Is it odd that the IRS is mandated to publish the full names of all who renounce US citizenship? Not that names are necessarily private information, but most other times when government agencies publish names, it's a wanted persons list.
Yeah, I don't get it either. I'm an anarchist, and would love to one day be able to renounce my citizenship and purposefully become stateless. Doing so requires significant financial resources though, and I doubt my family situation will ever allow it.
Still, discussion of that desire has led to many aggressive but interesting conversations on both right- and left-leaning platforms.
There are other examples. Off the top of my head, firearms law has a few instances of this. The ATF publishes a list of FFL holders[0]. This includes gun dealers, pawnbrokers, and even holders of "curio and relic" licenses, which are collectors who do not do it as a business.
Many states also publish lists of concealed carry permit holders. A few years ago, the Commercial Appeal published the entire list of permit holders for Tennessee on their website, searchable by ZIP code. It seems to be a dead link now, but there are still articles about it out there[1]. There was a lot of concern in the community that this would lead to targeted break-ins by people seeking to illegally obtain firearms, but I don't recall seeing anything solid about it happening.
Some business is restricted only to "US persons"--citizens and residents. Employers are expected to read the published list and fire anyone on it whose job description requires them to be a US person. There is no defense for "we were not aware of this", because the register is the ultimate public record.
The fact that the IRS could as easily notify employers directly that their employee has changed status is irrelevant. The list is published so that other people may also discriminate on the basis of changed citizenship status.
summary: expats are renouncing due to the difficulty of filing US taxes abroad. the article doesn't state it directly, but likely these are people who have decided to permanently move abroad, whose lives have changed, and don't want the burden of filing US taxes any longer.
it's a useless article. the fact that there is a "record" is meaningless at these insignificantly small numbers. the fact that tax reform won't change it is just clickbait. congress doesn't and shouldn't care about such a meaninglessly small number of people.
Last number I heard, 6 million. I'm one of them. State department last said there was an estimated 9 million. I've also heard 3 million. So, 6. lol.
Stupid US tax laws and FATCA are a major pain in the ass. FATCA made it all more ridiculous. I'm considering renouncing. Guess what, though? That costs like $3k.
You have to pay the US to stop being a citizen? I can understand a cost for filing, but that's a lot of money to opt out of your rights as a citizen.
I'm trying to think of equivalent items that one would do when opting out of citizenship that are equivalent to emptying out the health spending account when you quit a job to try and make your money back.
Yes, and the bar has been raised[1] in recent years. When high net worth individuals start to leave, it's good to question the reason since they typically have more flexibility than lower-income earners who might do the same if they had greater financial means. The high bar acts to prevent foolish decisions at best, and at worst serves to forcibly imprison the most vulnerable of the populace - it is akin to vendor lock-in of the worst kind.
As for my own opinion, Trump's actions have improved the situation somewhat but perhaps only temporarily. The reporting requirements remain onerous, as the IRS effectively intrudes into every aspect of your life through financial inspection - it is an absolute violation of everyone's humanity and rights, regardless of income level.
The United States had no income tax or reporting requirements for over a third of its existence and experienced growth; now that the tide has shifted, the US tax requirements would be causing a much greater exodus if it weren't for the fact that there are not currently many places worldwide in a better position.
> The United States had no income tax or reporting requirements for over a third of its existence and experienced growth; now that the tide has shifted, the US tax requirements would be causing a much greater exodus if it weren't for the fact that there are not currently many places worldwide in a better position.
I believe that the initial taxation was for import/export, but that's also a time when the social welfare state didn't exist. Though the first income taxes came along to pay for war - I guess all the United States needs to do is stop being in the business of war and the income tax could go away. Any day now.
> Though the first income taxes came along to pay for war - I guess all the United States needs to do is stop being in the business of war and the income tax could go away.
The first income tax came to pay for the Civil War; I don't think the US is going to give up on maintaining it's territorial integrity, even if it gave up on foreign wars.
Absolutely true. Though I'd argue at this point that the only way the United States would face a war that could be fought conventionally internally, it would be by a foe that's using the resource of the United States Army, as I don't believe there'd be another other viable option. We're a little far away from when every man had equivalent firepower to a member of the United States forces in their closet.
It would also seem to be a very hard line to draw in regards to "preventing external threats". An argument could be made that that's exact what's happening right now, and that it's aggressive posture and presence around the world is solely in self defense, so really, the industry of war probably can't ever stop, and neither can the income tax.
> Though I'd argue at this point that the only way the United States would face a war that could be fought conventionally internally, it would be by a foe that's using the resource of the United States Army, as I don't believe there'd be another other viable option
That's true because of the income tax derived funds lavished on the US Army (and other branches.)
Were that to stop—which abandoning the income tax without a similar scale replacement would likely require—other options would rapidly open up.
"You didn't build that" - perhaps the intent of the law is that you can't become wealthy in America by utilizing its resources and public resources and then check out the moment you think you don't need America any more.
