes increasing and pay being cut there be no way to save, no retirement for me.
THE issue for me is reporting. The only way I can increase my earning is by working more hours. Each hour spent satisifying homelanders paper fetish is one less hour I have available to earn money.
@plaxy
Seems much of this comes from trying to force everyone one into a “one size fits all” tax system. Obviously, that hasn’t worked. Sadly, any ‘solution’ will also mostly likely be another “one size fits all” attempt. No matter what happens, many needing relief will not get it and others may be hurt. A mess.
Interesting analysis of the budget resolution vote:
https://www.theatlantic.com/politics/archive/2017/10/house-republicans-budget-vote-tax-reform/543990/
So I guess that’s why a preview is promised for Nov 1.
@Japan T
If your children were not “Born In The USA” then why do you keep insisting that they are U.S. citizens?
Japan T: ‘Why should people be taxed just based on “place of birth”?’
Meanwhile, others are asking why they are taxed purely based on their bloodline–i.e. a US citizen parent–when they may have never been to the USA at all.
Well, how SHOULD citizenship be acquired?
Curiously, the Christian Science Monitor (who hosted the breakfast where Brady was quoted) hasn’t written anything on this.
@USCitizenAbroad
Could you comment on why you apparently disbelieve the story of calgary411’s son?
@Japan T
Back to my nit picking ways.
“1. Totally Unjust: It’s extremely unjust. Why should people be taxed just based on “place of birth”:?”
My children were not born in the US yet have the same requirements as their USC parent. Place of birth is one facet, bloodline taxation is another.
If your children were not “Born In The USA” then why do you keep insisting that they are U.S. citizens?
I do not. But the US Gov. does and with Japanese banks agreeing to turn over all US persons to the US and Japanese new national ID number, my children can not escape getting “caught”.
Well, let’s see… my children are born in Japan. Their mother is Japanese. They have Japanese passports. They have not been registeredwith the US embassy as births abroad. They can travel anywhere Japanese can travel to on their Japanese passports and be treated as Japanese citizens, which they are.
Japan does not grant citizenship to children born in Japan of two non Japanese citizens.
How are they USCs other than by proclaimation of what is a foreign power to them?
@USCAbroad,
There are many in the same situation, many whose stories have been told here as well as elsewhere. One type od so called “accidental Americans”.
Bubblebustin – here:
https://www.csmonitor.com/USA/Politics/2017/1025/New-endangered-species-the-GOP-deficit-hawk
But it doesn’t mention RBT/TTFI.
“Zla’od says
Japan T: ‘Why should people be taxed just based on “place of birth”?’
Meanwhile, others are asking why they are taxed purely based on their bloodline–i.e. a US citizen parent–when they may have never been to the USA at all.
Well, how SHOULD citizenship be acquired?”
BTW, I did type, “taxed by bloodline”, not ‘citizenship granted by bloodline’.
It seems the “Monitor Breakfast” is just a regular Washington “journalistic forum”:
https://www.csmonitor.com/USA/Politics/monitor_breakfast/About-The-Monitor-Breakfast
That’s interesting about the CSM luncheon, Plaxy. Would it be a way policy makers could “soft” launch new, and somewhat controversial initiatives to the media? I certainly don’t think they’d go to create fake or misleading news, as the article says “the goal is light – not heat”.
I’ve always liked the Christian Science Monitor. I started subscribing to them after 911, and found them to more balanced and uncynical than most major news outlets.
I don’t know. I didn’t get the impression from the FT article that the comments about RBT were pre-planned. The FT guy put the question to Brady. I notice Michael Desombre seems to get mentioned pretty often in FT Hong Kong coverage – maybe there’s a connection there.
Yes – some of the FT articles mentioning Desombre were written by Sevastopulo, who was based in Hong Kong for four or five years as FT Asia news editor. So they obviously knew each other; perhaps Desombre suggested the question.
Well done Michael Desombre, if so.
Good sleuthing, Plaxy.
Is it possible Brady knew he’d be asked that question?
I don’t know. It would be interesting to read the FT interview with Mulvaney.
Am curious what people think about this.
Let’s say a child is born in a country that has jus soli but does not allow dual citizenship..
One of the parents is a U.S. citizen who meets the transmission requirements.
Would one take the position that US law overrides in such a situation? That such a child is automatically a US citizen just because the U.S. says so?
It appears this is possible in at least 5 countries: Mexico, Ecuador, Peru, Venezuela and Fiji.
“Would one take the position that US law overrides in such a situation?”
Prior to FATCA IGAs, US law would override in the US, and the other country’s law would override in the other country. When other countries sign IGAs, they say that US law overrides their own. Canada’s Parliament did the same when saying that Congress has spoken.
