Americans Renouncing Citizenship at Record High | Hacker News Reader

Americans Renouncing Citizenship at Record High

bloomberg.com

49 pointschenster54 comments

I was born in and live in Canada, but am a US citizen through a parent. The US imposes difficult reporting requirements and regulations on its citizens living abroad. All bank accounts, their balances, stocks, earnings, and more. If you make above about $100k, the US demands taxes on your income, even if you earned the money locally and have never stepped foot in the US. (Edit: Only if living in a country with lower taxes than the US.) Retirement savings accounts and other financial tools that are given local tax breaks, the US does not recognize, and may tax your contributions on.

If you have not met your reporting obligations, whether you were aware of them or not, they can impose huge fines. Many american citizens here, or those with american parents, fear crossing the border or drawing attention to themselves.

Lottery winnings are not taxed by Canada, but if an american wins the lottery anywhere in the world, the USA will take its chunk.

And to add insult to injury, if you want to get out and give up your US citizenship for good, it will cost you. Before 2010 renunciation was free. From then to 2014, it was $400. Now they charge $2,350 plus a big exit tax if your net worth is above $2m.

The US is the only country that taxes its overseas citizens this way, beside Eritrea.

> The US is the only country that taxes its overseas citizens this way, beside Eritrea.

And the UN has routinely condemned Eritrea (and only Eritrea) for this criminal practice.

The US tax code has grown to be the most oppressive in the first world, including compared to countries with higher net rates.

That's because Eritrea doesn't have the US's military, and its ability to project power is limited to sending a couple of goons to harass a few rich expats they're aware of.

Also, the stick that the US uses to enforce FATCA is the threat of a 30% penalty on all US-sourced income of the entities that fail to report. That and the threat of seizing funds, because any SWIFT transaction in US dollars always passes through the US, even if it is to send money from Germany to India.

Actually Eritrea harasses quite a few ordinary people through a Stasi like network of regime loyal expats tasked with gathering intel on their brethren.

Actually the UN tends to complain about slightly different issues rather than taxing of expatriates:

> In 2015, a 500-page UNHRC report detailed allegations of extrajudicial executions, torture, indefinitely prolonged national service and forced labour, and indicated that sexual harassment, rape and prolonged sexual servitude by state officials are also widespread.

https://en.m.wikipedia.org/wiki/Human_rights_in_Eritrea

I hear many Americans are having trouble with consumer banking in other countries because it's not worth the paperwork and liability risk to have them as customers.

When I'm king I'll fix all this :-)

You have recent competition in the race to kingship.

It's always much easier to get someone else to lay the groundwork for you.

> If you make above about $100k, the US demands taxes on your income, even if you earned the money locally and have never stepped foot in the US.

Doesn't the income tax treaty help in that case? Quoting from https://www.irs.gov/pub/irs-trty/canada.pdf: "Subject to the provisions of Articles XVIII (Pensions and Annuities) and XIX (Government Service), salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived there from may be taxed in that other State."

I'm aware of the foreign income exclusion you're refering to, but wouldn't the tax treaty have a higher priority?

Yes, it seems you're right. Canada has the higher tax rate, so the USA gives a credit and you are not charged extra on employment income.

But the US has higher capital gains and estate taxes than Canada, and you may be charged there: http://www.theglobeandmail.com/news/politics/delays-costs-mo...

American in Norway here. The amount excluded depends on the tax treaty and is different for each country. Right now, if you make above around 100k USD in Norway (adjusted each year for inflation), that amount above is taxed by the US. But, that is only for regular employment.

If, for example, you decide to start freelancing, you still have to pay all of your self-employment taxes to the US, on top of the similar taxes here, even if your income is well below 100k.

Also, if you decided to start a company or start-up (i.e., anything that is not a sole proprietorship), you get into a hell hole of other compliance regulations that makes it VERY expensive. It effectively mean no one wants to cofound with you or invest in you. Having US citizenship while abroad is terrible for entrepreneurs. (source: conversations with other Americans who have tried and failed to launch startups here for these reasons)

That isn't much different for most countries.

Countries have tax agreements that settle expat earnings and social benefit contributions.

The big difference it seems is the reporting obligation which is more or less unique to the US, in most other cases you settle the taxation once you return.