> Last number I heard, 6 million. I'm one of them. State department last said there was an estimated 9 million. I've also heard 3 million. So, 6. lol.
Put another way, the number of US citizens living outside the US is somewhere between the population of Iowa (the 30th most populous state) and New Jersey (11th), with the middle of that range being approximately Massachusetts (15th). It's more than the combined population of the 5 - 10 (median: 8) least populous states that elect 10-20% of the US senate.
Sadly, the political power of that constituency is seriously diluted. Voting is a pain in the ass, and if you have never lived in the US and your parents are from the wrong state you're shit out of luck; there's no way to even register to vote.
Of course, Puerto Rico (and other territories like Guam, American Samoa, VI, CNMI) are the real injustices - Puerto Rico would be the 29th most populous state, but even US citizens who move there from other parts of the US lose their rights to vote in federal elections. Because they're still resident in the US. Infuriating.
Sooner or later, the malapportionment of the US senate is going to tear the country apart. Again.
> Maybe "doesn't care" is accurate. "Shouldn't care" is a pretty ignorant statement.
AFAICT, the GP was stating a political/civics position. Are you literally saying that it's based on ignorance, or just that you disagree with the position?
The sad thing is that the renouncers often don't mind paying tax, they just can't deal with the crazy amount of paperwork and costs involved, especially if they have investment income.
Yea, typically we don't owe. Many of us live in "socialist" countries with higher taxes so we get credited for that. Where it hits us in accounting fees and (after FATCA) an inability to have investments outside of registered retirement plans. Also a bunch of other crap. Imagine having an additional tens of thousands of dollars of accounting fees in your lifetime because 'murica.
I'm an American who is a permanent resident of Germany, and the main reason is that the level of assets a normal middle-class wage earner can accumulate (think six figures) is not worth it to banks here to deal with the US-mandated paperwork, and so none of them will sell me stocks, mutual funds or index funds, despite my openness with both the country of my residence and the country of my birth. The only realistic savings mechanism I have given Europe's current near-zero interest rates is real estate; I can buy property, but I'm a bit hesitant to do that at the moment, given the disparity between purchase prices and actual rents. After FATCA started being enforced more heavily, there were Americans whose banks closed their checking accounts! Fortunately, I've not had a problem with very basic financial services, but no one wants to open a brokerage account for me once that American passport comes out.
If I had eight figures to manage, no matter where I was actually resident, they'd probably figure out how to deal with the bureaucracies on both sides of the ocean...
I have my retirement accounts from back when I was still living in the US, but I cannot add to them.
Anything I make on a non-retirement account has to be reported to the German tax authorities, too - and I'll probably have to pay German taxes on those gains when I pull money out of them. Germany taxes all income earned by its residents, no matter where the source, but if my husband (German citizen) were a US resident, they would not tax what he earned in the US.
I am considering citizenship options for the same reasons - access to financial instruments that US institutions such as the SEC prohibit, despite some of those instruments being far better than can be obtained domestically.
It can be difficult to achieve but the optimal situation is to be a citizen of a minimal or tax-free country, reside in a separate country and do business or work in a third.
Treating countries/governments like companies that have to vie for your business is a perspective that helps protect oneself and family.
As someone who works with a lot of American expats, what's stopping you from opening a brokerage account at Interactive Brokers or Charles Schwab? That's what my colleagues seem to do.
Once you let it slip that you live overseas, they tell you they can't help you. They can't open accounts for citizens abroad. Yup, learned that one the hard way... Thanks Obama.
You're not actually being prohibited from opening accounts in those banks because of FATCA. Every major European country has adopted a variation of FATCA--most are actually more invasive than FATCA--and we have FATCA-related information disclosure treaties.
The problem is that the US has not agreed to disclose information back to other countries. Banks don't want to deal with the local consequences of that. It has nothing to do with FATCA.
Source: I do this for a living, and I have a great many contacts in banks all over the world.
You run into PFIC problems with a number of foreign tax wrappers.
Understanding PFICs enough to report them properly is bloody difficult. Once you know how to report those you have, you can do it yourself, but you most likely will not be reporting them to your best tax benefit, but instead in the way that is easiest to understand.
When I had to research them, after 6 or so years of not understanding I had to report them before realising a gain, it took me at least 2 weeks of research and that was with prior knowledge of some of the acronyms you come across. At that point I think I understand enough to report mine but who knows.
Iirc in my research I read a number of times that the IRS has been formally asked to clarify some parts but they haven't responded. And that PFICs are the purview of only a small handful of specialised IRS agents.
I know several people who were born abroad and raised abroad but are US citizens because their parents are citizens. Every year they have to report every cent that they own. In foreign bank accounts, foreign retirement funds and foreign investments. They have to file taxes every year, which means paying several hundred dollars for a tax attorney. They are unable to open several local bank accounts and several of them won't even hire US citizens for any possible job at the bank.
