Record number of Americans dump U.S. passports
money.cnn.com
money.cnn.com
Edit: And I don't find it to be a moving counter argument. Additionally, I'm not sure its a good apples-to-apples comparison as the phenomenon seems to be prevalent among US ex-patriots, rather than the entire population.
Edit2: It turns out that it's hard to know how many americans live overseas[0], but it seems like 6.8 million might be a good guess. 4.2k / 6.8m is still only about .0006% though.
[0] http://www.migrationpolicy.org/article/counting-uncountable-...
Nitpick: the word you're looking for is “expatriates”. Although this one made me smile :).
http://www.nbcnews.com/news/world/why-american-students-are-...
It's very unlikely that the uptick in expatriation is due to a recent increase in the number of US students enrolled overseas. It takes 6-8 years of residency to get German citizenship, and while I don't know the details for Germany, in Sweden that excludes residency as a student.
That doesn't sound any slower than the US - it'll probably take me around 8 years of post-student residency to become a US citizen (3 on H1-B, then 5 on a green card - and bear in mind it's much faster for me than for someone born in India or China, who face massively backlogged green card quotas).
A lot of people fixate on citizenship, but permanent residency is 99% as good as citizenship. Ask any green card holder, they'll tell you the real challenge is getting the green card. The subsequent 5 year wait for US citizenship is gravy by comparison.
While permanent residency might be a possible substitute, the lack of any citizenship will likely make it more difficult to travel to another country, and there may be legal problems should you have a child as a stateless mother.
He didn't say that it was.
Likely not. If they're so angry at paying taxes to the country that helped them build their wealth, they're likely already employing several other ways to cheat on taxes.
[1] For any length of time; so not comparing to, say, the National Socialist bubble in Germany, 1933-1945.
That's not correct, actually. It's 100% up to some number that's fairly high for a European salary.
And like you say, it's a big hassle.
For instance, part of the US-Italy tax treaty says that as a US person working as an independent contractor in Italy, I needed to pay into Social Security rather than the Italian equivalent. I'm not sure I would have figured that one out on my own.
Ha! And https://www.ssa.gov/international/agreements_overview.html#&... has a special exception just for Italy:
> Italian Agreement An Exception
> The agreement with Italy represents a departure from other U.S. agreements in that it does not include a detached-worker rule. As in other agreements, its basic coverage criterion is the territoriality rule. Coverage for expatriate workers, however, is based principally on the worker's nationality. If a U.S. citizen who is employed or self-employed in Italy would be covered by U.S. Social Security absent the agreement, he or she will remain covered under the U.S. program and be exempt from Italian coverage and contributions.
I'm not an ex pat, but I have dual citizenship. I've never lived or earned money in the US but I still have to offer my income and declare my bank balances to the IRS every year - the principle is enough to make me want to return my passport, never mind the paperwork.
My non working US wife has completely jeopardised my family's financial well being, purely through being american. She has been out of the country for 10 years, and she would be expected to pay 125% of our life savings as for over 5 years our joint bank account held the deposit for our house? She has no income, and didn't file. No FBAR -> 25% of the balance in fines per year for 5 years == 125%.
An incredible number of american's come out of the woodwork saying "there is no problem", because it wasn't hard for them. You don't prove a negative result with one data point!
https://www.americansabroad.org/banking-and-the-patriot-act/
I wonder how many of these ex-pats realize that they may never be able to visit again...
Seriously, this is apparently real law, but according to a "citation needed" bit in wikipedia, has never been enforced.
> The 1996 law included a provision to bar entry to any individual "who officially renounces United States citizenship and who is determined by the Attorney General to have renounced United States citizenship for the purpose of avoiding taxation by the United States."[47] There is no known case of this provision, known as the Reed Amendment, having ever been enforced.[citation needed]
[1] - https://www.google.com/#q=site:https:%2F%2Fnews.ycombinator....
I'm not sure what the benefit to these repeated articles is.. Anti-tax fervor? Some country-specific PR?
Among other things, you will need special banking services in your new home country, because foreign banks do not necessarily make FACTA reports for all accounts. Some won't even open accounts for Americans.
That's not the point. It's about all the paperwork you have to do. I live in the US, but I am not sure I would want to become a US citizen for this reason.
I'm curious -- is there actual paperwork, or is it possible to do it electronically? If yes, why aren't there programs that do it for you? Would like to hear comments from a US expat.
I wonder if there's an opportunity in simplifying this. I'm guessing most expats would rather pay, say $50 for a company to do this paperwork on their behalf? Or do H&R / Intuit have that market cornered as well?
