Why I’m Giving Up My Passport
nytimes.com
nytimes.com
Yep. I find the Norwegian taxation system to be considerably more manageable and equitable. You pay taxes that are not much higher than in the US and actually get things in return, like excellent health care, free tuition a social safety net, better infrastructure, and a much much higher standard of living across the board. Wellstone was right: We all do better when we all do better. It's genuinely great, but I digress...
The other awesome thing about Norwegian taxes is that the government does it for you. At the end of the year, they send you form with all of your taxes done and ask, "Is this right?" If it is, you click a button and are done. If not, then you might have to do a little work, but it is still so so so much less than managing the US taxes.
German taxes, on the other hand...
Also, there kinda isn't one Germany. Mittelstand vs Megacorp and different cities are all very different.
I know that the special cases (foreign income, family outside the country and so on) are a bit more complex, though.
I have been ignoring the problem.
Of course, the sad thing is that I actually DO still have to file taxes. To the US.
The IRS could do our taxes as well if there weren't 500,000 special interest exceptions to everything.
http://www.propublica.org/article/turbotax-maker-linked-to-g...
All this foaming at the mouth and finger pointing only makes things worse.
The IRS should be able to prefill all of your taxes for you, and allow you to click Submit. But you should be able to change/add info, if you have supporting documentation. There is no reason Intuit and other businesses should need to exist to provide tax preparation services.
The IRS could prepare a fairly reasonable tax return, and let people modify it for their deductions or unreported income. But for most people, all their income is reported, along with mortgage info.
Taxes should be a one page affair, yet as always politicians are adept at dividing us, boxing us, and generally punishing us when we don't do as we are told. The IRS is a political weapon more often than not.
As a typical corporate drone with a house how complex should my taxes be? I do the correct deductions throughout the year yet I never have a near zero difference.
Yes, for nearly everyone.
In fact, the IRS already does this -- your employer, bank, etc have already reported all of the biggest items to the IRS. They know what your tax bill will look like before you even crack open the 1040 instructions. Then when you file they'll compare what you send via the baseline and flag anything that has a discrepancy in that taxpayer's favor.
The IRS could easily let you start with the baseline and just say "OK, sounds good" or "actually, I've itemized my deductions, here is what I think the number should be". In fact the IRS wants to do that since it would be less work for them overall. Congress won't never let them though.
To bring it back to the original article, this is also why expats should never expect tax relief. The tax preparation industry would lose millions of customers.
If only the American public actually understood the value of paying someone to have responsibilities rather than paying them to do work. But that might entail paying people to do their taxes, get an educations, vote, obey the law, etc. Real communism stuff!
The US has also attempted to do this. However, every attempt has been killed by corporate interests (like Intuit) and politicians (mostly Republicans) and special-interest-groups (conservative anti-tax organizations)
The latter claim that the government shouldn't automatically create a form with all taxes done because the government will not try to minimize citizen tax payments (and most people will check the 'OK' button without reviewing their taxes to see if they can get additional deductions). In reality, I think that most anti-tax organizations realize that they'll lose a significant portion of their support if filing taxes becomes easy. In the case of companies like Intuit, the motives are obviously transparent.
This may be true, but I downvoted your comment because I don't see any sources for the strongly worded assertions made.
A googling of something like "intuit lobby irs" will turn up as much info as you care to have about the situation, incidentally.
Most people (I bet HN readership included) are paid under a full time employee structure where the employer files a W2 and deducts all (or most) of the federal taxes the employee is liable for from their paychec. Even if you are a contractor, you're supposed to pay all of your own taxes every quarter (or pay penalties + interest), including your employer's half of the Medicare/Social Security taxes.
The big difference in the United States is that you are still required to file your own forms by April for the previous fiscal year for your tax return. You still have to do work to get a nontrivial amount of money back.
High taxes. Long wars that promise to only get longer. Lack of meaningful industry regulations. For what? What is it getting us? It's not like we're getting free tuition out of it, or even reasonably cheap tuition. It's not like we're getting more land and resources--and freedums, I seem to have a lot fewer of those these days, and it weren't no Al Qaida that done took 'em from me. We aren't getting cheaper products with more innovative features. Republicrats and Demicans can argue all day about what change is needed, and we've only ended up with the worst of both sides of the aisle. We'd be a lot better off with the whole program of one system, even if it was the system I didn't agree with.
