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Comment by nradov | Hacker News Reader

Swiss banks are in that position today because some of them engaged in criminal conspiracies to help US customers commit tax fraud. If they want to participate in the US financial system then they have to play by US rules.

US citizens residing in other countries can still receive some services and protection from the US federal government. So it's completely fair to tax them for that. We can argue about the value of those services but clearly it's >0. Those who don't like the deal are free to pay an administrative fee and renounce their citizenship.

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Every single bank in every country that wishes to use USD is in that position today, it is not related to whether they were shown to help in some criminal activity.

> US citizens residing in other countries can still receive some services and protection from the US federal government.

Seriously, like what? In how many percent of situations does this ever come up. Sure it's more than >0, but if it is like 1$/person does it really make sense? This is economic bullying by a country that right now happens to be in a position (having strong military, influence and their currency being the reserve one) to be able to get away with it.

The most obvious is something like state department emergency assistance, but there's plenty of US government programs without a residency requirement.

For example: federal student aid doesn't require US residency.

https://studentaid.ed.gov/sa/types/international

Also, the taxes that the US imposes on citizens overseas has some pretty significant exceptions. US citizens can deduct over $100,000 worth of their foreign-earned income and part of their housing expenses.

That’s part of the mess: the US tax system isn’t the same as others’, so you now have to optimize for 2 systems.

Differing rules of what’s a short-term vs long term capital gain.

E.g.: Canada doesn’t tax capital gains on your Primary residence when you sell it, but US does.

And buying a non-US ETF can create another tax mess since you’ve now bought into a multibillion dollar trust that doesn’t file with the US gov.

The US doesn’t see your Canadian Tax-free savings account as tax free, so now you have to keep track of every transaction in there.

The us does not tax capital gains on your primary residence unless you lived in it for less than 2 years.

https://www.investopedia.com/ask/answers/06/capitalgainhomes...

Seems even more complicated than that. It's only on $250k in gains, or $500k if you're a couple filing jointly.

It's a lot of money, but if you bought a house in Canada in Toronto/Vancouver 30 years ago, you'd be paying US CGT on its sale.

And can a US-citizen/non-US-citizen couple still file jointly?

In the US you also got to deduct the interest you paid on your mortgage from your taxable income for 30 years.

I never said our tax code wasn’t complicated. I simply said expatriates still get some services for their tax dollars.

I’ll be first in line to complain about complicated taxes. I file three income tax returns, thanks to the fact I live in a jurisdiction with local income taxes as well as state and federal.

For starters the first $103,900 is tax free if you qualify and are living abroad.

What it comes down to is that because of its size and economic power there is an enormous incentive for wealthy people who earn their income (in an actual sense, not a tax law menagerie sense) in the US to try to avoid US taxes by living abroad and moving assets, their "home", etc outside of US jurisdiction while still in reality earning their income from the US.

One of the basic benefits is always being able to return to the US. Being inside American borders is very much safer than being anywhere else if/when the next major global military issue arises.

You also get the benefits of the US legal system if you maintain ties, investments, etc.

If you don't want to pay those taxes you are welcome to renounce your citizenship, but you have to get another country to accept you first. (they won't revoke your citizenship if the result is your being stateless)

> One of the basic benefits is always being able to return to the US. Being inside American borders is very much safer than being anywhere else if/when the next major global military issue arises.

It’s a funny fear, because today, being in the US vs. some other developed country takes about 7-8 years off your life.

Meanwhile, those developed countries with functioning health care systems that you can return to whenever don’t bother with worldwide taxation.

>It’s a funny fear, because today, being in the US vs. some other developed country takes about 7-8 years off your life.

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

When accounting for all sexes, US sits at 79.3 years and the top country sits at 83.7 years. Where is this "7-8 years" coming from?

> Where is this "7-8 years" coming from?

My poor recall.

>It’s a funny fear, because today, being in the US vs. some other developed country takes about 7-8 years off your life.

Does it actually?

I assume that disparity is more to do with the populations of impoverished people around this very diverse country that can't compare to smaller European countries that just don't have those populations.

There is no Mississippi in Germany, those populations are in other countries.

If you compare the whole European Union to the US the disparity is much smaller.

>It’s a funny fear, because today, being in the US vs. some other developed country takes about 7-8 years off your life.

I think that is an exaggeration, I can't find that statistic anywhere.

But you have to look at people in your demographic, not the entire country.

The US has the best health care in the world if you can afford it.

Just about anybody can get insurance and set aside the max out of pocket costs to insure themselves and their family, but they will take a considerable hit in quality of life, home size, luxuries, etc. In other countries that health care is paid for with lowered salaries through taxes and quality of life takes a hit anyway.

> The US has the best health care in the world if you can afford it

But you don’t need a US passport to access that, just a decent one.

You would have to be very rich indeed to achieve the same level of cover as is provided in comparable economies (UK/DE/AU etc), because the insurance is expensive and out of pocket costs / copay is high, and you may discover you cannot get or maintain insurance once you develop a chronic condition.