This cost me $300 last year when I spent the entire year in Italy and did not have much US income, plus a half a day to go see the accountant and make sure everything was squared away correctly.
Not worth giving up my citizenship for, but a big PITA nonetheless. The US is the only country in the world to do this BS.
Although annoying, it's also way down the list of annoyances and expenses involved in being an expat. I don't think "regular" expats like me are renouncing their citizenship over the hassle/expense of paying a CPA $200, especially because renouncing your citizenship is also a considerable hassle (and reduces your future employment options). I'm almost certain this is mainly much wealthier people.
I would say it's most likely people who don't have strong ties to America like people born in the US to foreign parents who moved back to their home countries.
I do know a few Denmark-U.S. dual citizens (by birth, never lived in the U.S.) who renounced their U.S. citizenship, but that was because of Danish rather than American laws. Until September 2015, Denmark had a public policy against dual citizenship, which among other things required children who were born as dual citizens to choose one when they turned 21, and renounce the other one. Since that requirement was just abolished, I would guess renunciations of U.S. (and Canadian) citizenship by Danes are now going to drop.
Every foreign bank account or financial instrument over some trivial amount ($500?) must be reported. Foreign banks must report your holdings and gains using forms more burdensome than the usual American ones. Good luck owning a company: if Americans have controlling interest in a foreign corporation, their books must be open to the US or the corporation's income will be included in your own. The last time I saw one, the form to describe your foreign corporate holdings had a Paperwork Reduction Act notice declaring it expects it will take 2 weeks to fill out.
I think the absolute simplest case would be a 1040 (not 1040-EZ), along with the extra form for the FEIE. The FEIE has a 'bona fide resident' determination section which is up for interpretation. Two examples are given in the instructions, but the IRS will not tell you if you count as a bona-fide resident in advance (I have tried to get a determination here, and they just won't make one). There is, thankfully, a 330/365 days out of the country exclusion; just carefully fill out the form that lists all of your travel days to any country for the year.
If you live abroad, your 16 year old kid is responsible for serious fines if they don't do this for their first McJob (in theory; I've never heard of it prosecuted that way).
This was all a few years ago; some details may be inaccurate. But it's a serious amount of work, and it's enough hassle that a lot of foreign banks and financial institutions simply won't do business with Americans (which is yet another hassle).
https://www.irs.gov/Businesses/Small-Businesses-%26-Self-Emp...
This used to be self reported on form TD F 90-22.1, which has been superseded by the new FinCEN Form 114:
https://www.treasury.gov/services/Pages/TD-F-90-22.1-Report-...
Note, there may be, and likely are, additional forms to be filed, but these are the ones that I recall for reporting foreign assets.
And, by the way, the whole system is bullshit. To give another example of how this hurts Americans abroad, the lack of banks willing to work with Americans means that some places it's technically illegal to obtain an apartment lease, though some sort of side deal can normally be worked out. For example, in Norway, the deposit money for an apartment must be held in a joint interest bearing account between the landlord and the tenant. This protects both parties and is generally a good idea. However, if a bank won't work with an American, these accounts become impossible. Yes, both parties can just ignore the law and that often happens, but it's another example of how these kind of banking and reporting laws hurt Americans in less known ways.
There are still fairly few expats who go to the trouble to renounce their citizenship... so "good riddance" to them?
It's perhaps worth pointing out that these are people who've already left, some of them decades earlier, who hung onto their US citizenship possibly because it's been easier than the alternatives (I can tell you getting citizenship in, e.g., France, is non-trivial, particularly if you're not married to a citizen, but even so if you are).
But now, for this little slice of expats, keeping US citizenship has become the more onerous option, and so they have a pragmatic reason to drop their old citizenship in a country they no longer inhabit, anyway. What's to get worked up about, really?
This article reports its publication date as:
February 8, 2016: 9:27 AM ET
You seem to be confusing it with this one:
http://www.wsj.com/articles/americans-pay-your-taxes-or-lose...
Edit: Naturally, this doesn't invalidate what you're saying, this is just a clarification.
2012 - https://news.ycombinator.com/item?id=3850929
2014 - https://news.ycombinator.com/item?id=8368174
2015 - https://news.ycombinator.com/item?id=10379308
But if you look at say, CNBC or Fortune, a nearly identical article is composed every year (or more) without fail.
https://www.google.com/#q=site:cnbc.com+taxes+renouncing+us+...
