I'm quoted in the article and would be happy to answer questions about this. Our firm does a lot of this kind of work -- U.S. citizens and green card holders cutting all ties to the United States.
Why would this make sense for any country with taxes at or higher than the states, since you can write off taxes paid to foreign governments anyways? Yes, Singapore, Switzerland or Hong Kong, or any country like Afghanistan if you have enough power (Karzai), but for most of us?
Also, 640 a year is hardly more than an anomaly statistically.
I've been out for 7 years and haven't paid anything to the IRS yet, even without the FEIE I just deduct anyways. The only annoying thing is double taxation when I go back to the states on business trips.
My company is a Hong Kong registered entity and there is no tax because no work is being performed in Hong Kong. Personal income tax in HK is like 15%, but only of you earned that income in HK.
Some people I know who have setup a similar thing only pay themselves 50k USD a year and the company pays for the rest as expenses. It's a little more complicated then that, but that is the gist of it.
Hong Kong and Singapore are set up to work like this. It's how all the mainland Chinese hide their money from the communists.
> Some people I know who have setup a similar thing only pay themselves 50k USD a year and the company pays for the rest as expenses.
Technically those people are still on the hook for the expenses the company pays for them, sans the generous overseas housing deduction that congress recently implemented.
I have the opposite problem really. All my money is held by the communists (well, in my China Merchants Bank account anyways).
Are you a resident of HK or doing this as a citizen/resident elsewhere? I'd be interested in speaking with any experts/service-providers you could recommend for the process of setting up an HK-based company. (Contact info in my profile.)
Same here, been out of the States for 15 years and family have our own business. We've been paying taxes locally and filing tax returns yearly for the States. There's a minimum which one can make before they have to pay taxes to the US (about $70-80,000 a year individually).
For an average person or family, it's hard to reach this amount, and as said before you can write off taxes paid in a foreign country.
Though the main problem would be if you're registered as a Professional and individual business (contractor/consultant). Then you're liable for taxes in both the country you live in, and the US. I've been made a number of offers of work as a contractor and had to refuse (due to low pay since companies didn't want to hire employees only contractors, the fact I'd have to pay for all benefits, and also on top of that pay taxes on what ever I made).
Yes it is a a small number. Canary in a coal mine, really.
The people who leave go everywhere. Including high tax locations. Income tax is not usually the issue. Estate tax is a big reason. So are the tax penalties imposed by the US for trivial paperwork problems. Hint. You Aussies in the USA have a big big problem with your superannuations.
You get paid for your time by your foreign employer and pay foreign taxes on that income, but the US won't let you deduct that as foreign earned income since you were in the US at the time. Even if you take a holiday to the US you are reducing the amount of foreign earned income that you can deduct for the year.
I am a self-employed US citizen living in Sweden, so I can relate some of the paperwork. I manage it because I had a good accountant before I left the US, and she handles all of the paperwork.
First, be aware that only the US and Eritrea taxes its citizens on their world-wide income, no matter where they live. If I were a South African citizen living in Sweden then I wouldn't have to pay taxes back to South Africa. But I am a US citizen, so I have to file taxes for both countries.
Of that, $95,100 in 2012 is tax free, so I only pay taxes on what I make over that. Which I did one year, so that was fun trying to figure out how to pay the IRS from an overseas bank account.
The US has a bunch of bilateral agreements on income taxes so that I don't have double taxation. However, there's only a handful of countries with bilateral social security agreements with the US. Luckily, Sweden is one of them; I needed to get a form to prove that as a self-employed person I was covered. Being self-employed overseas makes things more complicated.
From what I can tell, if I had moved to New Zealand then I would be paying social security to both countries.
I also need to report the maximum value of each of my accounts, because of the FBAR requirements. Some people have gotten in trouble with it. See http://www.thelocal.se/39522/20120306/ for some examples. ("the penalty for non-compliance of FBAR is $10,000 per bank account per year, with the IRS looking back six years").
Have you filed your FBAR statement?
Then there's problems with the banks. Swedish banks really don't want customers who are US citizens, because the US requires a lot of extra paperwork from the bank. FACTA makes this worse. I am a permanent residence here, with an account which was opened before the new requirements went into place, but last month I spent an anxious 30 minutes at the bank while they figured things out.
There are more complications for a US citizen who wants to invest in a company. I think there's more reporting obligations for the company in that case.
And of course I pay for a CPA to handle things, since there's no way I would keep track of the relevant laws myself.
It ends up being this odious choice - how much are you willing to pay and how much hassle will you put up with in order to keep your citizenship?
The even worse case is for someone who is an American citizen by birthright, but was born, raised, and lives outside of the US, with no intention of going to the US. I think these people are still supposed to file taxes and deal with all of this mess - and are potentially subject to huge fines for not having done so already, should the IRS decide to go after them.
Also, it makes sense for a few corner-case reasons. The Wikipedia page on "Renunciation of citizenship" mentions that Vincent Cate 'renounce[d] his US citizenship to avoid the possibility of violating US laws that may prohibit US citizens from "exporting" encryption software.'
> Of that, $95,100 in 2012 is tax free, so I only pay taxes on what I make over that. Which I did one year, so that was fun trying to figure out how to pay the IRS from an overseas bank account.
Are you telling me that the Swedish taxes you deducted from your tax bill were lower than the corresponding American taxes? I find this very hard to believe. Yes, you have to pay taxes after $95k, but you can deduct what you pay to the government in the country you are working in, which usually comes out to zero overall.
> From what I can tell, if I had moved to New Zealand then I would be paying social security to both countries.
You do not have to pay payroll taxes if you are employed abroad. I haven't contributed to SSI or Medicare in a long time.
> Have you filed your FBAR statement?
Every year! This is annoying, but at least we can file online now.
> Swedish banks really don't want customers who are US citizens, because the US requires a lot of extra paperwork from the bank. FACTA makes this worse.
Thankfully, I live in China where they could careless about American laws (up until this point).
> It ends up being this odious choice - how much are you willing to pay and how much hassle will you put up with in order to keep your citizenship?
It really isn't that big of a deal. There is at least a million of us working abroad, probably more, and only 640 a year decide to renounce. And what are the other choices? Should I become a PRC citizen, even if that was possible?
I'm saying that I trust my CPA to do the right thing. For one, it looks like I didn't even get the year right. I paid those taxes two years ago, not last year. Last year's US tax bill (when I cleared $100K) was $0. It was two years ago when I had to pay $2000. Those records are more difficult to get access to than I care to do, and I don't recall the reason.
> You do not have to pay payroll taxes if you are employed abroad
Correct. But as I started off, I'm self-employed.
Quoting from elsewhere: "If you are self-employed and you live overseas, you may still be required to pay self-employment taxes in the US, including Social Security. This would need to be paid before the Foreign Earned Income Exclusion so it is an actual out-of-pocket expense, not something that would be offset on your expat tax return."