If renouncing citizenship was free then they would do it in a heartbeat, but alas the US wants to steal even more money from them.
When I was living and working outside the USA, I found the process quite simple and straight forward. As long as you didn't earn over 127k USD (limit has increased) you were fine and didn't have to pay any additional taxes. If you earned more you were entitled to all the write offs you would get in the US. It was basically just filing a 1040 and 1 other form. I never had to pay any additional taxes that I already payed in the country I was living and working.
I'm not sure why anyone would need a tax lawyer? The process is very simple and explained in detail on the IRS website.
People that write these articles always fall into a few camps 1) they don't understand their tax position 2) they've received some extremely dodgy advice 3) they're trying to be 'clever' with their money or 4) are extremely wealthy and have very complicated finances and they're trying to dodge US taxes but retain the benefits of citizenship
Is holding a mutual fund in your home country dodgy?
It subjects you to the punitively complex PFIC rules. These are largely a protectionist measure for the US financial system but you get caught up in them regardless.
To do your US taxes correctly as an ex-pat is really complex. If you just file a 1040 you’ve missed a number of forms to document your foreign holdings.
Does being clever with your money include a retirement fund that is considered absolutely vanilla in the country you are living in? Because the USA assumes that all financial services in the world provide exactly the same format of financial reporting that US services do. So retirement funds that are the foreign equivalent of an ordinary 401K have high compliance costs if you need to file with the USA.
Plenty of people earn more than that, that's barely anywhere near the level of a typical software engineer in many locations.
And at that point there's a lot of paperwork to correctly attribute the foreign taxes. Even more so if the country one lives in has mandatory pension or retirement funds, at which point you need someone well versed in 2+ country's tax laws and corresponding agreements to figure out what to write in the forms, never mind what needs paying. (Did I mention: once the country of residence processes the tax return, the US tax return may need amending with further payments based on the actual tax amount in the country of residence.) It's pure expensive time-killing bureacracy.
It gets worse if you want to invest outside of your retirement schemes. Other posters here seem to have already brought up the PFIC issue.
One result of the tax laws is that Americans are nowadays refused custom at most financial institutions in most countries.
That amount 127k if I remember correctly is after taxes (net) in the country of where the earning occurred. In Canada 127k USD equates to about 175k CAD. To earn 175k net in Canada you would need to be earning over 250k CAD. I don't know anyone in Toronto earning more than that as a developer. Actually I know many who can't even break 100-110k CAD. The best paying jobs are in the Valley and USA, if you know of any Canadian outfits paying over $250k CAD please let me know.
Many of the posters who brought up PFIC are probably referring to Investments they made before they became US Citizens. Even then you would only pay taxes on what your investment earned and that is after any write offs you might have.
Like OP said, this procedure is difficult for the very rich or people who are looking to evade taxes. Otherwise it is a simple procedure and doesn't affect the average person.
From what I have heard, the issue isn't paying taxes, but filing them. Do you not have to file even if your income is below $127K? As in you need to file and disclose everything, but won't owe any taxes?
The burden I always hear about is that the reporting requirements are high, and institutions in other countries are not equipped to provide as much detail as the US wants.
Expats are entitled to Social Security and Medicare (once they meet the qualifying thresholds like age). Therefore, they are also required to pay in to Social Security.
If you had any sort of local assets beyond a simple checking account, such as a retirement account or real estate, you were probably doing it wrong and are lucky not to have gotten caught.
Edited to add: either that, or you were doing it before 2010 or so, in which case, yeah, it was apparently way simpler back then.
If you buy a house, things are going to be complicated.
If you have a workplace pension from your job, you're probably screwed. State pensions have screwed people too.
If you invest in stocks, or mutual funds, you'll pay more in tax preparation than you'll make.
If you set up your own company and are not paid as an employee but as the owner, you will be screwed.
Rent out a property, screwed.
Fail to declare every account that you're a signatory on? Prepare to pay up to 125% of the contents.
If you're children are beneficiaries of a trust set up by their non-american grand-parents? Totally screwed.
Almost every American expat I've spoken to has had a shock when they find they totally didn't understand their commitments. The only ones who didn't were employees of big banks/hedge funds whose employers paid a big 4 accountant to take care of everything.
Nothing jumps out at me, but IANAL so I'm not sure.
I guess holding citizens for ransom seems so damn un-American[0] to me that I hope/wish there's a good Constitutional barrier to it.
edit:
[0] By "American", I mean the qualities of freedom and liberty that I was taught, in the 1970's public school system, distinguished the U.S. from most other countries.
As a US citizen you're taxed even if you stop living in the US. In many states, you have to show proof of residency to vote, so there's taxation without representation.
You have to renounce your US citizenship to stop being taxed on income you earn abroad.
Citizens in DC are allowed to vote in federal elections.