It's an exceptionally narrow topic that gets an outsized focus, maybe because it highlights a wider narrative? Otherwise I'm at a loss why anyone would care.
Given the huge amount of interest the digital nomad community generates on HN, the link is clear to me.
Right... so these two points might be related, as the people renouncing might be the people who do owe additional tax. Personally, I would feel a bit put out if I'd permanently moved to another country and had Uncle Sam looking to take a piece of my income.
> Persons who wish to renounce U.S. citizenship should be aware of the fact that renunciation of U.S. citizenship may have no effect whatsoever on his or her U.S. tax or military service obligations (contact the Internal Revenue Service or U.S. Selective Service for more information). In addition, the act of renouncing U.S. citizenship does not allow persons to avoid possible prosecution for crimes which they may have committed in the United States, or escape the repayment of financial obligations previously incurred in the United States or incurred as United States citizens abroad.
Even under US law after ten years you no longer have to pay income taxes.
And said 10 years would apply even without expatriation, so expatriating doesn't change anything their either.
Thus, there is no advantage to expatriating in order to avoid owed taxes.
Well, good. That makes us even.
>And said 10 years would apply even without expatriation, so expatriating doesn't change anything their either.
I don't believe that's true. There are plenty of news articles about people who are filing twenty or thirty years after leaving the US. Some of them dual citizens who'd never actually been here.
Your last comment is a non sequitur. You originally wrote "the people renouncing might be the people who do owe additional tax". My comments are all about that conjecture.
The people who continue to file income tax statements even decades after living in the US are not in the category of "people renouncing" or "owe additional tax".
US law is irrelevant. US law only applies in the US, whatever Congress thinks. If I'm not in the US and I'm not a US citizen, the US government can pound sand.
I'm always curious why Americans expect the US to have jurisdiction everywhere on the planet and yet don't expect other countries to make laws affecting them.
>Your last comment is a non sequitur. You originally wrote "the people renouncing might be the people who do owe additional tax". My comments are all about that conjecture.
Yes, people who owe additional tax. That's what I was talking about. People who are expected to pay taxes to the US government even though they don't live in the US and haven't for many years.
What is it you're talking about?
>The people who continue to file income tax statements even decades after living in the US are not in the category of "people renouncing" or "owe additional tax".
Yes, those are the people. Who else would you expect was doing this?
That's my point. Expatriation doesn't change anything concerning taxes you already owe.
> Who else would you expect was doing this?
Hmm. Perhaps I have confused your meaning.
I thought this whole time you mean people who owe taxes, don't want to pay taxes, and expatriate to try to avoid paying those taxes.
Do you mean people who will in the future need to pay taxes, and expatriate in order to avoid future obligations?
If so, then I was confused because these people don't yet owe anything.
FWIW, I file US taxes every year, having lived in Sweden for nearly 10 years. I've only once owed any taxes. The Foreign Earned Income Exclusion is, after all, $100,800 . Since that's well above the average income, I expect that many people who expatriate won't ever owe any future taxes.
>Do you mean people who will in the future need to pay taxes, and expatriate in order to avoid future obligations?
Yes, I mean the latter. If you rack of legal debts (of any sort) as a citizen, IMO you should pay. Part of the naturalization process in most countries is a check to see that you're not some kind of criminal and that you've tied up all the financial loose ends in the country of your birth. My problem is that Congress assumes jurisdiction over your actions and finances if you were ever a citizen.
It used to be widely recognized in international law that the laws of a country only applied on the soil of that country and on ships traveling in international waters under that country's flag. If you traveled to a different country you were under the jurisdiction of that country's laws. So as a citizen of the US, if I moved to Germany, say, even though I was a US citizen I could do things that are illegal in the US as long as they're legal in Germany. And I couldn't do things that were illegal in Germany even if they're legal in the US.
This all seems like common sense.
But it's changed in recent decades, as countries are punishing citizens for things they do elsewhere, e.g. Swedes, who are breaking Swedish law if they patronize a prostitute even in another country where it's perfectly legal. I think this kind of overlapping jurisdiction is a terrible idea, but whatever.
The idea you fall under a country's law even if you become a citizen of another country and renounce the citizenship of your birth is a bridge too far. As far as I know most countries won't extradite a citizen (even a naturalized citizen) for that sort of thing.
The US government presumes to tax your (new) income for ten years after you've renounced your citizenship, even if you had no outstanding tax debt at the time of renunciation. There's also a one-time 40% tax on assets held in the US, which I find less objectionable but still pretty damn objectionable.