The exceptions are those countries which have a totalization agreement with the US. "This covers Australia, Austria, Belgium, Canada, Chile, Czech Republic, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, Korea (South), Luxembourg, Netherlands, Norway, Poland, Portugal, Spain, Sweden, Switzerland and the United Kingdom."
> It really isn't that big of a deal
If you focus just on that number then I agree. As that's what this linked-to page discusses, then yes you're right.
I think there's a more interesting numbers lurking. From the article, "I.R.S. data for 2012 shows just over two million tax returns filed in 2012 by overseas Americans, compared with an estimated six million Americans living or working abroad."
Now, a tax return can cover multiple people and some of the Americans living abroad are children. I'll be generous and say that some one million people aren't following the law, compared to a few hundred people who are doing what the law says in order to avoid the extra hassle.
Has that reporting rate gone up or down? How much revenue has the US gotten from its ex-pats because of the heightened reporting requirements? How much has it cost those Americans? I pay about $600/year for my CPA, for me and my wife, so assuming $100/return gives an unfunded mandate, as it were, of $200 million.
Before I moved here, I visited often for work. I would rent a business apartment for a month or two. Most work on P.O.s and the giro/SWIFT system, not by credit card or cash. I also had difficulty purchasing some things online because sites wanted a Nordic bank card. I figured that opening a local account would make things easier for me. Had I been any nationality other than US, I could have done so. But US banking laws prohibited me from doing so.
Again, not a big deal. But little deals * 6 million become large.
> what are the other choices?
You could not file your income tax. It seems that over 1 million people don't do so. It would help if you never wanted to return to the US. (A friend of mine lives in Shanghai, and has for almost 10 years. I'm pretty sure she's not paid US taxes during that time.)
> Correct. But as I started off, I'm self-employed.
Ok, that makes sense. I do pay SSI in China, but I'm sure I'll never see anything good from that. Would have been nice to at least get a 401K or something. Retirement funding is also another huge pain in the ass for expats.
> Now, a tax return can cover multiple people and some of the Americans living abroad are children. I'll be generous and say that some one million people aren't following the law, compared to a few hundred people who are doing what the law says in order to avoid the extra hassle.
Everyone who has an accountant doing their taxes is following the law, and that is much of the high end (sans those who are explicitly dodging taxes, of course). I do see my friends who have accountants paying more than me, but I think this is because the accountants are very conservative in how they deal with double taxation.
Most of us are mostly following the law.
> Has that reporting rate gone up or down? How much revenue has the US gotten from its ex-pats because of the heightened reporting requirements?
Many of us are just normal worker bees who already pay enough taxes in the country we are working in. It makes no sense for us to renounce our citizenship to not pay taxes we don't need to pay anyways.
> Before I moved here, I visited often for work. I would rent a business apartment for a month or two. Most work on P.O.s and the giro/SWIFT system, not by credit card or cash. I also had difficulty purchasing some things online because sites wanted a Nordic bank card.
I have the opposite problem: I don't have a US credit card and get lots of pain because of that. The Chinese system is quite limited.
> You could not file your income tax. It seems that over 1 million people don't do so. It would help if you never wanted to return to the US. (A friend of mine lives in Shanghai, and has for almost 10 years. I'm pretty sure she's not paid US taxes during that time.)
She probably doesn't have to pay US taxes if she's paying higher Chinese taxes. Anyways, she should file tax forms just to put $0 on that line.
I think our positions are clear. I just wanted to make one last comment.
> She probably doesn't have to pay US taxes if she's paying higher Chinese taxes. Anyways, she should file tax forms just to put $0 on that line.
I completely agree, but given the circumstances around her leaving, I'm rather certain that she's never coming back to the US. At this point, given US law, is it reasonable for her to start filing again? A quick check now suggests that it isn't - she should wait until she knows she wants to return to the US. I don't think the fines or other penalties gets any worse by waiting longer.
For those that are solidly American (e.g. 3rd+ gen), what are their options of where to go? Or is the only way to marry someone of the target country or have millions to get an investor/monied-type visa?
You buy a passport or you go to a country where you can get permanent residency and they you stay long enough to qualify for citizenship. Or yeah. Marriage. :-)
I read it more to mean, a US citizen with highly attenuated ties to another country; after 3rd generation, you aren't likely to have immediate family overseas, &c. At least, I hope that's what was meant.
He doesn't mean it like that. He's referencing the tendency of other nations to grant citizenship to descendents of citizens. E.g., if my father were German, I'd have a better chance of acquiring German citizenship than if my most recently immigrated ancestors came to the U.S. circa 1840 (which for me happens to be the case).
I know that for Australia and Canada, at least, marriage really means nothing as far as permanent residency (and from that, citizenship) is concerned.
It's all about the relationship itself. That is to say, you need to prove that the relationship is solid and marriage does not prove that. It's the years before that of living together, joint bank accounts and bills that proves that relationship.
I'm not a citizen, but have a friend that has dual US/Canadian citizenship. If he renounces the US side, will they harass or prohibit him from entering the US again?
I only knew it because that is one of the questions that you answer on a Form 4473 (the form used for background checks at gun stores). There is a whole list of questions to which you must answer in the negative, and that was one of them.
Theoretically they can ban you from ever entering the US again even with a valid foreign passport. In practise this doesn't seem to happen. But I guess you never know when they'll start enforcing that rule. There are also complicated tax implications - basically they treat you as if you died and tax you one time on all of your assets.
Are most people leaving simply immigrants who got US citizenship vs real Americans with American parents? Are the majority leaving to the Middle-East? (Edit: just saw from a post that people are leaving to many different locations.)
I read some articles by a company that helps facilitate this, and their claim was these people tend to be expatriates that over time have had less and less connection to the country of their birth that the citizenship and taxation issues have become more trouble keeping than dropping.
I'm curious if anyone does it now for reasons entirely unrelated to taxes or inheritance or finance or the hassle of filing taxes/regulatory in general, but purely as a political protest or something like that.
I only know one person (who wasn't otherwise a criminal) who renounced for what seemed like totally non-financial, non-administrative reasons: Vince Cate, back in the 1990s, when he was my neighbor in Anguilla and wanted to work on crypto stuff during the ITAR ban days.
One of the cornerstones for Socrates' defense of the rule of law was that any adult who did not like the law was free to leave, without being taxed for doing so.
I find it interesting that there are clearly so many in this country who have very deep disagreements with the law, but so few seem to leave. Of course I do not blame them; simply moving somewhere more agreeable to you is not as simple as Socrates may have you believe...
I've "left" a few times (I think I've lived outside the US longer than I've lived in the US, at least after age 14), but as a US Citizen, the most egregious aspects still apply to me wherever I am. And renouncing one's citizenship is a far bigger step than leaving, or never having had it in the first place.
Also, many of the problems with the US are actually global externalities and hurt non-citizens/non-residents abroad even more than they affect US citizens or those within the US. We essentially are responsible for the global war on drugs, for instance.