However, per the Constitution itself, as a non-state DC is not entitled to a Congressperson or Senator unless the Constitution is amended. (It took a federal amendment for DC residents to get the right to vote in presidential elections, which in the US actually means the right to vote for representatives of the electoral college that actually elect the president. The amendment just gave DC electors.)
https://en.wikipedia.org/wiki/Declarationism . I also found http://www.members.tripod.com/candst/doisussc.htm which says "that there are at least 100 United States Supreme Court cases that mention the words "Declaration of Independence" somewhere in the dicta of that opinion. Yet, not one single case can be found where the authority for the holding in that case was the Declaration of independence."
I believe the Supreme Court has found a right to renounce citizenship, but they haven't yet found a right to do so for free. Maybe someone can plead for a poverty exception on constitutional grounds, but that wouldn't waive the fee for people who can afford it but find it offensive.
> Citizenship is of tangible worth, but the possessor thereof may voluntarily renounce it even though Congress may not be able to arbitrarily impose such renunciation.
On a tangent, it used to be very easy to give up citizenship. That same link says:
> Marriage of an American woman with a foreigner is tantamount to voluntary expatriation, and Congress may, without exceeding its powers, make it so, as it has in fact done, by the Act of March 2, 1907.
Or relinquish. There is a difference and people would be wise to know it.
Also, I'm sure that US would argue that those living outside of its official/continental borders are still well "represented" by its military and consular forces, and as such should pay up. In a sense, the taxes as fees are "insurance premiums."
Personally, I wish the issue had been addressed better than it was during the recent tax "reform" debate, but I knew better. There is no interest in giving up revenues and access to data.
They've raised the relinquishment fee - i.e. the fee to get the State department to evaluate the relinquishment and issue a Certificate of Loss of Nationality - to match the renunciation fee.
For this conversation the difference is therefore mostly moot, even if a few minor differences still remain in the consequences.
> For this conversation the difference is therefore mostly moot
Perhaps you're correct, but I don't consider loss of entry a "minor" difference, my friend. That's why I suggest that people do the research and try to be a bit more precise. But yes, I was aware of the fee change.
Also worth noting, since people like to quibble about numbers, that I've consistently heard that the list doesn't actually include everyone who has parted w/their citizenship or green card. So, the true numbers could be anyone's guess.
The minor differences I was referring to were between loss of citizenship by formal renunciation and loss of citizenship by performing one of the other potentially expatriating acts voluntarily and with intent to relinquish citizenship (making the potential expatriation into actual expatriation).
Both of these paths cause a loss of right to enter the US. Neither one automatically bans re-entry if one otherwise qualifies to enter as an alien. I agree differences in these areas would be major.
The minor differences I know of: formal renunciation specifically for the purpose of avoiding taxes makes one inadmissible, but this purpose is so hard to prove and enforce that only a very small number of people (I forget precisely but around 2-5) have ever been ensnared by it. Also, renunciants are ineligible to possess firearms in the US, even if they'd otherwise be in one of the nonresident alien categories which would be allowed to.
Taking the wording of both of these provisions at face value, they don't apply to former citizens who relinquish but don't renounce.
Courts probably haven't yet been asked to rule either way on this, but at the very least, I don't know a court ruling finding that all former citizens are covered by either provision.
> Taking the wording of both of these provisions at face value
I hope we can both easily agree that law should (almost) never be taken at face value. In my professional experience, the words mean what they mean until they mean something different.
You show residency when you live in a location and register to vote. If you move overseas, you remain registered in the county/precinct where you were last a resident.
You then vote in elections. I've got my ballot for the November elections, ready whenever I am.
And as for taxes, If you live in a higher tax location, you're not going to pay anything to the US. If you earn under 100k, you aren't going to pay anything in the US. You do have to file a return tho, which is a pain.
In many states, you have to show proof of residency to vote, so there's taxation without representation.
Expats can vote in federal elections in the last state they were resident in (or born in). I'm not sure what jurisdiction they get to vote in if they've never lived in the US (i.e., foreign-born US citizens). Expats that lived in the US and intend to return to their former residence may also vote in state and local elections.
AFAIK, the Soviet tax only applied to people who obtained higher education in the USSR. Essentially the Soviet government didn't want to pay tuition for people who were simply going to leave for higher pay abroad.
I don't have an issue with the Soviet tax, or with the progressive portion of the US exit tax, but a requiring a head-tax on would-be emigres is unacceptable IMHO.
>Their American status can make them untouchable by many banks. Many foreign banks do not want American account holders.
This is an understatement.
Some years ago, I was a citizen of Pakistan and had a green card in the US. I never had any accounts in Pakistan. My father in Pakistan had passed away, and I traveled there to visit family. All of my share of the inheritance money was sitting in my brother's account in Pakistan. So we went together to a bank to open an account in my name and transfer my share of the inheritance over.
Now in Pakistan people have an ID card similar to the Social Security Card. They provide a different one for overseas Pakistanis. So when they asked for my ID card, I gave them my overseas ID card. Things were going smoothly until the person got to the address field.
"Oh, I see you live in the US?"