My boss goes with the phrase "Republi-cons and Demo-rats" which I was always a fan of.
I have a paperback sized device that can download thousands upon thousands of books pretty much anywhere I am. I think it's nothing short of incredible! And the battery lasts for several weeks at a go, to boot.
Your comments about taxes are fairly accurate, but the above surprised me some.
1: http://www.economist.com/news/special-report/21570842-oil-ma...)
Cost of living to some degree reflects what people actually can afford because that's what suppliers can get away with.
The stress and time wasted to comply with pointless regulations (ala IRS) likely affects your quality of life more than a few numbers on a balance sheet that are likely compensated by living costs.
Norway is not Saudi Arabia, in other words. The part that worries me is not oil's contribution to the government balance, but its outsized share of private enterprise, especially technology.
*The fund is composed of 60% global shares, 35% bonds and 5% real estate.
Live(!) valuation here: http://www.nbim.no/en/
That said, I certainly agree that wise application of that oil income has as much of an impact on the country's financial well-being as the income itself.
This is what bothers me the most about the U.S. Federal Government. Most of the things I enjoy in the U.S. are provided by my city, county and state. Things like courts and fire protection and cops and roads and schools and water and sewage systems and electricity and parks.
And what's amazing about all that is I don't pay very much for it. States and cities seem to be able to really stretch our tax dollars.
I pay a lot more into the federal government and in return I get interstates (which are awesome) and the TSA at airports and borders. Other than that, I don't really have many tangible interactions with the federal government at all. This was made very obvious during the shutdown, which I wouldn't have noticed if I hadn't been reading the news. It seems to be largely a money pit.
edit: What's the state/federal taxes ratio ?
So for us, income and property tax add up to almost 32% of our income.
Home ownership is the big wildcard in that calculation. You could pay nothing to your locality (other than sales taxes) if you don't own a home and instead pay a higher percentage to the feds.*
* - of course, someone owns the home and is paying property taxes, but your personal tax bill doesn't reflect that.
Fed usually use the "carrot" approach to distributing some taxes. So instead of "forcing" states to comply say to set a speed limit. They'll just withhold the funds for road repair and maintenance if speed limit is not set according to some standards. Perhaps the same goes for other things welfare money, drinking age, etc.
Some people are fiercely in favour of more state control (almost down to a religious type conviction). I never really got that. I came from Europe and when I think of "government" I think of one government entity. It operates at multiple levels but it is more or the same entity. And basic things like traffic laws, gun laws, sales taxes, etc are uniform.
Europe will come to understand that philosophy as it merges to become the EU. Already the EU is an overcomplicated mess where the dynamics of agency are unclear. It will get worse as the EU claims more power over the member states.
I'm not sure that is very likely. France for example is 65 million people, so around 1/5th of the US. That is not a very large difference, and that's twice the size of the largest US state.
With anywhere between 1 and 11 million inhabitants, French régions are actually close to US states, yet since 1789, there have been little will to delegate more power to the régions (or the smaller départements).
Some people like having a central government that ensures equality between all parts of the territory. On the other hand we might have more little overseas régions that might have a hard time fending for themselves if the central state didn't allocate more money to them without asking the other régions' opinion.
US States are European Countries. The demographics are similar. State/Municipal governments are far more integrated than state/Federal, much like the EU/Country divide.
Federal tax as percent of GDP: 19% [1]
State and local tax as percent of GDP: 9% [2]
So, even if we bump up state and local expenditures to 11.25%, it still seems like we're getting a better deal from local governance.
1) http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Doc...
2) http://www.ncsl.org/documents/fiscal/TaxesandtheEconomy.pdf (a little out of date...)
Some say the US screwed up so much under Bush it would have been better to loose the world without American protection, and Bush did do a terrible job. But we don't know either way.
In any case, many other countries would pay more for military operations if the US paid less.
Not that they've asked for it - but it's difficult to conceive that Europe would have escaped Hitler or the USSR's aggressions without a lot of military spending on their behalf by the USA.
Or was it just some kind of one-upmanship?