It's hard to figure out what things would cause me to be so angry at the USG to renounce citizenship but not to remain in the US and use all means to try to fix the problem. e.g. if there were a genuine Hitler/Stalin/Mao-level takeover of the US, I wouldn't be content to just flee somewhere and try to avoid it; the only reason to leave would be temporarily to raise funds/forces to try to fix it. But I really don't see anything like that happening in the US -- much more likely just a long slide into comparative irrelevancy like the UK has done over the past 60-80 years.
> I'm curious if anyone does it now for reasons entirely unrelated to taxes or inheritance or finance or the hassle of filing taxes/regulatory in general, but purely as a political protest or something like that.
Yes. Despite the HN headline and the lede paragraph of the linked article ascribing this to US taxes, the article's "poster boy" (I mean, literally, the example of the trend who they lead with a big photograph of, and the only one of the two named examples who is quoted actually discussing his motive in the article) -- Mahmood Karzai, who has lived in Afghanistan for 12 years and is the elder brother of Afghan President Hamid Karzai, cites his reason as "I might become politically active, therefore I decided to give up my [U.S.] passport." Nothing to do with taxes, there.
For example, Terry Gilliam (the director) "renounced his American citizenship, describing the George W. Bush administration as having created an environment "scarily similar to the Orwellian nightmare" of his 1985 film Brazil."
Wow, a few of those guys are awesome. http://en.wikipedia.org/wiki/William_Ash_(writer) who renounced because the US had a stance of neutrality vs. the Nazis for too long, so he renounced to become a Canadian military pilot. Awarded MBE.
Apparently they used to be a lot more "automatic" about revoking citizenship for acts (like joining a foreign military as an officer) where there wasn't clear intent to renounce citizenship. It now requires a seriously affirmative act; essentially showing up at a consulate and making a declaration, demonstrating that it's intentional and informed, etc.
Does a flat tax (with reasonable deductions) hurt anyone besides the super rich? It seems like it would solve a lot of problems and close a lot of tax loopholes. Imagine if we could nearly eliminate the IRS.
1. If you accept current economic theory, a flat tax actually hurts poor people more because it's regressive. It's regressive because each percentage point of tax means more to the poor person than it does to the rich. 15% of 1M is a lot of money compared to 15% of 30K, but the 30K earner feels that a lot more.
2. The IRS would not be eliminated. There would probably still be a federal entity responsible for managing the tax income at the federal level
3. The IRS would not be eliminated. There are a lot more taxes besides personal income taxes.
4. We basically already have most of what you're really thinking about with adopting a flat tax. The majority of tax information is already given to the IRS by your employer, bankers, etc. Most people don't really need to file a tax return, since they are just writing down numbers they got from forms which the IRS also gets copies of. Eliminating the personal income tax return in these situations has been discussed, but Intuit and some bright lights on the right/republican side of the aisle believe its a terrible idea and are fighting against it.
5. Does this response really have anything to do with people renouncing citizenship to avoid taxes on foreign income? Would replacing a rule heavy progressive taxation system with a simple flat tax really change someone's opinion on having to pay it?
> If you accept current economic theory, a flat tax actually hurts poor people more because it's regressive.
A flat tax is not "regressive" by either of the usual definitions (by the standard definition, a "regressive" tax takes a either a higher total percentage or a higher marginal percentage at lower incomes.)
It still hurts poor people compared to a progressive tax system, because it isn't progressive, so the burden on the poor, at any given total revenue level, is greater than in a progressive system.
> It's regressive because each percentage point of tax means more to the poor person than it does to the rich. 15% of 1M is a lot of money compared to 15% of 30K, but the 30K earner feels that a lot more.
While this decreasing-marginal-utility based argument for why flat taxes are bad for poor people is both consistent in outline with the current theory and well supported by empirical research on the marginal utility of income, calling this "regressive" is inconsistent with the usual definition of "regressive" when it comes to taxation.
I agree. Prefacing with 'current economic theory' was a poor choice on my part.
A few of my friends are heavily left-leaning, and anytime the topic of flat taxation or 'the fair tax' comes up they start foaming at the mouth about how it's regressive. The two concepts are paired in my mind.
The US system is complicated because of deductions. You can still have a progressive (and I would argue more fair) tax system that is very simple. For example here in NZ there are various tax brackets but most people don't ever file a tax return - your employer deducts the correct amount from your paychecks and sends it to the govt. What in the US would be deductions are benefits here - the govt send you a check if you qualify (poor with children, disability, etc) but you still pay your normal tax rates. It makes the system much simpler to understand and for most people they have zero interaction with the tax authorities at all - the only people who do are the poor and the rich.
Oh come on guys. Every country has some tax blip that makes it foolish for a small number of people to live in that regieme. Fine. Lets not extrapolate that out to headlines designed to be read as "millions are throwing away their citizenship - its all because we are over taxed!"
Plus please realise America is a low-tax country compared to Europe and Australia because it has a minimal welfare state, compared to Europe and Australia.
It is more that the USA is one of the few countries that taxes on citizenship rather then residency, so this means that if you are living in another country you are still dealing with USA tax laws as well the tax laws of your country of residency.
If you're doing a lot of convoluted business dealings, I imagine it could be a hassle, but for a regular professional expatriate employee I have not found it complex. I earn a salary; I pay Danish taxes on that salary; I deduct the Danish taxes paid from my U.S. tax obligation as a Foreign Tax Credit; and the net result is negative so I pay no U.S. tax.
It would be even easier if I spent less than 35 days/year in the U.S. and qualified for the $95k foreign income exclusion. But even though I don't (I spend ~2 months/yr in the U.S. in an average year), it's still easy enough.
USA taxes citizenship, as well as residency (both physical and legal). As a non-us person, I paid more taxes than my friends did. As a permanent resident, I still have to pay taxes if I leave the US - even though I'm not a citizen.
It's not as simple as saying it's a 'low-tax country compared to Australia'. Perhaps in some states, but not all. The tax I pay in California is very comparable to the tax I paid in Australia.
Meanwhile, living in Australia I had to file a US tax return every year, and have the potential to be taxed on things where no tax exists in Australia (inheritance tax, gift tax).
FTA: In total, more than 670 U.S. passport holders gave up their citizenship [...]in the first three months of this year
Not understanding how a fact like this even rises to the level of a sentence in a related article, much less the lede. Can someone please explain to me how a tax policy which has a net effect of reducing its tax base by 0.002% (rough guess, assuming I didn't slip a digit) is something worth talking about at all?
I mean, the IRS is going to lose more revenue to people upset with US food choices...
Also worth noting: during that same period, around 165,000 formerly non-Americans naturalized as U.S. citizens. A 250:1 ratio of people joining to people disaffiliating ain't bad.
Some countries have major problems with an exodus of qualified people and an inability to attract people to the country, but the U.S. is not really in that category. Quite the opposite: there are many qualified, intelligent people wanting to move to the country, but who are currently blocked by immigration law from doing so.