"Yes."
"Sorry, we cannot open a bank account for you."
I talked a bit more, and explained to them that I'm a Pakistani citizen, and not a US one. Nope. The laws were clear. No bank accounts for US based persons without special approval from some senior officials.
I asked would this apply even if I didn't have a green card and was merely a student in the US?
The cost and risk banks take to ensure that US citizens comply with US law is absurdly draconian. It is massively safer for a bank to simply deny participation than to risk fines and expulsion from the global financial system that would effectively cripple it. Banks and other businesses globally are forced to become extensions of the US government without receiving funding to do so.
This is economic warfare. The United States is a great place and the people are amazing (as people have been everywhere I've travelled), but the institutions have essentially enslaved the population and strong-armed the rest of the world.
Thankfully, it ends soon with internal reform or collapse under its own paranoia and resource-intensive policing. I'm expecting this within a decade and am hopeful that it is the former.
Do you have any details about this? My impression was that the Pakistani government felt that requiring US based people to report details of foreign accounts was a way to gather intelligence about other countries, and they didn't want to give them a way to do it. I did not think it was that Pakistani banks themselves had any reporting requirements to the US.
> The Foreign Accounts Taxation Compliance Act required all foreign banks to disclose the financial information of any American with assets over $50,000 sitting in banks outside of the US.
> Steep penalties add muscle to the law. If a foreign bank – not just in Canada, but anywhere – fails to report even a single US citizen as a customer to the IRS, the US Treasury department would withhold 30% of the banks’ US income as penalty.
The article is informative. It seems the requirements are only for banks that have a presence in the US. I'm not sure if the bank I went to has a presence in the US. But I can see the Pakistani government simply giving a blanket "No".
> In September 2018 the European Union foreign policy head, Federica Mogherini, proposed the development of a new "special purpose financial vehicle" intended to bypass the U.S. controlled Society for Worldwide Interbank Financial Telecommunication payments system - commonly known as SWIFT. The seven founding members of this new system are to be Iran, the European Commission, Germany, France, the U.K., Russia and China - but not the United States.
I actually work in this field, and I interact with banks regularly.
The FATCA requirements are actually quite simple, and the theoretical penalties are just that--theoretical.
As a practical matter, the FATCA US customer report is satisfied by a relative spartan list of names, tax ids, account numbers, and balances. In other words, something a simple report should be able to generate in about .000001 seconds.
If a bank can't handle that type of compliance, you should take your money elsewhere because it indicates serious internal control issues.
Your answer seems to be that "yes, banks and other businesses globally are forced to become extensions of the US government without receiving funding to do so" (quoting miscreanity) and "Pakistani banks themselves [have] reporting requirements to the US" (quoting throwaway676980) ... so long as they have an account in the US (my link). I believe that includes Swift accounts?
I don't think they are really asking about the ease by which a bank should be able to generate that report, but rather the necessity to do so.
This article is dated and didn't contain full-year numbers. The tax bill does in fact appear to have considerably changed the rate of Americans renouncing their citizenship: renunciations plunged by 71% in the fourth quarter of 2017 vs the fourth quarter of 2016, 16% in 1Q18 (vs 1Q17), and 38% in 2Q18 (vs 2Q17).
The tax bill became a near-certainty in the fourth quarter of 2017, and was formally passed at the end of the year.
Here's the rest of the story:
"For the first time in five years, the number of Americans renouncing their citizenship decreased in 2017, government records show. Renunciations for the year fell 5.1 percent, to 5,133 — after a four-year climb to a record 5,411 in 2016, according to the IRS."
"But the real story lies in the fourth quarter, when the number of renunciations tumbled 71 percent from the same period in 2016."
Further, for the first quarter of 2018, it fell considerably:
"The total for the first quarter of 2018 was 1,099."
That compares to the 2017 rate of 1,313. A decline of 16%.
In the second quarter of 2018, 1,090 persons renounced their citizenship, a huge drop from 1,759 in Q2 of 2017. A decline of 38%.
Full year 2018 expectations would be for roughly a 29% decline vs the record 2016 figures (around ~3,800 vs the 5,411 for 2016).
"Some observers may want to blame President Trump for the spike, but it is much more likely that longstanding tax issues are the real culprits." he claimed, completely sans evidence or even a coherent argument
89 comments
[ 2.9 ms ] story [ 148 ms ] threadStill, discussion of that desire has led to many aggressive but interesting conversations on both right- and left-leaning platforms.
Many states also publish lists of concealed carry permit holders. A few years ago, the Commercial Appeal published the entire list of permit holders for Tennessee on their website, searchable by ZIP code. It seems to be a dead link now, but there are still articles about it out there[1]. There was a lot of concern in the community that this would lead to targeted break-ins by people seeking to illegally obtain firearms, but I don't recall seeing anything solid about it happening.
0: https://www.atf.gov/firearms/listing-federal-firearms-licens...