I think you can see my confusion as you originally wrote:
"the people renouncing might be the people who do owe additional tax"
This is in the present tense, meaning people who currently owe taxes, which is different from those "who will in the future need to pay taxes".
What are you basing that on? Hong Kong and Singapore (where Eduardo Saverin became a citizen to avoid paying 1 Billion USD in taxes from his Facebook windfall) have taxes in the %11 range.
"Hey guys, what's a great way to show time-series, numerical data in a concise and easy to understand way?"
"How about a movie, Bob?"
Far more Americans immigrate to feel freer, safer, better protected, for a higher quality of life or for a richer culture. Anecdotally, I alone know four Americans who permanently immigrated to Europe. None for tax reasons.
Where's that source? Where are they going that's "freer" and "safer". I'm not saying there aren't areas that are more free, however the hell you define that. There might even be safer places, although that's a ridiculous generalization of the United States. It's all relative to your race, religion, location, economic situation. That sounds absurd.
https://en.wikipedia.org/wiki/List_of_countries_by_intention...
That wasn't the chief reason I lived there though.
The health care system in the US is a godawful mess.
OTOH, the US is a pretty wealthy place with lots of good stuff going on. I'm sure everyone has their own reasons.
Healthcare's a pain, sure.
Still there's no evidence that any meaningful amount of people are leaving for the bastion of freedom that is Europe, which I find laughable. Ask an Arab around Paris how safe they feel.
Actually, statistically speaking, you do. The rate is 3.6 https://en.wikipedia.org/wiki/List_of_U.S._states_by_homicid... for Montana, as compared to Italy at 0.9, Germany and Spain at 0.8.
All things considered, I doubt anyone moves to Europe for that reason alone, as there are plenty of places in the US where the numbers are fairly low.
We interpret statistics differently.
Or, rather, what does "a lot of murders" mean to you?
It's 3 murders per 100,000 people. No, that isn't a lot to me. I'm completely fine and feel safe knowing I have a 0.000036 percent chance of being murdered next year.
The 2012 homicide rate in Paris is 1.8 / 100,000, according to the "Homicide counts and rates in the most populous city, time series 2005-2012" spreadsheet available from linked from http://www.unodc.org/gsh/en/data.html . The total count was 41, so an overall population of 2.2 million.
To confirm, https://en.wikipedia.org/wiki/Demographics_of_Paris says "The city of Paris (also called the Commune or Department of Paris) had a population of 2,241,346 people within its administrative city limits as of January 1, 2014".
It's hard to know the ethic breakdown of everyone who was murdered. That last URL says there are 436,576 immigrants in the city of Paris. I'll assume 2/3rds of those are Arabs, based on the '2011 Census Paris Region; Country/territory of birth' chart from that page, and assume that there are no non-Arab homicides. This is, of course, going to give a very high number compared to the actual number:
That gives a homicide rate of 41 / (436576*2/3) = 14/100,000, compared to Montana's 3.6.
This absurd number is still less than 4x of homicide rate in Montana.
Under your logic, an Arab in Paris should not feel unsafe due to threat of being murdered.
Why should we think that Montana is safer for you than Paris is for an Arab?
3.
This isn't going anywhere, right? Let's just wrap it up.
I'm not interested in coming to some conclusion that X is safer than Y. So far you're the only one I've seen struggling to understand this.
But feeling free and safe is subjective and the number leaving is not large. But it is vastly larger than those leaving for tax reasons is my point.
We don't really have much beachfront property in Montana, though I've seen plenty of naked folks in the rivers.
Montanans are intensely private people and proud of it. I have never heard my gay friends mention being unwelcome, though I'll certainly not speak for them here. I've never been stopped drinking beer in a park, though yes it isn't legal in my town (although not true of all towns in Montana like Butte). Sorry that you can't smoke a joint in a cafe right now, however you can pretty much smoke it anywhere else in public so long as you don't bother others.
I'm guessing Americans that moved to Holland are probably pretty happy there. That says absolutely nothing about the United States.
True and I personally would recommend everyone who can, try to live in both places as each suits different temperaments.
And I do not mean to denigrate Montana particularly which surely has virtues. But at the risk of being provocative I would cite this billboard near Malad city which simply would not exist in Europe. http://i.imgur.com/MDSWg.jpg
I'm happy for you that speech is legislated so carefully in Europe, if that's something you value. What's the point you're making? Should I bring up how nice it must feel to be a muslim in Serbia in the 90s? Of course not.
Safety and freedom are relative terms.