That's only an interesting counterpoint if those people more than counteracted the taxable assets/income of the ones leaving. I would not take that as a given.
For 165,000 * M >= 640 * N, N would have to me much greater than M. I think its a win.
But this isn't accurate, the 165k who naturalized were probably already visa or greencard holders and paying taxes. A more accurate way to measure this is to look at how many visas that support employment are issued each year, which is probably greater than 165K.
Where do you get the 0.002% figure from? The number of people divided by the population of the US? If so, that's not a meaningful figure - you should be examining the tax they would pay compared to the tax base, which could be many times higher.
The reason this is news is because it's incredibly wealthy and high profile people with a large amount of assets to tax that are giving up their passports.
With all due respect, the linked article should be examining that. You assert it "could be many times higher", which is fine. I assert, with equal justification, that the relevant expats are destitute receivers of the EITC and that the IRS revenue will increase.
Wouldn't it be nice if someone out there, maybe a web site with journalists and stuff, might do that research for us and give us the results?
I'm not saying there can't possibly be an issue worth talking about. I'm saying that this article isn't worth talking about.
Fair enough point - but they do mention some specific examples of people that obviously have a high net worth and have a _lot_ to lose by these tax laws. I assume that anyone giving up their citizenship has enough to lose to make that worthwhile.
It would be good to examine exactly how much is being lost and whether it's _actually_ newsworthy, but I'm not sure how they can do that - AFAIK all they can go on is the number of people giving up their citizenship that is provided by the IRS. You'd need to figure out specific names, it'd be a huge undertaking. It'd be interesting to know though, and probably worthwhile for the government to investigate and monitor.
Ugh, this article again? It crops up every quarter without fail.
If one of these could actually provide some sort of analysis or evidence for their conclusions, that'd be pretty great. Each time it's published, they relay a few anecdotes about 1 or 2 mildly famous people renouncing citizenship. They then give a trend in absolute numbers without addressing population changes, and finally go on to blame taxes or whatever else for the trend that they assure is happening.
Is expatriation increasing? Maybe? Who knows with this quality of reporting.
The question of how to treat international taxation is almost entirely separate from expatriation. If people aren't taking the easy step and relocating to different states due to tax differences[1][2][3], I doubt it's the main reason they're renouncing citizenship.
Good points, but regarding moving states - that doesn't address large federal taxes, or taxes on things that aren't taxed in other countries (death tax, gift tax).
True, but if tax regime had a significant impact on migration, it should have an incremental impact at all scales, offset by the expense / difficulty of actually migrating.
If one lives in California and earns enough to be in the top bracket (>$1mm/year), they could save a marginal 10% by relocating to Nevada. It's only a four hour drive to Tahoe, so you would expect to see a fair portion of people doing so. However, there is almost no evidence that this actually occurs.
Expatriation is just migration on a larger scale. The expense and complexity are obviously higher, but the basic incentives are identical. I have no doubt that at some very-high net worth, it makes sense to renounce and move abroad, but is it worth wasting energy on the few people a year who will do so?
(Though "LOCKE-TECKEMEIER LORETTA ULLRICH" and "LOCKE-TECKMEIER LORETTA U." are likely the same person, so the count won't be perfect.)
With a bit of work, you can easily verify if the number is increasing.
"If people aren't taking the easy step and relocating to different states due to tax differences..."
A different logic is much more likely. There are Americans who have already relocated overseas and some decades later renounce their citizenship.
Consider Corine Mauch, the Iowa born mayor of Zurich. “My relationship with the U.S. is limited to my very early youth,”. "[S]he regards Switzerland as her home and doesn’t want to deal with Internal Revenue Service paperwork, according to an e- mailed statement from her office today." http://www.bloomberg.com/news/2013-04-18/zurich-mayor-renoun... .
You're right; it's hard to tell if someone renounced citizenship in order to avoid paying US taxes. Indeed, there are other reasons for doing so. Someone running for the legislature of another country may be required to renounce all other citizenships.
But given the rather rapid rise in renunciations, correlated with the increase in tax reporting and compliance policies, it's a pretty reasonable conclusion. In any case, the US policies both real (the Reed amendment) and proposed (the Ex-Patriot Act) are rather harsh on people who renounce for tax reasons, so it will be hard to carry out a study where you ask people if that's the basis for their decision. (You'll see that Mauch carefully did not say that she left because of taxation reasons.)
"Expatriation is just migration on a larger scale."
Your example, with two US states, isn't the same comparison. Better would be to think of a California resident who moves to Nevada, never goes back to California, but still has to pay California taxes.
"is it worth wasting energy on the few people a year who will do so"
No. Absolutely not. But there's a few other issues at play. For example, the reason for the heightened tax reporting policies is to crack down on US residents with overseas bank accounts, who use those accounts to avoid paying US taxes. Ex-pats (who have no strong representation in Congress), are caught in the cross-fire.
With this reporting it was very easy to find the actual list, which is at ....
(Though "LOCKE-TECKEMEIER LORETTA ULLRICH" and "LOCKE-TECKMEIER LORETTA U." are
likely the same person, so the count won't be perfect.) With a bit of work, you
can easily verify if the number is increasing.
That's much of my point, I went looking at the source, to check for myself. But the best case scenario is aggregating a series of CSV files which you have to locate manually, something an actual news article would have done for themselves. Further analysis would be to move past the absolute number of citizens dropping citizenship and perhaps calculate the proportion of citizens doing so. We could even hope to run some simple tests to determine if the number of expats was statistically significant.
Instead we get none of that, just a vague, "Taxes are complicated, expats are increasing, trust me." It's very disappointing.
You want something between the raw data and the digested summary provided by the news service? That's expensive. Who should pay for it?
For the most part, I agree with your view. There's almost no deep analysis of the reasons for renunciation. That analysis is hard. It's going to be a variety of factors. Given the political tone behind the (unenforced) Reed amendment and the (proposed) Ex-PATRIOT act, anyone reasonable would avoid bringing up the non-tax-avoiding reasons and emphasize the other reasons.
But your view is that we can't make any inferences. I disagree. We have the raw numbers - there's no need to trust people for that. It might not be as easy as you like, but it's at most an evening of work. (Less if you trust graphs like http://finance.yahoo.com/news/should-you-renounce-your-citiz... ).
There's no need to "calculate the proportion of citizens doing so." As the article reports, "From 2009 to 2011, the number of expatriates, or those who renounced their U.S. citizenship, doubled to 1,781." The number of US citizens did not double in two years. Including a population analysis in this news article would be a distracting tangent stating the obvious.
Those raw numbers show a big increase in 2010. That's when the US reporting law went into effect. You insist on some statistical analysis, but in my readings, no one has come up with a better explanation for the increase - what tests should people do? Correlated it with Bieber Fever?
We can't get meaning from those numbers, and it's hard to get that information directly from the people, but we can ask people who generally give international tax advice. Biased though it might be, that's what this CNN article does.