1: https://www.heraldcourier.com/news/tn-newspaper-publishes-co...
The fact that the IRS could as easily notify employers directly that their employee has changed status is irrelevant. The list is published so that other people may also discriminate on the basis of changed citizenship status.
it's a useless article. the fact that there is a "record" is meaningless at these insignificantly small numbers. the fact that tax reform won't change it is just clickbait. congress doesn't and shouldn't care about such a meaninglessly small number of people.
Aren't there millions of expats abroad?
Stupid US tax laws and FATCA are a major pain in the ass. FATCA made it all more ridiculous. I'm considering renouncing. Guess what, though? That costs like $3k.
I'm trying to think of equivalent items that one would do when opting out of citizenship that are equivalent to emptying out the health spending account when you quit a job to try and make your money back.
As for my own opinion, Trump's actions have improved the situation somewhat but perhaps only temporarily. The reporting requirements remain onerous, as the IRS effectively intrudes into every aspect of your life through financial inspection - it is an absolute violation of everyone's humanity and rights, regardless of income level.
The United States had no income tax or reporting requirements for over a third of its existence and experienced growth; now that the tide has shifted, the US tax requirements would be causing a much greater exodus if it weren't for the fact that there are not currently many places worldwide in a better position.
[1] https://www.forbes.com/sites/robertwood/2015/10/23/u-s-has-w...
I believe that the initial taxation was for import/export, but that's also a time when the social welfare state didn't exist. Though the first income taxes came along to pay for war - I guess all the United States needs to do is stop being in the business of war and the income tax could go away. Any day now.
The first income tax came to pay for the Civil War; I don't think the US is going to give up on maintaining it's territorial integrity, even if it gave up on foreign wars.
It would also seem to be a very hard line to draw in regards to "preventing external threats". An argument could be made that that's exact what's happening right now, and that it's aggressive posture and presence around the world is solely in self defense, so really, the industry of war probably can't ever stop, and neither can the income tax.
That's true because of the income tax derived funds lavished on the US Army (and other branches.)
Were that to stop—which abandoning the income tax without a similar scale replacement would likely require—other options would rapidly open up.
Put another way, the number of US citizens living outside the US is somewhere between the population of Iowa (the 30th most populous state) and New Jersey (11th), with the middle of that range being approximately Massachusetts (15th). It's more than the combined population of the 5 - 10 (median: 8) least populous states that elect 10-20% of the US senate.
Sadly, the political power of that constituency is seriously diluted. Voting is a pain in the ass, and if you have never lived in the US and your parents are from the wrong state you're shit out of luck; there's no way to even register to vote.
Of course, Puerto Rico (and other territories like Guam, American Samoa, VI, CNMI) are the real injustices - Puerto Rico would be the 29th most populous state, but even US citizens who move there from other parts of the US lose their rights to vote in federal elections. Because they're still resident in the US. Infuriating.
Sooner or later, the malapportionment of the US senate is going to tear the country apart. Again.
Maybe "doesn't care" is accurate. "Shouldn't care" is a pretty ignorant statement.
AFAICT, the GP was stating a political/civics position. Are you literally saying that it's based on ignorance, or just that you disagree with the position?
If I had eight figures to manage, no matter where I was actually resident, they'd probably figure out how to deal with the bureaucracies on both sides of the ocean...
Anything I make on a non-retirement account has to be reported to the German tax authorities, too - and I'll probably have to pay German taxes on those gains when I pull money out of them. Germany taxes all income earned by its residents, no matter where the source, but if my husband (German citizen) were a US resident, they would not tax what he earned in the US.
It can be difficult to achieve but the optimal situation is to be a citizen of a minimal or tax-free country, reside in a separate country and do business or work in a third.
Treating countries/governments like companies that have to vie for your business is a perspective that helps protect oneself and family.
The problem is that the US has not agreed to disclose information back to other countries. Banks don't want to deal with the local consequences of that. It has nothing to do with FATCA.
Source: I do this for a living, and I have a great many contacts in banks all over the world.
Understanding PFICs enough to report them properly is bloody difficult. Once you know how to report those you have, you can do it yourself, but you most likely will not be reporting them to your best tax benefit, but instead in the way that is easiest to understand.
When I had to research them, after 6 or so years of not understanding I had to report them before realising a gain, it took me at least 2 weeks of research and that was with prior knowledge of some of the acronyms you come across. At that point I think I understand enough to report mine but who knows.
Iirc in my research I read a number of times that the IRS has been formally asked to clarify some parts but they haven't responded. And that PFICs are the purview of only a small handful of specialised IRS agents.
If renouncing citizenship was free then they would do it in a heartbeat, but alas the US wants to steal even more money from them.
I'm not sure why anyone would need a tax lawyer? The process is very simple and explained in detail on the IRS website.
https://www.irs.gov/individuals/international-taxpayers/u-s-...
It subjects you to the punitively complex PFIC rules. These are largely a protectionist measure for the US financial system but you get caught up in them regardless.