Plus, it created the military industrial complex.
So...a lot.
Sure, some of these countries have great freedom, but I'm not convinced whether US military subsidy protects freedom or just the status quo.
If you're not fighting a war or retired, it's not a surprise that you don't see much direct benefit from federal spending.
State operations like schools, streets and roads, airports, transit, and police are much more visible in daily life. Still, state budgets are supplemented with grants from the federal government, too.
But the big point here is that retirement and health care and war are the biggest federal operations. And, to reference op, you don't get much benefit of that living overseas.
--- Incidentally, the TSA is paid for by air ticket taxes and the interstates were paid for mostly by federal gas taxes and maintained by state taxes. Only new highway construction is paid for out of federal income taxes since the gas tax became unpopular in Congress in the 1990s and was allowed to drop too low to pay for highway grants so it was replaced with income tax money. So even your visible federal tax benefit examples aren't really paid out of federal income tax.
I didn't know this was the case. Why would they start paying out as soon as they started collecting? It makes no sense to me.
http://www.ssa.gov/oact/STATS/table4a1.html
I found it interesting that the system looks to be in far better shape today than it has been for many decades. In the early ears, assets outweighed expenditures by a huge amount, sometimes by more than a factor of 10. As you move down the table, this stops, and in the 1970s it hits a 1:1 ratio of yearly expenditures to assets, then shoots way past. In 1983, the trust fund had under $20 billion in assets but the program spent $153 billion! That's clearly a program where current taxpayers are paying for current retirees, rather than the savings program it's painted as.
By the late 80s, things start looking much better, as income substantially outweighs expenditures. In 2001, the trust fund exceeded $1 trillion while expenditures were at a considerably more modest $378 billion. The 2013 figure has about $2.7 trillion in the trust fund, with expenditures of about $679 billion. Not a factor of 10, but certainly far better than the 60s, 70s, or 80s.
I knew that SS was in better shape than many people say, but I had no idea that it used to be so much worse. The picture painted by the naysayers is one of a long slide towards disaster, whereas it looks like the program is currently doing great. Future demographic shifts will certainly hurt a lot, but compared to the years when the trust fund was essentially nonexistent there's almost nothing to worry about.
I just started taking social security (yes, I am an old programmer :-) and unless I live a very long time I will never get back all that I have paid into social security, if you take I to account what I put in and earn a small amount of interest on the money (which is not so small with compounding).
Medicare is more of a government handout - I agree with you there.
This page has the story of the first SS beneficiary:
http://www.ssa.gov/history/imf.html
This wasn't until 1940, even though the program began three years before.
As far as I know, SS benefits are and always have been determined by what you pay in, from the beginning. Do you have information to the contrary?
If you prefer thinking in monetary terms (as most people do), think about somebody who has a retirement savings account. Their money comes out of payments that firms make (in the form of interest on bonds, or in the form of dividends etc.). This is money that could otherwise have gone to the employees of those firms.
To get an even clearer picture, think about it in real terms. Retirees use up real resources and services that are generated by the currently working population. So the current workers provide for the current beneficiaries, plain and simple. The movements of money that are used to reflect the movements of real resources is really just a thin layer on top, and it would be wise not to focus too much on the cosmetics of that thin layer.
[1] Mostly children and retirees and, if you allow yourself to be honest about the reality of capitalism, the rich and powerful.
You also leave off debt service, which is approaching the military budget in size.
That aside, I agree with what you wrote.
There's a lot of FUD and wrong opinions approaching the national debt, and people don't think about it correctly.
Very briefly, I'll make one point to bring some of this to light: 40% of the national debt is owned by the government.
* 16% by social security (so this portion isn't debt service, it's SS funding) * 13% by other government entities (likewise funding these agencies) * 12% by the Federal Reserve (whose profits are remitted to the Treasury, this money is free)
Another 25% of the debt is owned by Americans in some form or another.
For comparison, the two largest foreign debt holders are China and Japan each with about 7%.
If default is the worst case scenario, defaulting on foreign banks seems preferable to defaulting on your retirees. The same is true for money printing, as retirees are harmed greatly by inflation.