In fact, it gives a specific and reasonable example of why someone may renounce their US citizenship, because of tax purposes: "growing numbers of Middle Eastern investors were ordering their dual-citizen children to dump their U.S. passports if they wanted to inherit family-owned companies without onerous U.S. estate taxes".
This is not vague, though it is from a secondary source.
Therefore I persist in correcting you. This article gives enough information to draw the reasonable conclusion - affirmed by other data - that 1) renunciations are increasing and 2) that the US tax laws are a likely factor.
I definitely trust that graph, and if the good people at Yahoo Finance can put it together for their piece, surely Fortune magazine has the wherewithal.
There's no need to "calculate the proportion of citizens doing so."
As the article reports, "From 2009 to 2011, the number of expatriates,
or those who renounced their U.S. citizenship, doubled to 1,781."
The number of US citizens did not double in two years.
The point I took the most offense to was the article providing 3 data points about migration and calling that a trend -- especially since the period in question is directly on the tail end of a massive global recession and they ignore a more recent data point (year 2012) which contradicts their story. I took a few minutes and put together a chart with a simple linear regression:
That's a poor analysis. What basis do you have for assuming that it's a linear growth over the entire period?
As you see, that 1997 data point is very high. The Yahoo Finance link I gave notes "The high number of expatriations that year is thought to be a result of Hong Kong reverting back to Chinese sovereignty, according to tax attorney Andrew Mitchel. Chinese citizens are not allowed to have dual citizenship, so many Hong Kong residents renounced their U.S. citizenship prior to Hong Kong joining China in 1997, so they would become fully Chinese citizens." You might be able to verify that a bit by looking to see if there's a higher number of Chinese sounding names for that year.
In any case, remove that first data point and you'll see that the trend is much more pronounced and statistically significant. Because you have so few data points, any analysis will be sensitive to a single large outlier like that one.
You'll should also investigate if there were similar effects elsewhere. Why, for example, was there a seeming slump in 2006-2008?
You'll also need to compare your linear model to other models. The one proposed by many is that the tax and enforcement changes around 2010 caused a big reaction. Can you model that piece-wise?
Also, there are many factors which affect the numbers. The rate of US citizens who renounce citizenship in order to take on high office in another country should be about the same, compared to those leaving for tax reasons, so you should be subtracting some baseline for that.
With this few data points, and with a complicated underlying system, it's basically impossible to make a valid statistical interpretation. That's why these articles end up talking to the people who work with those who renounce their citizenship.
The one proposed by many is that the tax and enforcement changes around
2010 caused a big reaction. Can you model that piece-wise?
Why should the reader have to perform these exercises? If the author's premise relies on such a situation existing, they should absolutely perform the analysis.
The rate of US citizens who renounce citizenship in order to take on high office in
another country should be about the same, compared to those leaving for tax reasons,
so you should be subtracting some baseline for that.
Once again, someone would have to actually do some reporting to determine what that baseline should be.
With this few data points, and with a complicated underlying system, it's basically
impossible to make a valid statistical interpretation. That's why these articles end up
talking to the people who work with those who renounce their citizenship.
Precisely my problem with this type of reporting. What do you think a tax lawyer is going to say when you ask him why people are renouncing their citizenship? How does that add any value?
This isn't talking about average Americans, it is talking about dual citizens who are living in and have significant assets and income in foreign countries. It is saying that more and more people are deciding that the many benefits of American citizenship are being outweighed by the onerous tax laws placed on American citizens . . . rules that no other country places on their citizens.
While it would improve the article to have better reporting, it is not a controversial idea. And, it is not limited to Americans. A famous French example is Gérard Depardieu who recently renounced his French citizenship in exchange for Russian citizenship explicitly for tax reasons (and he had no prior connection to Russia).
I wonder if that "due to high taxes" causal explanation can be quantified a bit better. Not every person who renounces U.S. citizenship does so for tax reasons. I could believe it's 98% though, or maybe 80%; I have no idea. Is there any way to estimate the proportion who renounce for various reasons?
A non-tax category in which I know people who've renounced is those who have issues with dual citizenship. Denmark, for example, does not permit dual citizenship. So if you are an American who moves to Denmark and eventually wishes to naturalize, you must renounce your American citizenship. Perhaps more commonly, if you are born with dual Danish-American citizenship (Danish parents but born in the U.S.), you can keep the dual citizenship until age 22, but then at age 22 must apply for permanent Danish citizenship, and at least officially they will, as with the naturalization case, require you to renounce your American citizenship (though in practice it seems not everyone actually does so).
89 comments
[ 2.8 ms ] story [ 163 ms ] threadAlso, 640 a year is hardly more than an anomaly statistically.
I've been out for 7 years and haven't paid anything to the IRS yet, even without the FEIE I just deduct anyways. The only annoying thing is double taxation when I go back to the states on business trips.
Some people I know who have setup a similar thing only pay themselves 50k USD a year and the company pays for the rest as expenses. It's a little more complicated then that, but that is the gist of it.
Hong Kong and Singapore are set up to work like this. It's how all the mainland Chinese hide their money from the communists.
Technically those people are still on the hook for the expenses the company pays for them, sans the generous overseas housing deduction that congress recently implemented.
I have the opposite problem really. All my money is held by the communists (well, in my China Merchants Bank account anyways).
For an average person or family, it's hard to reach this amount, and as said before you can write off taxes paid in a foreign country.
Though the main problem would be if you're registered as a Professional and individual business (contractor/consultant). Then you're liable for taxes in both the country you live in, and the US. I've been made a number of offers of work as a contractor and had to refuse (due to low pay since companies didn't want to hire employees only contractors, the fact I'd have to pay for all benefits, and also on top of that pay taxes on what ever I made).
The people who leave go everywhere. Including high tax locations. Income tax is not usually the issue. Estate tax is a big reason. So are the tax penalties imposed by the US for trivial paperwork problems. Hint. You Aussies in the USA have a big big problem with your superannuations.
First, be aware that only the US and Eritrea taxes its citizens on their world-wide income, no matter where they live. If I were a South African citizen living in Sweden then I wouldn't have to pay taxes back to South Africa. But I am a US citizen, so I have to file taxes for both countries.
Of that, $95,100 in 2012 is tax free, so I only pay taxes on what I make over that. Which I did one year, so that was fun trying to figure out how to pay the IRS from an overseas bank account.
The US has a bunch of bilateral agreements on income taxes so that I don't have double taxation. However, there's only a handful of countries with bilateral social security agreements with the US. Luckily, Sweden is one of them; I needed to get a form to prove that as a self-employed person I was covered. Being self-employed overseas makes things more complicated.
From what I can tell, if I had moved to New Zealand then I would be paying social security to both countries.
I also need to report the maximum value of each of my accounts, because of the FBAR requirements. Some people have gotten in trouble with it. See http://www.thelocal.se/39522/20120306/ for some examples. ("the penalty for non-compliance of FBAR is $10,000 per bank account per year, with the IRS looking back six years").