But even if you dealt with a broker and crafted a special insurance insurance product to deal with the eventuality of being denied further insurance, you are ignoring something significant: you don't improve the quality of life or lifespan of the population by making healthcare only accessible to the rich.

The ACA has removed the pre-existing condition problem, and significantly changed some of the pricing considerations. It’s more affordable now than many are led to believe based on the old structure.

There are plenty of large European countries with good healthcare systems: Germany, France and the UK, for example. I don't think there's a reason why countries with 60-80 million residents can establish good healthcare systems, but countries with 300 million people can't (even China, a much larger and poorer country than the US, is approaching universal coverage). But even if that were the case, individual US states could step in and set up their own universal healthcare systems.

> There is no Mississippi in Germany, those populations are in other countries.

It depends on what you mean by that comparison. Germany relatively recently absorbed a much poorer East Germany. There are still states like Mecklenburg-Vorpommern that are much poorer than the average in Germany. Yet they're all integrated into Germany's very good healthcare system. It could be the same in the US, but it isn't, for political reasons.

> If you compare the whole European Union to the US the disparity is much smaller.

This is not true. The European Union member states have a much greater range of GDP/capita than US states.

The factors which shorten average lifespans for Americans by a few years relative to some other developed countries are almost entirely lifestyle issues. They aren't actually caused by geographic location or government problems.

I think that’s debatable. France for example goes to great lengths to preserve local food culture and the protection of locally produced heirloom foods.

The US government couldn’t care less. If everyone decided to eat only TV dinners and shelf stable snacks that would be A-OK, even desirable because that kind of thing leads to GDP growth. France would never allow it.

US governments are borderline contemptuous of tradition, and tend to court radical reinventions of basic needs. That leads to people getting hurt, but is great for the economy.

>If everyone decided to eat only TV dinners and shelf stable snacks that would be A-OK

>France would never allow it.

While I do not support eating unhealthy foods like that on a regular basis at all (I have some sort of instinctive repulsion towards that), I do support allowing adults to have the freedom to make their own choices regarding what they eat.

By and large, American grocers don’t sell food like that, so we don’t really have the choice.

In the U.S. no one is going to force you to buy anything, but no one will save you when your market disappears.

It’s a kind of freedom, but it’s not “more choice”. It’s often less choice.

No, the US is likely to be the other side of whatever the next major conflict is. If it's a major conflict it will likely end in nuclear war, even if it doesn't start that way. The US is the last place you want to be. Australia, New Zealand, or South America would be much safer, and the climate still amenable to growing food during the nuclear winter. In Australia and New Zealand the land area to population is also very high, which helps in a famine situation.

I like to think (hope? Dream?) That there won't be any more major conflicts now that we have nuclear weapons. But betting against the stupidity of politicians seems like a risky proposition.

> One of the basic benefits is always being able to return to the US. Being inside American borders is very much safer than being anywhere else if/when the next major global military issue arises.

Well to be fair, once you move back in you will already start paying taxes again. This "benefit" is already paid for by you paing taxes when you effectively become resident again after moving inside the country again. Exactly like it works for any other country right now. This is questionable as a benefit while you're not living there.

> You also get the benefits of the US legal system if you maintain ties, investments, etc.

You get those benefits even if you just do some business in US as a foreigner. By this logic, should US also tax worldwide income of anyone who does any business in it and relies somehow on its legal system? Cmon this is a huge stretch. Also if you maintain ties, investments, this means that you are already helping the country by either supporting business or outright keeping your capital in the country and helping it by investing in it. You are ALREADY helping the country. And by this logic the country is supposed to tax you further to what puniush you for helping it?

>This is economic bullying by a country that right now happens to be in a position (having strong military, influence and their currency being the reserve one) to be able to get away with it.

I wonder if this is the kind of stuff that pushes EU politicians forward with their notions that they cannot rely on the US?

I should think that if you are doing something that every other country in the world (save one[0]) does not do, you might want to at least consider that it just might be wrong, rather than cavalierly dismiss an opposing viewpoint out of hand.

> US citizens residing in other countries can still receive some services and protection from the US federal government.

Same deal for expat citizens of many other countries and their government, but they aren't taxed for it.

There's an expat downthread who was extracted from a dangerous country, and the US later sent him a bill for his services. After reading that, it jogged a memory of reading about this being a common occurrence. So what are these "services" he's supposedly paying taxes for?

> If they want to participate in the US financial system then they have to play by US rules.

This is just simple strong-arm bullying and control-freak data collection, and will almost certainly come back to bite the US as its economy declines over the next decades and loses the leverage to impose these sorts of things.

(Disclosure: I'm a US citizen who resides in the US, and think these regressive practices are gross.)

[0] Eritrea, which is not exactly the best company to be in with regard to this topic, since if you are an expat and don't pay taxes, they threaten your remaining family with violence until you pay. And that's just for a 2% flat tax.