> Lottery winnings are not taxed by Canada, but if an american wins the lottery anywhere in the world, the USA will take its chunk. And to add insult to injury, if you want to get out and give up your US citizenship for good, it will cost you. Before 2010 renunciation was free. From then to 2014, it was $400. Now they charge $2,350 plus a big exit tax if your net worth is above $2m. The US is the only country that taxes its overseas citizens this way, beside Eritrea.

Loving how you explained it in simple English! I hope all regulations and laws explained this way!

FATCA is a mess. For example, some non-US (e.g. Hong Kong) bank will assume you are a US person (and presumably share your account info with the IRS) if you opened the account with a US phone number unless you prove that you are not a US person by doing some troublesome paperwork. (So what if you have a US number? It could be a Google Voice or Twilio number.)

The onus should be on the IRS to prove to the bank that the account holder is a US person, not the other way round. They want the money but they won't do their share of the due diligence.

Worth noting that Trump signed to withdraw FACTA. Will see if follow up on that as much on immigration stuff.

That would be really awesome if he did that, even though he would be doing it purely to help out his friends from the banking lobby.

FATCA is pretty bad because it imposes a one-sided requirement that everybody report to the US, but the US doesn't want to lose its beneficial position of being the world's biggest tax-haven, so it sends data to nobody. There were calls to make the US send information to the EU and other countries, but the banking lobby has so far succeeded in stopping such initiatives as they don't want the Russian mob's funds in Miami banks to suddenly go away.

> of the world's biggest tax heaven

As a European, I've always thought the US had extremely high reporting requirements, power of investigation, and anonymity was dead since the NSA was invented. What makes it a tax heaven? Is it the Delware loophole only?

Nope if you open an investment account in the US and make a bunch of money, that will not be reported to your home country (Unless you do it yourself.)

It's not just Delaware. There are a bunch of other states, e.g. Wyoming, Nevada, Florida, etc.

Having said that, it's not a tax haven if you're a US resident for tax purposes (then you're completely screwed). If you're a European with no ties to the US however (no residency, work visas, or US parents that can tie you to nationality by inheritance), then you can incorporate or stash money in the US in complete anonymity. The US won't easily (at least not on a fishing expedition) give out your information to your government. (And I'm guessing your concern would be hiding money and information from your own government rather than the NSA).

Check this out:

http://www.npr.org/2016/04/08/473477551/why-wyomings-laws-ma...

I'm curious what happens when you do renounce your US citizenship? Are you deported? To where? Whose laws are you subject too? How can you travel anywhere? Can you get citizenship anywhere else?

These are people with double citizenship.

I believe you're not allowed to renounce your citizenship if you don't have another one; in other words, you can't be stateless.

Edit: Interestingly enough, the US allows it. The Wikipedia page on statelessness says "The United States, which is not a signatory to the 1954 Convention on the Status of Stateless Persons or the 1961 Convention on the Reduction of Statelessness, is one of a small number of countries that allow their citizens to renounce their citizenship even if they do not hold any other." See https://en.wikipedia.org/wiki/Statelessness

Right, but I don't know what happens when you are a "stateless" person. Are you ever allowed in ANY country? Are you deported from the US after becoming stateless? I have never seen a good explanation of what happens AFTER becoming stateless.

I would guess that this varies a great deal depending on what country one happens to be in at the moment of becoming stateless, but that's really just a hunch.

Update: the Wikipedia article seems to back that up.

https://en.wikipedia.org/wiki/Statelessness

Can someone at bloomberg do something about those annoying videos in there. Not even giving you an option to close the damn thing.

Seems like a risky trade to take just for money's sake considering the immigration policies currently at play.

There are pretty much no upsides to being a US citizen if you don't intend to make the US your primary residence ever.

And if you have a lot of money and want to get back in, an investor visa or even a green card is not that hard to get.

> There are pretty much no upsides to being a US citizen if you don't intend to make the US your primary residence ever.

Passport power?

There is a significant amount of countries with similarly or better ranked passports: https://www.passportindex.org/byRank.php

> There is a significant amount of countries with similarly or better ranked passports

Yes, and I'm sure after throwing away the US passport all it takes to get one from one of these countries is just asking them nicely, right? It's not like you have to spend years of your life living there or that your time has any value or anything.

I think that only people living abroad for a long time will have a logical intent on renouncing US citizenship...

You're not going to be renouncing your citizenship unless you already have another one... these people aren't going stateless.

People who are renonouncing their passport already have a passport from one of these countries.

>a green card is not that hard to get.