Have you filed your FBAR statement?
Then there's problems with the banks. Swedish banks really don't want customers who are US citizens, because the US requires a lot of extra paperwork from the bank. FACTA makes this worse. I am a permanent residence here, with an account which was opened before the new requirements went into place, but last month I spent an anxious 30 minutes at the bank while they figured things out.
There are more complications for a US citizen who wants to invest in a company. I think there's more reporting obligations for the company in that case.
And of course I pay for a CPA to handle things, since there's no way I would keep track of the relevant laws myself.
It ends up being this odious choice - how much are you willing to pay and how much hassle will you put up with in order to keep your citizenship?
The even worse case is for someone who is an American citizen by birthright, but was born, raised, and lives outside of the US, with no intention of going to the US. I think these people are still supposed to file taxes and deal with all of this mess - and are potentially subject to huge fines for not having done so already, should the IRS decide to go after them.
Also, it makes sense for a few corner-case reasons. The Wikipedia page on "Renunciation of citizenship" mentions that Vincent Cate 'renounce[d] his US citizenship to avoid the possibility of violating US laws that may prohibit US citizens from "exporting" encryption software.'
> Of that, $95,100 in 2012 is tax free, so I only pay taxes on what I make over that. Which I did one year, so that was fun trying to figure out how to pay the IRS from an overseas bank account.
Are you telling me that the Swedish taxes you deducted from your tax bill were lower than the corresponding American taxes? I find this very hard to believe. Yes, you have to pay taxes after $95k, but you can deduct what you pay to the government in the country you are working in, which usually comes out to zero overall.
> From what I can tell, if I had moved to New Zealand then I would be paying social security to both countries.
You do not have to pay payroll taxes if you are employed abroad. I haven't contributed to SSI or Medicare in a long time.
> Have you filed your FBAR statement?
Every year! This is annoying, but at least we can file online now.
> Swedish banks really don't want customers who are US citizens, because the US requires a lot of extra paperwork from the bank. FACTA makes this worse.
Thankfully, I live in China where they could careless about American laws (up until this point).
> It ends up being this odious choice - how much are you willing to pay and how much hassle will you put up with in order to keep your citizenship?
It really isn't that big of a deal. There is at least a million of us working abroad, probably more, and only 640 a year decide to renounce. And what are the other choices? Should I become a PRC citizen, even if that was possible?
> You do not have to pay payroll taxes if you are employed abroad
Correct. But as I started off, I'm self-employed.
Quoting from elsewhere: "If you are self-employed and you live overseas, you may still be required to pay self-employment taxes in the US, including Social Security. This would need to be paid before the Foreign Earned Income Exclusion so it is an actual out-of-pocket expense, not something that would be offset on your expat tax return."
The exceptions are those countries which have a totalization agreement with the US. "This covers Australia, Austria, Belgium, Canada, Chile, Czech Republic, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, Korea (South), Luxembourg, Netherlands, Norway, Poland, Portugal, Spain, Sweden, Switzerland and the United Kingdom."
> It really isn't that big of a deal
If you focus just on that number then I agree. As that's what this linked-to page discusses, then yes you're right.
I think there's a more interesting numbers lurking. From the article, "I.R.S. data for 2012 shows just over two million tax returns filed in 2012 by overseas Americans, compared with an estimated six million Americans living or working abroad."
Now, a tax return can cover multiple people and some of the Americans living abroad are children. I'll be generous and say that some one million people aren't following the law, compared to a few hundred people who are doing what the law says in order to avoid the extra hassle.
Has that reporting rate gone up or down? How much revenue has the US gotten from its ex-pats because of the heightened reporting requirements? How much has it cost those Americans? I pay about $600/year for my CPA, for me and my wife, so assuming $100/return gives an unfunded mandate, as it were, of $200 million.
Before I moved here, I visited often for work. I would rent a business apartment for a month or two. Most work on P.O.s and the giro/SWIFT system, not by credit card or cash. I also had difficulty purchasing some things online because sites wanted a Nordic bank card. I figured that opening a local account would make things easier for me. Had I been any nationality other than US, I could have done so. But US banking laws prohibited me from doing so.
Again, not a big deal. But little deals * 6 million become large.
> what are the other choices?
You could not file your income tax. It seems that over 1 million people don't do so. It would help if you never wanted to return to the US. (A friend of mine lives in Shanghai, and has for almost 10 years. I'm pretty sure she's not paid US taxes during that time.)
Ok, that makes sense. I do pay SSI in China, but I'm sure I'll never see anything good from that. Would have been nice to at least get a 401K or something. Retirement funding is also another huge pain in the ass for expats.
> Now, a tax return can cover multiple people and some of the Americans living abroad are children. I'll be generous and say that some one million people aren't following the law, compared to a few hundred people who are doing what the law says in order to avoid the extra hassle.
Everyone who has an accountant doing their taxes is following the law, and that is much of the high end (sans those who are explicitly dodging taxes, of course). I do see my friends who have accountants paying more than me, but I think this is because the accountants are very conservative in how they deal with double taxation.
Most of us are mostly following the law.
> Has that reporting rate gone up or down? How much revenue has the US gotten from its ex-pats because of the heightened reporting requirements?
Many of us are just normal worker bees who already pay enough taxes in the country we are working in. It makes no sense for us to renounce our citizenship to not pay taxes we don't need to pay anyways.
> Before I moved here, I visited often for work. I would rent a business apartment for a month or two. Most work on P.O.s and the giro/SWIFT system, not by credit card or cash. I also had difficulty purchasing some things online because sites wanted a Nordic bank card.
I have the opposite problem: I don't have a US credit card and get lots of pain because of that. The Chinese system is quite limited.
> You could not file your income tax. It seems that over 1 million people don't do so. It would help if you never wanted to return to the US. (A friend of mine lives in Shanghai, and has for almost 10 years. I'm pretty sure she's not paid US taxes during that time.)
She probably doesn't have to pay US taxes if she's paying higher Chinese taxes. Anyways, she should file tax forms just to put $0 on that line.
> She probably doesn't have to pay US taxes if she's paying higher Chinese taxes. Anyways, she should file tax forms just to put $0 on that line.
I completely agree, but given the circumstances around her leaving, I'm rather certain that she's never coming back to the US. At this point, given US law, is it reasonable for her to start filing again? A quick check now suggests that it isn't - she should wait until she knows she wants to return to the US. I don't think the fines or other penalties gets any worse by waiting longer.
and where exactly does one's US citizenship start becoming "unsolid"?
It's all about the relationship itself. That is to say, you need to prove that the relationship is solid and marriage does not prove that. It's the years before that of living together, joint bank accounts and bills that proves that relationship.
What are the downsides?
edit: nevermind, it's in 18 U.S.C. § 922 : US Code - Section 922
I only know one person (who wasn't otherwise a criminal) who renounced for what seemed like totally non-financial, non-administrative reasons: Vince Cate, back in the 1990s, when he was my neighbor in Anguilla and wanted to work on crypto stuff during the ITAR ban days.