To do your US taxes correctly as an ex-pat is really complex. If you just file a 1040 you’ve missed a number of forms to document your foreign holdings.
And at that point there's a lot of paperwork to correctly attribute the foreign taxes. Even more so if the country one lives in has mandatory pension or retirement funds, at which point you need someone well versed in 2+ country's tax laws and corresponding agreements to figure out what to write in the forms, never mind what needs paying. (Did I mention: once the country of residence processes the tax return, the US tax return may need amending with further payments based on the actual tax amount in the country of residence.) It's pure expensive time-killing bureacracy.
It gets worse if you want to invest outside of your retirement schemes. Other posters here seem to have already brought up the PFIC issue.
One result of the tax laws is that Americans are nowadays refused custom at most financial institutions in most countries.
Many of the posters who brought up PFIC are probably referring to Investments they made before they became US Citizens. Even then you would only pay taxes on what your investment earned and that is after any write offs you might have.
Like OP said, this procedure is difficult for the very rich or people who are looking to evade taxes. Otherwise it is a simple procedure and doesn't affect the average person.
Ever heard of Singapore? Hong Kong? Switzerland?
The burden I always hear about is that the reporting requirements are high, and institutions in other countries are not equipped to provide as much detail as the US wants.
Edited to add: either that, or you were doing it before 2010 or so, in which case, yeah, it was apparently way simpler back then.
I guess you'd be an illegal emigrant?
It's very disappointing to contrast how I now perceive the actions of the U.S. federal government with the view I was fed growing up in the 1970s.
I'm curious if anyone has / shall sue the U.S. government on Constitutional grounds regarding these policies.
[0] https://www.nytimes.com/1972/09/28/archives/jews-ask-nixon-t...
Nothing jumps out at me, but IANAL so I'm not sure.
I guess holding citizens for ransom seems so damn un-American[0] to me that I hope/wish there's a good Constitutional barrier to it.
edit: [0] By "American", I mean the qualities of freedom and liberty that I was taught, in the 1970's public school system, distinguished the U.S. from most other countries.
You have to renounce your US citizenship to stop being taxed on income you earn abroad.
However, per the Constitution itself, as a non-state DC is not entitled to a Congressperson or Senator unless the Constitution is amended. (It took a federal amendment for DC residents to get the right to vote in presidential elections, which in the US actually means the right to vote for representatives of the electoral college that actually elect the president. The amendment just gave DC electors.)
Next you're gonna tell me it was just a plot by wealthy white men to enrich themselves by subverting a foreign government.
> so there's taxation without representation
What does that have to do with the constitution?
> Citizenship is of tangible worth, but the possessor thereof may voluntarily renounce it even though Congress may not be able to arbitrarily impose such renunciation.
On a tangent, it used to be very easy to give up citizenship. That same link says:
> Marriage of an American woman with a foreigner is tantamount to voluntary expatriation, and Congress may, without exceeding its powers, make it so, as it has in fact done, by the Act of March 2, 1907.
For example, from https://supreme.justia.com/cases/federal/us/338/491/ :
> Held: she expatriated herself under the laws of the United States by her naturalization as an Italian citizen followed by her residence abroad
or from https://en.wikipedia.org/wiki/Perez_v._Brownell , "the Supreme Court upheld an act of Congress which provided for revocation of citizenship as a consequence of voting in a foreign election. The precedent was repudiated nine years later in Afroyim v. Rusk". See https://en.wikipedia.org/wiki/Afroyim_v._Rusk .
Or relinquish. There is a difference and people would be wise to know it.
Also, I'm sure that US would argue that those living outside of its official/continental borders are still well "represented" by its military and consular forces, and as such should pay up. In a sense, the taxes as fees are "insurance premiums." Personally, I wish the issue had been addressed better than it was during the recent tax "reform" debate, but I knew better. There is no interest in giving up revenues and access to data.
For this conversation the difference is therefore mostly moot, even if a few minor differences still remain in the consequences.
Perhaps you're correct, but I don't consider loss of entry a "minor" difference, my friend. That's why I suggest that people do the research and try to be a bit more precise. But yes, I was aware of the fee change.
Also worth noting, since people like to quibble about numbers, that I've consistently heard that the list doesn't actually include everyone who has parted w/their citizenship or green card. So, the true numbers could be anyone's guess.
Both of these paths cause a loss of right to enter the US. Neither one automatically bans re-entry if one otherwise qualifies to enter as an alien. I agree differences in these areas would be major.
The minor differences I know of: formal renunciation specifically for the purpose of avoiding taxes makes one inadmissible, but this purpose is so hard to prove and enforce that only a very small number of people (I forget precisely but around 2-5) have ever been ensnared by it. Also, renunciants are ineligible to possess firearms in the US, even if they'd otherwise be in one of the nonresident alien categories which would be allowed to.
Taking the wording of both of these provisions at face value, they don't apply to former citizens who relinquish but don't renounce.