While inflation can allow you to payoff debt with less valuable $ and thus reduce the value of what is given to other countries (also to retirees and other holders of government debt but for the matter of losing wealth to other countries that isn't a factor). But markets adjust and unless you have now paid off all your debt and owe nothing you have to borrow again, and lenders will demand larger interest payments to make up for the risk of your debasing the currency to pay them back worthless dollars. So while this can maybe work in the short term if you fool the markets it most likely doesn't work in the long term for the USA.
I would say it is probably true defaulting on foreign banks would be preferable but it isn't that neat. The USA would default to everybody and it would be chaos (because of the central role of the USA - different than if some minor economic power defaults). The USA owes lots to foreigners and those in the USA and while spreading the costs of default overseas sounds better really it would be so catastrophic I doubt it matters. Debasing the currency through inflation is what would happen instead in the case of the USA. Which would have bad costs to the USA and to those holding USA government debt.
What is aggravating is that this is where they want to make the most cuts. Not to defense or large social programs. 2 or 3 billion to NASA will make huge progress for our country and technology, and it is a drop in the pond for the government. Yet, that is where they want to make cuts.
https://en.wikipedia.org/wiki/File:U.S._Federal_Spending_-_F...
Presumably if the fed wasn't paying for social security and medicare/medicaid, your state would have to, or you'd have bands of sick and elderly wandering the streets like so many zombies. If the fed wasn't paying for the military, I guess your state could also do this, lest the Brits march in and put us all under the rule of the king again.
Also: FDA, EPA, FCC, FBI, CIA, and tons of other TLD agencies that keep the country running in the long run.
This is amazing. (Let's disregard the two countries' differences in population sizes, demographics, debt, and military budgets.) A self-employed person in the US tends to lose between 40 and 50% of income to triple-taxes (depending on federal, state, and local levels), self-employment tax, and the need to buy expensive health insurance. What is the range of Norwegian tax rates under similar circumstances? Does Norway have a high consumption or sales tax rate?
Councils also charge rates for local road, service and facility management based on land and improvement value, this works out to around $1000-$2000 per year for a family-size house. This is simply invoiced to the home owner.
There are limited rebates for low-income people, especially families.
This covers healthcare - both emergency and elective (though there are waiting lists for elective procedures), education at pre-univeristy levels (though schools do ask for donations because the funding is low after decades of cuts), road maintenance, public transport subsidies, unemployment and sickness benefits, armed forces and various other things.
All this is deducted as I earn, I haven't filed a tex return since I was self employed 8 years ago. As a self-employed contractor I could claim business expenses against income and then paid the personal income tax on the remainder. I did not have an accountant for this, though I have accounting training.
Incorporated companies pay a flat 28% tax, though there are some company types where the shareholders simply pay personal tax on dividends. There's no requirement for a company to be registered or incorporated though, simply pay personal tax on any profits.
Also we don't have any capital gains tax, stamp duty, or pretty much any other sort of tax, other than import duties.
Everywhere overseas looks so complex from this perspective.
This is in Netherland, by the way. We also have sales tax that ranges from 6% for necessities (food, books) to 21% for luxuries. My health insurance costs about EUR 100 per month.
http://en.wikipedia.org/wiki/Government_Pension_Fund_of_Norw...
Cumulative oil production:
US: ~200bn barrels Norway: ~25bn barrels
(in all fairness, the population of the US is about 60 times larger ... but then again, most of the fund is not spent today)
Although it still only takes me 30 minutes.
You mean "We all do better when we use oil money spend $3800 more per capita than we collect in taxes".
Several points, as an American who has lived abroad for most of my life, and only recently found out about the taxation laws and requirements:
* the requirements are Overwhelming. Most people don't realize how bad it gets. It's not about the money (most "normal" Americans living abroad owe no money to the IRS), but about the reporting. Every bank account, every stock you own or owned within the last several years, every company you started, and guess what — even if you own 15% of an LLC, that is considered a "controlled company", so all of its financials are to be reported. It's insane!
* it's not work you can easily shift to an accountant. Oh, you do have to hire one, because there is no way a US citizen can do his own taxes (in contrast to most EU countries, for example), but you still have to prepare all the information. Ever tried to report interest (accrued monthly) on six bank accounts, in three currencies, over the past 6 years?