I find it interesting that there are clearly so many in this country who have very deep disagreements with the law, but so few seem to leave. Of course I do not blame them; simply moving somewhere more agreeable to you is not as simple as Socrates may have you believe...
Also, many of the problems with the US are actually global externalities and hurt non-citizens/non-residents abroad even more than they affect US citizens or those within the US. We essentially are responsible for the global war on drugs, for instance.
It's hard to figure out what things would cause me to be so angry at the USG to renounce citizenship but not to remain in the US and use all means to try to fix the problem. e.g. if there were a genuine Hitler/Stalin/Mao-level takeover of the US, I wouldn't be content to just flee somewhere and try to avoid it; the only reason to leave would be temporarily to raise funds/forces to try to fix it. But I really don't see anything like that happening in the US -- much more likely just a long slide into comparative irrelevancy like the UK has done over the past 60-80 years.
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&obj...
Yes. Despite the HN headline and the lede paragraph of the linked article ascribing this to US taxes, the article's "poster boy" (I mean, literally, the example of the trend who they lead with a big photograph of, and the only one of the two named examples who is quoted actually discussing his motive in the article) -- Mahmood Karzai, who has lived in Afghanistan for 12 years and is the elder brother of Afghan President Hamid Karzai, cites his reason as "I might become politically active, therefore I decided to give up my [U.S.] passport." Nothing to do with taxes, there.
For example, Terry Gilliam (the director) "renounced his American citizenship, describing the George W. Bush administration as having created an environment "scarily similar to the Orwellian nightmare" of his 1985 film Brazil."
Apparently they used to be a lot more "automatic" about revoking citizenship for acts (like joining a foreign military as an officer) where there wasn't clear intent to renounce citizenship. It now requires a seriously affirmative act; essentially showing up at a consulate and making a declaration, demonstrating that it's intentional and informed, etc.
1. If you accept current economic theory, a flat tax actually hurts poor people more because it's regressive. It's regressive because each percentage point of tax means more to the poor person than it does to the rich. 15% of 1M is a lot of money compared to 15% of 30K, but the 30K earner feels that a lot more.
2. The IRS would not be eliminated. There would probably still be a federal entity responsible for managing the tax income at the federal level
3. The IRS would not be eliminated. There are a lot more taxes besides personal income taxes.
4. We basically already have most of what you're really thinking about with adopting a flat tax. The majority of tax information is already given to the IRS by your employer, bankers, etc. Most people don't really need to file a tax return, since they are just writing down numbers they got from forms which the IRS also gets copies of. Eliminating the personal income tax return in these situations has been discussed, but Intuit and some bright lights on the right/republican side of the aisle believe its a terrible idea and are fighting against it.
5. Does this response really have anything to do with people renouncing citizenship to avoid taxes on foreign income? Would replacing a rule heavy progressive taxation system with a simple flat tax really change someone's opinion on having to pay it?
> If you accept current economic theory, a flat tax actually hurts poor people more because it's regressive.
A flat tax is not "regressive" by either of the usual definitions (by the standard definition, a "regressive" tax takes a either a higher total percentage or a higher marginal percentage at lower incomes.)
It still hurts poor people compared to a progressive tax system, because it isn't progressive, so the burden on the poor, at any given total revenue level, is greater than in a progressive system.
> It's regressive because each percentage point of tax means more to the poor person than it does to the rich. 15% of 1M is a lot of money compared to 15% of 30K, but the 30K earner feels that a lot more.
While this decreasing-marginal-utility based argument for why flat taxes are bad for poor people is both consistent in outline with the current theory and well supported by empirical research on the marginal utility of income, calling this "regressive" is inconsistent with the usual definition of "regressive" when it comes to taxation.
A few of my friends are heavily left-leaning, and anytime the topic of flat taxation or 'the fair tax' comes up they start foaming at the mouth about how it's regressive. The two concepts are paired in my mind.
Plus please realise America is a low-tax country compared to Europe and Australia because it has a minimal welfare state, compared to Europe and Australia.
In practice, it's allegedly quite a bit of hassle and paperwork and a net expense (regardless of tax agreement).
It would be even easier if I spent less than 35 days/year in the U.S. and qualified for the $95k foreign income exclusion. But even though I don't (I spend ~2 months/yr in the U.S. in an average year), it's still easy enough.
Meanwhile, living in Australia I had to file a US tax return every year, and have the potential to be taxed on things where no tax exists in Australia (inheritance tax, gift tax).
Not understanding how a fact like this even rises to the level of a sentence in a related article, much less the lede. Can someone please explain to me how a tax policy which has a net effect of reducing its tax base by 0.002% (rough guess, assuming I didn't slip a digit) is something worth talking about at all?
I mean, the IRS is going to lose more revenue to people upset with US food choices...
Some countries have major problems with an exodus of qualified people and an inability to attract people to the country, but the U.S. is not really in that category. Quite the opposite: there are many qualified, intelligent people wanting to move to the country, but who are currently blocked by immigration law from doing so.
But this isn't accurate, the 165k who naturalized were probably already visa or greencard holders and paying taxes. A more accurate way to measure this is to look at how many visas that support employment are issued each year, which is probably greater than 165K.
The reason this is news is because it's incredibly wealthy and high profile people with a large amount of assets to tax that are giving up their passports.
Wouldn't it be nice if someone out there, maybe a web site with journalists and stuff, might do that research for us and give us the results?
I'm not saying there can't possibly be an issue worth talking about. I'm saying that this article isn't worth talking about.
It would be good to examine exactly how much is being lost and whether it's _actually_ newsworthy, but I'm not sure how they can do that - AFAIK all they can go on is the number of people giving up their citizenship that is provided by the IRS. You'd need to figure out specific names, it'd be a huge undertaking. It'd be interesting to know though, and probably worthwhile for the government to investigate and monitor.
If one of these could actually provide some sort of analysis or evidence for their conclusions, that'd be pretty great. Each time it's published, they relay a few anecdotes about 1 or 2 mildly famous people renouncing citizenship. They then give a trend in absolute numbers without addressing population changes, and finally go on to blame taxes or whatever else for the trend that they assure is happening.
Is expatriation increasing? Maybe? Who knows with this quality of reporting.
The question of how to treat international taxation is almost entirely separate from expatriation. If people aren't taking the easy step and relocating to different states due to tax differences[1][2][3], I doubt it's the main reason they're renouncing citizenship.
[1] - http://www.stanford.edu/group/scspi/_media/working_papers/Va... [2] - http://www.cbpp.org/cms/?fa=view&id=3556 [3] - http://publicassets.org/press/press-releases/new-study-jobs-...
If one lives in California and earns enough to be in the top bracket (>$1mm/year), they could save a marginal 10% by relocating to Nevada. It's only a four hour drive to Tahoe, so you would expect to see a fair portion of people doing so. However, there is almost no evidence that this actually occurs.