Courts probably haven't yet been asked to rule either way on this, but at the very least, I don't know a court ruling finding that all former citizens are covered by either provision.
I hope we can both easily agree that law should (almost) never be taken at face value. In my professional experience, the words mean what they mean until they mean something different.
You show residency when you live in a location and register to vote. If you move overseas, you remain registered in the county/precinct where you were last a resident.
You then vote in elections. I've got my ballot for the November elections, ready whenever I am.
And as for taxes, If you live in a higher tax location, you're not going to pay anything to the US. If you earn under 100k, you aren't going to pay anything in the US. You do have to file a return tho, which is a pain.
Expats can vote in federal elections in the last state they were resident in (or born in). I'm not sure what jurisdiction they get to vote in if they've never lived in the US (i.e., foreign-born US citizens). Expats that lived in the US and intend to return to their former residence may also vote in state and local elections.
I don't have an issue with the Soviet tax, or with the progressive portion of the US exit tax, but a requiring a head-tax on would-be emigres is unacceptable IMHO.
This is an understatement.
Some years ago, I was a citizen of Pakistan and had a green card in the US. I never had any accounts in Pakistan. My father in Pakistan had passed away, and I traveled there to visit family. All of my share of the inheritance money was sitting in my brother's account in Pakistan. So we went together to a bank to open an account in my name and transfer my share of the inheritance over.
Now in Pakistan people have an ID card similar to the Social Security Card. They provide a different one for overseas Pakistanis. So when they asked for my ID card, I gave them my overseas ID card. Things were going smoothly until the person got to the address field.
"Oh, I see you live in the US?"
"Yes."
"Sorry, we cannot open a bank account for you."
I talked a bit more, and explained to them that I'm a Pakistani citizen, and not a US one. Nope. The laws were clear. No bank accounts for US based persons without special approval from some senior officials.
I asked would this apply even if I didn't have a green card and was merely a student in the US?
Yup.
The reason they gave me? US tax laws.
This is economic warfare. The United States is a great place and the people are amazing (as people have been everywhere I've travelled), but the institutions have essentially enslaved the population and strong-armed the rest of the world.
Thankfully, it ends soon with internal reform or collapse under its own paranoia and resource-intensive policing. I'm expecting this within a decade and am hopeful that it is the former.
> The Foreign Accounts Taxation Compliance Act required all foreign banks to disclose the financial information of any American with assets over $50,000 sitting in banks outside of the US.
> Steep penalties add muscle to the law. If a foreign bank – not just in Canada, but anywhere – fails to report even a single US citizen as a customer to the IRS, the US Treasury department would withhold 30% of the banks’ US income as penalty.
> In September 2018 the European Union foreign policy head, Federica Mogherini, proposed the development of a new "special purpose financial vehicle" intended to bypass the U.S. controlled Society for Worldwide Interbank Financial Telecommunication payments system - commonly known as SWIFT. The seven founding members of this new system are to be Iran, the European Commission, Germany, France, the U.K., Russia and China - but not the United States.
Web sites like http://non-fatca-banks.com/pk.html list which banks are members of SWIFT, because that means they are exposed to penalties should they fail to follow FACTA reporting laws. For example, the National Bank of Pakistan followed FACTA, see https://www.nbp.com.pk/fatca/index.aspx .
The FATCA requirements are actually quite simple, and the theoretical penalties are just that--theoretical.
As a practical matter, the FATCA US customer report is satisfied by a relative spartan list of names, tax ids, account numbers, and balances. In other words, something a simple report should be able to generate in about .000001 seconds.
If a bank can't handle that type of compliance, you should take your money elsewhere because it indicates serious internal control issues.
I don't think they are really asking about the ease by which a bank should be able to generate that report, but rather the necessity to do so.
The tax bill became a near-certainty in the fourth quarter of 2017, and was formally passed at the end of the year.
Here's the rest of the story:
"For the first time in five years, the number of Americans renouncing their citizenship decreased in 2017, government records show. Renunciations for the year fell 5.1 percent, to 5,133 — after a four-year climb to a record 5,411 in 2016, according to the IRS."
"But the real story lies in the fourth quarter, when the number of renunciations tumbled 71 percent from the same period in 2016."
Further, for the first quarter of 2018, it fell considerably:
"The total for the first quarter of 2018 was 1,099."
That compares to the 2017 rate of 1,313. A decline of 16%.
In the second quarter of 2018, 1,090 persons renounced their citizenship, a huge drop from 1,759 in Q2 of 2017. A decline of 38%.
Full year 2018 expectations would be for roughly a 29% decline vs the record 2016 figures (around ~3,800 vs the 5,411 for 2016).
https://nypost.com/2018/02/09/fewer-americans-gave-up-their-...
https://www.forbes.com/sites/robertwood/2018/05/14/fewer-ame...
Reference: https://www.alamy.com/stock-photo/your-tax-dollars-at-work.h...