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.
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).
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).
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.
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?
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.
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'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?
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.
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.
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.
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).
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).
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?
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.
[+] [-] mikeyouse|13 years ago|reply
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-...
[+] [-] goodcanadian|13 years ago|reply
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).
[+] [-] mech4bg|13 years ago|reply
[+] [-] philiphodgen|13 years ago|reply
[+] [-] seanmcdirmid|13 years ago|reply
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.
[+] [-] billpaetzke|13 years ago|reply
[+] [-] rdl|13 years ago|reply
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.
[+] [-] cadalac|13 years ago|reply
[+] [-] MichaelGG|13 years ago|reply
What are the downsides?
[+] [-] cpursley|13 years ago|reply
[+] [-] ajross|13 years ago|reply
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...
[+] [-] _delirium|13 years ago|reply
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.
[+] [-] mech4bg|13 years ago|reply
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.
[+] [-] lifeisstillgood|13 years ago|reply
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.
[+] [-] cjh_|13 years ago|reply
[+] [-] mech4bg|13 years ago|reply
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).
[+] [-] mjn|13 years ago|reply
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).
[+] [-] gamechangr|13 years ago|reply
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
[+] [-] Mc_Big_G|13 years ago|reply
[+] [-] gnoway|13 years ago|reply
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?
[+] [-] dllthomas|13 years ago|reply
[+] [-] mprovost|13 years ago|reply
[+] [-] illuminate|13 years ago|reply
Why would it hurt the super rich? They can afford to find loopholes.
[+] [-] terio|13 years ago|reply