Are you eligible for Permanent Residency after renouncing US citizenship? I would have thought that such an action would have some consequences regarding future residency.

I hear Roger Ver has experience in this arena.

Oh god! Robert Ver got a passport from St Kitts and Nevis.

I remember reading this book about survivalism ("Emergency" by Neil Strauss--a really awesome read in investigative journalism btw), and he had a whole chapter on how to get a passport from St Kitts and Nevis. Basically, the point was that you need to buy property worth about a million, and if you don't get screwed over by real-estate agents or the government, you'll get it pretty quickly.

My main concern was that once you have it, it's not very likely that many countries would take it seriously. It's like a running joke that if you're a shady millionaire/mobster trying to dodge taxes and stash money away, you'd always have a St Kitts and Nevis passport.

I was responding sarcastically, but forgot the /s afterwards. My bad.

He renounced his US citizenship and then got pissy when the US wouldn't let him back in. It was hilarious.

According to the State Department's site, if you renounce U.S. citizenship to avoid taxes (i.e., if Homeland Security says that you did), you will be declared permanently inadmissible to the U.S.

Careful, even a green card status is difficult to throw off. Funny that you could lose your green card by not meeting the residency test, but that doesn't negate your USA taxation obligations on worldwide income. Not even sure why they think that makes sense.

Really? Do you have any source for that? (not arguing - genuinely interested. That's precisely how I lost my greencard)

http://www.forbes.com/sites/robertwood/2012/12/01/high-cost-...

Its complicated. If you don't have lots of assets, you are probably ok.

Wow, I had no idea, at all. Luckily my most valuable asset when I expatriated was a laptop, so I'm probably safe from capital gains.

> a green card is not that hard to get

Have you, like, ever applied for permanent residency?

Yes, actually. I have also directly seen people with high levels of wealth get one in < 24 months (perhaps even 18).

And how many of these people had previously renounced US citizenship?

If you have half a million dollars in free cash you can afford to set aside for a few years (you'll even get most of it back), you can buy a green card.

Yeah that's not most people.

That being said, the green card lottery is apparently much easier if you're from Europe (because of the lack of competition for the 7% country limit of cards).

But overall, the US is among the hardest places in the developed world to get a good visa situation, I think.

There are massive upsides to US citizenship. Few countries will exert the same effort as the US to help out any of its citizens that end up in harm's way in other countries; Americans have a high level of default business credibility; in many parts of the world, having an American employee can bring considerable prestige and so on. Of course these days it also means being more of a target for terrorism and so on so it's not all gravy for sure.

If you have already formally renounced US citizenship, though, getting a visa or a green card is damn near impossible. You'll have to put a lot of money on the table to win that argument. The rules very strongly discourage deals of this kind, though that probably doesn't mean much any more if the last 3 weeks are a guide.

All the things you say are equally true for holders of passports from any first world country, which the overwhelming majority of people renouncing US citizenship have.

And regarding "a lot of money", we are talking Eduardo Saverin levels of wealth here. At that level, if you really really need to make the US your permanent residence again, you can make probably pull some strings and make it happen.

With H1-B/GC applicants also climbing record high in the recent years, what are we trying to say here?

Mostly that people now move between countries and tend to live and work in different countries than the ones the grew up in (obviously this is not the majority of the population, but is a higher proportion than even a few years ago), and the the US makes it very painful to be a citizen while living abroad. Plenty of people are fine with living in the U.S. and paying taxes in the U.S., or living in country X and paying taxes in country X. But living in country X and paying taxes in country X and the U.S. sounds very unattractive to a lot a people, especially if you have not lived in the U.S. for 20+ years...

If you are looking for a commentary one way or the other on recent political developments in the U.S., well, we have no clue yet, because all the data for H1Bs/GCs and citizenship renunciations both are probably from last year. Also, assuming someone moves to Canada tomorrow, it will take time for them acquire a Canadian citizenship and then from there to the point where they are ready to renounce their U.S. citizenship permanently, specially if that is right now their only citizenship.

H-1Bs do not have to pay US taxes for life no matter where in the world they go. It's just one more way that foreigners in the USA are privileged again and again over American citizens.

Really? As a current H-1Bs, I believe I paid in both income tax + sales tax + property tax (I owned a property here). And I could be kick out at any rate, which means those taxes meant nothing to me, nor to my future generations. Is it really that privileged?

You get to pay Caesar his due and leave.

If you're a non-resident US citizen in particular, you can really be screwed.

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