Expatriation is just migration on a larger scale. The expense and complexity are obviously higher, but the basic incentives are identical. I have no doubt that at some very-high net worth, it makes sense to renounce and move abroad, but is it worth wasting energy on the few people a year who will do so?
It certainly is. With this reporting it was very easy to find the actual list, which is at https://www.federalregister.gov/articles/2013/05/08/2013-108... .
(Though "LOCKE-TECKEMEIER LORETTA ULLRICH" and "LOCKE-TECKMEIER LORETTA U." are likely the same person, so the count won't be perfect.)
With a bit of work, you can easily verify if the number is increasing.
"If people aren't taking the easy step and relocating to different states due to tax differences..."
A different logic is much more likely. There are Americans who have already relocated overseas and some decades later renounce their citizenship.
Consider Corine Mauch, the Iowa born mayor of Zurich. “My relationship with the U.S. is limited to my very early youth,”. "[S]he regards Switzerland as her home and doesn’t want to deal with Internal Revenue Service paperwork, according to an e- mailed statement from her office today." http://www.bloomberg.com/news/2013-04-18/zurich-mayor-renoun... .
You're right; it's hard to tell if someone renounced citizenship in order to avoid paying US taxes. Indeed, there are other reasons for doing so. Someone running for the legislature of another country may be required to renounce all other citizenships.
But given the rather rapid rise in renunciations, correlated with the increase in tax reporting and compliance policies, it's a pretty reasonable conclusion. In any case, the US policies both real (the Reed amendment) and proposed (the Ex-Patriot Act) are rather harsh on people who renounce for tax reasons, so it will be hard to carry out a study where you ask people if that's the basis for their decision. (You'll see that Mauch carefully did not say that she left because of taxation reasons.)
"Expatriation is just migration on a larger scale."
Your example, with two US states, isn't the same comparison. Better would be to think of a California resident who moves to Nevada, never goes back to California, but still has to pay California taxes.
"is it worth wasting energy on the few people a year who will do so"
No. Absolutely not. But there's a few other issues at play. For example, the reason for the heightened tax reporting policies is to crack down on US residents with overseas bank accounts, who use those accounts to avoid paying US taxes. Ex-pats (who have no strong representation in Congress), are caught in the cross-fire.
Instead we get none of that, just a vague, "Taxes are complicated, expats are increasing, trust me." It's very disappointing.
For the most part, I agree with your view. There's almost no deep analysis of the reasons for renunciation. That analysis is hard. It's going to be a variety of factors. Given the political tone behind the (unenforced) Reed amendment and the (proposed) Ex-PATRIOT act, anyone reasonable would avoid bringing up the non-tax-avoiding reasons and emphasize the other reasons.
But your view is that we can't make any inferences. I disagree. We have the raw numbers - there's no need to trust people for that. It might not be as easy as you like, but it's at most an evening of work. (Less if you trust graphs like http://finance.yahoo.com/news/should-you-renounce-your-citiz... ).
There's no need to "calculate the proportion of citizens doing so." As the article reports, "From 2009 to 2011, the number of expatriates, or those who renounced their U.S. citizenship, doubled to 1,781." The number of US citizens did not double in two years. Including a population analysis in this news article would be a distracting tangent stating the obvious.
Those raw numbers show a big increase in 2010. That's when the US reporting law went into effect. You insist on some statistical analysis, but in my readings, no one has come up with a better explanation for the increase - what tests should people do? Correlated it with Bieber Fever?
We can't get meaning from those numbers, and it's hard to get that information directly from the people, but we can ask people who generally give international tax advice. Biased though it might be, that's what this CNN article does.
In fact, it gives a specific and reasonable example of why someone may renounce their US citizenship, because of tax purposes: "growing numbers of Middle Eastern investors were ordering their dual-citizen children to dump their U.S. passports if they wanted to inherit family-owned companies without onerous U.S. estate taxes".
This is not vague, though it is from a secondary source.
Therefore I persist in correcting you. This article gives enough information to draw the reasonable conclusion - affirmed by other data - that 1) renunciations are increasing and 2) that the US tax laws are a likely factor.
http://i.imgur.com/ieCTHrk.png
Including all the available data really changes the story don't you think?
And just for the fun of it, taking the proportion (which should control for population growth) actually weakens the correlation even further:
http://i.imgur.com/C9rdDHx.png
As you see, that 1997 data point is very high. The Yahoo Finance link I gave notes "The high number of expatriations that year is thought to be a result of Hong Kong reverting back to Chinese sovereignty, according to tax attorney Andrew Mitchel. Chinese citizens are not allowed to have dual citizenship, so many Hong Kong residents renounced their U.S. citizenship prior to Hong Kong joining China in 1997, so they would become fully Chinese citizens." You might be able to verify that a bit by looking to see if there's a higher number of Chinese sounding names for that year.
In any case, remove that first data point and you'll see that the trend is much more pronounced and statistically significant. Because you have so few data points, any analysis will be sensitive to a single large outlier like that one.
You'll should also investigate if there were similar effects elsewhere. Why, for example, was there a seeming slump in 2006-2008?
You'll also need to compare your linear model to other models. The one proposed by many is that the tax and enforcement changes around 2010 caused a big reaction. Can you model that piece-wise?
Also, there are many factors which affect the numbers. The rate of US citizens who renounce citizenship in order to take on high office in another country should be about the same, compared to those leaving for tax reasons, so you should be subtracting some baseline for that.
With this few data points, and with a complicated underlying system, it's basically impossible to make a valid statistical interpretation. That's why these articles end up talking to the people who work with those who renounce their citizenship.
These are professional journalists writing articles with massive holes, it's embarrassing.
Here's what that looks like: http://imgur.com/a/FBeAv -- Still ugly. Why should the reader have to perform these exercises? If the author's premise relies on such a situation existing, they should absolutely perform the analysis. Once again, someone would have to actually do some reporting to determine what that baseline should be. Precisely my problem with this type of reporting. What do you think a tax lawyer is going to say when you ask him why people are renouncing their citizenship? How does that add any value?While it would improve the article to have better reporting, it is not a controversial idea. And, it is not limited to Americans. A famous French example is Gérard Depardieu who recently renounced his French citizenship in exchange for Russian citizenship explicitly for tax reasons (and he had no prior connection to Russia).
A non-tax category in which I know people who've renounced is those who have issues with dual citizenship. Denmark, for example, does not permit dual citizenship. So if you are an American who moves to Denmark and eventually wishes to naturalize, you must renounce your American citizenship. Perhaps more commonly, if you are born with dual Danish-American citizenship (Danish parents but born in the U.S.), you can keep the dual citizenship until age 22, but then at age 22 must apply for permanent Danish citizenship, and at least officially they will, as with the naturalization case, require you to renounce your American citizenship (though in practice it seems not everyone actually does so).
A total of 932 gave up their passport in 2012. This quarter has been high, so we are taking about a couple hundred in a country of 310,000,000