@Shovel
I have periodically posted on Brock my view that birth outside of the USA to a USC parent does NOT automatically make a person a USC. This view has been aggressively resisted (I really don’t know why) by Brockers. Nevertheless, I will explain my reasoning again …
It seems to me that there are a number of questions that must be considered in order. The questions include but are not limited to:
1. What is the U.S. law? Does U.S. law automatically make a person born outside the USA a USC?
2. Does/can U.S. law apply outside the USA and therefore to people born outside the USA?
3. Does Canada have to accept a claim by the USA that a person born in Canada (as a Canadian citizen) is a USC for the purposes of Canadian law?
So, here are some of thoughts on this which have appeared on Brock for about 6 years.
1. It is NOT clear that U.S. law should be interpreted to mean that a person born outside the United States IS automatically a USC. What is clear is that, in certain circumstances (having to do with the parent(s))a person born outside the USA is entitled to U.S. citizenship. In all cases, the person claiming U.S. citizenship has the burden of proving facts which trigger the right to U.S. citizenship. The person is NOT a U.S. citizen until those facts (citizenship and possible residence of parents) is offered and proven. In other words, there are “conditions precedent” that must be met before U.S. citizenship is acknowledged.
In other words, the law could be interpreted to mean that there is an “opt in” to U.S. citizenship. Furthermore, the Immigration and Nationality Act is based on the assumption that every person in the world (and the galaxy) wants more than anything to have U.S. citizenship. Therefore, (given this assumption) it is reasonable to read the U.S. law which says “shall be U.S. citizens” to mean that those who “shall be U.S. citizens” are part of the very privileged few who the U.S. Government is willing to bestow the priceless privilege of U.S. citizenship on (if they want it).
2. Although the traditional law on citizenship has been that each country is free to define who its citizens are, one must remember that the person is NOT born in the USA and is therefore born outside of U.S. territorial jurisdiction. Does the U.S. have the right to decree that a person born in Canada is a U.S. citizen (especially when that person is born a Canadian citizen)? Could the U.S. claim that a person born in Canada with blue eyes is a U.S. citizen? Are there are any circumstances in which the U.S. can impose its laws in an extraterritorial manner and impose citizenship on people?
This is an interesting question because the U.S. has “weaponized” citizenship. Tax compliant U.S. citizens living in Canada are “Trojan Horse Soldiers” which exist to extract capital from the Canadian economy.
The argument that the U.S. can impose citizenship in an extra-territorial manner is interesting. To interpret U.S. law to mean that the U.S. can impose citizenship on citizens of other countries, opens the door to many problems.
Here are two examples of these problems:
1. Today the Australian High Court decided that dual citizens are not eligible to sit in the Legislature. Does this mean that an Australian citizen born to a USC parent is automatically not eligible to sit in the legislature? Well, if they were born a dual citizen, then this (given the court decision) would seem to be the case. This is a strong reason to interpret U.S. laws as NOT imposing U.S. citizenship on those born outside the USA.
2. If one born outside the USA is born a USC, then that person would be subject to U.S. laws (including taxation). Taxation is an expression of culture. U.S. tax rules operate to impose U.S. cultural values on those subject to U.S. tax laws. Therefore, if a person born outside the USA is automatically a USC, then that person becomes an ambassador of U.S. culture. Interestingly, this means that by deeming somebody to be a USC, is to export U.S. cultural values to other countries. For example, the U.S. through citizenship and taxation would be exporting U.S. cultural values to Muslim countries.
3. If the USA is free to claim that a person born in Canada is USC, then surely Canada is free to claim that this person is ONLY a Canadian citizen while under Canadian jurisdiction (some variant of the “Master Nationality Theory”.
My point is that even on the level of what US law is, it is NOT clear that somebody born outside the United States is automatically a USC.
What follows is a link to one of the many posts I have written advancing this position.
http://isaacbrocksociety.ca/2016/01/16/born-abroad-to-us-citizen-parents-in-a-cookvtait-world-are-you-a-us-citizen-or-do-have-a-right-to-us-citizenship/
As a practical matter no parent should take the kid to the U.S. consulate and attempt to make the claim that the person is entitled to U.S. citizenship. Interestingly, there has never been support on Brock for any of these arguments. Furthermore, I have never heard of a single instance where the U.S. has attempted to impose citizenship on a person born outside the United States.
So, no, I do not think that people born outside the USA to U.S. citizen parents are automatically U.S. citizens.
In the 1970s, there was an ad for Camel cigarettes that said:
“Camel filter. They’re not everybody, but they could be for you.”
Why not look at it this way:
“U.S. citizenship. It’s not for everybody born abroad, but it could be for your child.”