People renouncing citizenship don't do so simply because they've made a life for themselves in Europe or somewhere similar (be it temporarily or semi-permanent or permanent). Being a dual citizen has many advantages. (Not the least of which is allowing the US constitution to actually apply to you as you enter the country)
People renounce their citizenship when retaining it becomes more effort than the benefit received. For instance, I'm dual Italian-Canadian, and I have no qualms about retaining my Italian passport indefinitely, even though my father was Italian and I only lived in the country for a year.
Now, should the Italian government decide they needed monthly bank statements from my Canadian accounts like the US does, making my life a nightmare of paperwork every year, I might reconsider.
Only much later to the (unduly onerous and exploitive) tax issues creep up on them -- for many in the rudest (and most painful) way.
I was born in the US but have been living and making most of my income over seas for five years. I'm actually relocating back to the US in two weeks (yey, welcome back :D). On the one hand I'm sad to leave the place that I currently live since, for me, it's better in nearly every way than most US cities. It's cleaner, I've lived well without a car, walked/cycled significantly more and I've visited nearly every crevice of this city and never felt unsafe due to a combination of cultural and legal differences. I pay slightly higher taxes than I would in the states. On the other hand, I'm very excited about having less paper work to do for a few years.
That's all context for my view: For me, it's not about the amount of money I pay in taxes. I'd call myself upper middle class so far as income goes and I've not had to pay US tax for the past five years. I will have to this year because of some options that I exercises but generally I'm happy to pay US tax.
The burden, the thing that's made me consider renouncing, is the reporting. Let's start with the basics, I have to do my taxes in two places. This involves finding an accountant both in the US and over seas who is capable of doing taxes for someone who is a special type of tax resident. Every accountant will say that they are competent but I have found their claims mostly unfounded. One can pay someone who specializes but that always involves paying a significant premium.
In addition to doing taxes in two places I also have to fill out a separate form listing all assets worth > $10k and in which I have >= 50% ownership. This includes bank accounts, houses and any other investments. This is particularly onerous when one marries to a non-US resident. Suddenly the US government knows a lot about them. Do they have any bank accounts with more that $10k in them? Do they own any property? Any investments? Because if they do, by most countries standard you probably suddenly own 50% of it.
On top of all of that, as of 2015 I also have to ensure that my bank does a specific type of reporting. I'm lucky in that where I am Americans are numerous enough to make this worthwhile for the banks but this is not the case everywhere. Some banks in foreign countries have started refusing US customers.
Comparing the number of people renouncing citizenship to the total population of the US misses the point. It's better to compare against the number of americans living and working over seas. From a quick search around the internet the number of expats looks to be ~7M. It's still a very small fraction and not something that I expect law makers to pay attention to. The reason I think this comparison makes sense is because it is worthwhile to consider whether or not we want to keep connections to our diaspora. The issue from a governance perspective doesn't seem to be a loss of tax revenue but instead a non-reversible export of talent. In a flat world I have doubts about the US's ability to maintain expertise in all of the area that will fuel future economies. That being the case, I think it would be good for the US to make it simple and straightforward for Americans to go to other places where they can become experts and return home for further work.
I don't expect the US's policy to change. In fact, if the number of people renouncing continues growing more rapid I wouldn't be surprised to see the US use more aggressive rent seeking measures. This seems obvious given recent additions to the reporting requirements placed on expats and higher fees associated with renouncing.
For example, I have contributed to a small retirement plan which grows tax free here in the UK, and the US/UK tax treaty ensures that it will continue to grow tax-free once I've moved. So far, so good. However, there is a body of professional opinion stating that such plans count as a "foreign grantor trust" under US law, which has specific reporting requirements that the plan itself is required to comply with, and I am penalised if it fails to do so. The penalty scale starts at $10,000 and goes up from there.
Of course, this body of opinion is being pushed by tax advisors who have a vested interest in both making things as complicated as possible, and who are inclined to a conservative view of the law given their responsibilities to their clients. The IRS hasn't clearly stated one way or another whether UK pension plans are subject to this reporting -- but have specifically exempted the Canadian equivalent.
This is just one frustration of several: becoming a US resident will force me to close some of my financial accounts with institutions which want to avoid FATCA hassles, I'll be limited in which investment choices I can make, and when I eventually take my pension benefits the US will claim tax on the tax-free lump the UK provides if I'm still a resident or have taken citizenship.
For those who have emigrated permanently -- or who acquired US citizenship at birth without ever living there -- I can well understand why even those without significant income or assets would want to renounce their citizenship.