Swiss banking history and the process they and their US customers have to go through are entirely unrelated. The US simply created these regulations because for some strange reason the US believes it somehow has the authority to collect every last penny on every single citizen regardless of residence and or if that person gets any value out of having said citizenship. Something the rest of the world obviously doesn’t agree with.

Swiss banks were doing business in the US, setting up offices in the US, and literally counseling American clients on how to export their assets. These were Americans living in America doing business with Swiss banks on American soil in order to avoid taxes.

Several banks have been stomped on for this behavior, the "oldest bank in the world" closed as a result and there have been many other actions.

If you don't want to deal with American taxes, renounce your citizenship, or earn less than $100k abroad.

Correlation =/= Causation

There are way bigger fish for the US to fry other than Switzerland. FATCA wasn’t created because of Swiss banks. Claiming otherwise is ignorant.

There are but the prosecutors went for the biggest win, not the biggest target.

Making cases is hard because these things are very convoluted.

Swiss banks, however, were doing things which were really obviously illegal and their brazen tax avoidance made them a good target for prosecutors. Other targets are honestly just better at avoiding the law and will be harder to get to. Progress is being made though.

For many decades Switzerland was definitely the biggest fish to fry for most western countries regarding offshore accounts and tax dodging. By far.

That's true, but has nothing to do with the mess US citizens have to go through, when opening a bank account abroad.

A lot of banks in Switzerland will outright refuse to deal with US customers, even when they have residency.

This is, however, not specific to Swiss banks. US citizens (or even green card holders) can have a hard time opening a bank account just about anywhere, because of such onerous reporting requirements[1] to the US authoritues that's it's just not worth their while.

[1] https://en.wikipedia.org/wiki/Foreign_Account_Tax_Compliance...

> We can argue about the value of those services but clearly it's >0.

From personal experience, I can tell you that (value of expatriate services) - (cost of dealing with US tax system) is a very deep negative value.

I assume you've never been in a foreign country when it fell apart and the US government had to evacuate their citizens. Some other expatriates weren't so lucky.

I have, actually (Kenya). I'm also lucky enough to hold the passport of another developed country that helps its expatriates and doesn't have a regressive expatriate tax system, so I can compare.

I need to add that a country providing expatriate safety services has nothing to do with a tax system and everything to do with supporting the country's imperialist interests.

It's much harder to get your citizens to work in your interest in risky foreign countries if you aren't willing to back them up.

Fun fact: if evacuated in the manner you describe and as a civilian, you get a bill for it.

I really doubt this is a major worry for a tax exile living in Monaco.

Most countries do the far more reasonable procedure of having you give up ties and get another residency, rather than fully renounce.

Getting a second passport is extremely costly in terms of time or money, and your “free to pay an administrative fee and renounce” comment indicates that you don’t understand this at all.

Source: went through the process of acquiring a second passport for the purpose of renouncing.

The only "services and protection" you receive from the US government abroad are pretty much consular visits if you're arrested. Everything else you pay for, normal in advance, although repatriation is usually billed after the fact.

The US rules apply not just to Swiss banks, but to all banks. Many overseas banks will no longer allow US citizens to open accounts, and some have even closed accounts rather than deal with the burden that the US is placing on them. This does not help US citizens at all.

You cannot just renounce your citizenship. Beyond it being costly, you have to have a second citizenship first, which takes time - 7 years is a common length of time, although some countries have shorter or longer requirements, and many have language requirements that you're expected to meet.

The US is one of two countries in the world that require you to jump through tax hoops if you're working overseas.

> Swiss banks are in that position today because

uh no.

Every bank around the world is in that position today because of the FATCA treaty.

You know there are people who are citizens that have never been to the US. Why should they have to pay to renounce citizenship? If $Forefathers_nationality told you that you were a citizen and that you'd have to pay taxes, how would you feel about that?

Then there's Boris Johnson, British PM, and until recently US citizen. What benefits do you think he would have been getting as a US citizen abroad, over and above diplomatic protections he already had as MP and member of Govt?

Multi-citizenship is a very strange concept anyway. Sure you can check the boxes and countries A and B consider you a citizen, but it's bizarre to me that one nation would let you swear loyalty to another without revoking your citizenship. The naturalization oath of allegiance, at least the American one, is very explicit about conflicts of interest like that but we've just sort of chosen not to enforce those parts of it.

Citizenship is a very strange concept to me. The fact of a person being born in a specific geographic location giving the surrounding nation-state the right to claim some sort of perpetual jurisdiction over that person to the exclusion of all other nation-states seems, upon reflection, quite bizarre.

Correct me if I'm wrong, but I believe most Western democracies freely allow people to renounce their citizenship.

Not if it will result in you becoming stateless.

This is not particular to Switzerland. Any bank in any country that has U.S.-related clients (just having a green card is enough) is compelled by the U.S. to comply with FATCA and similar legislation.

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