* the benefits of being an American: frankly, I can hardly name any these days. I guess the ability to work in the US counts as one.
* it used to be that having US citizenship would be a dream, especially for people in former Eastern European post-soviet countries. But this is no longer the case. These days being a citizen of one of the EU countries gives you much more benefits and earns you much less hate abroad.
The problem with taxation of expats is very, very serious, and as others have mentioned it is unlikely to be resolved, because there is no organized lobby. The real tax-evaders don't have this problem: it's "normal" people who do.
Luckily I'm young and make less than $97,600 (yet another seemingly arbitrary corner of the tax code), so I don't have to pay taxes. Of course, I still have to file and then request an exemption, but that's no surprise in a system where lawyers are the only ones voting on the laws.
If you're young, things are slightly simpler. You don't have a financial history, you (usually) only have one bank account, no savings, no trust funds, no stocks, no shares in companies, and often no mortgage. Believe me, it gets much, much more complicated later on. But I do hope you know what FBAR and FATCA requirements are when you say that you file and request an exemption.
I've seen other tax systems and the US one is the only one with these overblown reporting requirements.
The value of an American citizenship is incredibly high. The vast majority of people in the world would go to great lengths and expense to be able to have one. The taxation requirements, as onerous as they are, are still worth it to the vast majority of citizens.
Similarly, the value of a British citizenship (or of any other powerful western country) is very high, and most people would put up with great costs to have it. The author mentions that he pays quite high taxes there as well.
The marginal value of having an additional citizenship from the set of powerful western countries is quite low, though, which is why this author no longer feels that the costs are worth it. But only an incredibly small fraction of people are in a position to be citizens of more than one powerful western country, which means that the costs of being a citizen will likely continue to be judged (by most people) against the value of citizenship on its own, not as a marginal addition to some other citizenship.
On the other hand, it is possible to change it with very little loss of revenue to the US because this taxation raises very little money in practice. Because of the 97.6k income exemption, as well as double taxation tax credits, the only real thing it does is create mountains of expensive paperwork for expats (as well as the IRS). Think along the lines of paying $5k to a specialty accountant to prove that your US tax bill is zero, every year.
The other part of your comment about this affecting only a small fraction of people is inaccurate. It affects all US expats - currently several million (6.32m is the last number I've seen). The only criterion for being affected is US citizenship. Foreign citizenship is irrelevant. You will be taxed in most foreign countries if you are resident there, regardless of your citizenship - and then taxed again by the US on the basis of your US citizenship.
I've filed a total of zero tax forms with the UK government in my lifetime. I've filed several hundred with the US government in a couple of years (and paid third parties money to file "for me" because filing directly is insanely difficult).
That said, there shouldn't be; there's quite a bit of lobbying by the aforementioned tax prep industry to prevent simplification of taxes to the point where everyone could simply file them on their own, as well as to prevent the establishment of an online government-hosted tax prep system. And that's completely ridiculous. The IRS already has more than enough information to simply send everyone a pre-calculated bill.
The IRS says the average time to complete a tax return is 13 hours: - 12% complete 1040EZ at 4 hours each, - 19% complete 1040A at 7 hours each, - 69% complete 1040 at 16 hours each [1].
Since some 150 million returns will be filed this year [2], that's an aggregate of almost 2 billion hours spent. That's just federal, of course. States are probably less time each, since they piggyback on federal, but there's certainly some time spent there.
[1] http://www.irs.gov/instructions/i1040/ar03.html [2] http://www.irs.gov/pub/irs-soi/P6187.pdf
Considering my taxes would be easy peasy, I wouldn't think $5k is out of the range of normal.
If you're an individual with a fairly "normal" expat job (just a salary), I'd recommend finding an independent tax preparer who's done expat taxes before. There are a lot of CPAs who have 1-person offices doing tax prep, and some are knowledgeable about how to file for an expat. I asked around and found a friend-of-a-friend in that line of business.
I've been very happy with their service and am happy to recommend them.
And if you don't follow the letter - well, depends how much the IRS thinks they can extract from you.
Are you sure? These tax laws also collect money from US Citezens working as contractors for the US military over seas not just someone who has decided they would rather live in Europe for the rest of their lives. They are often paid 6 figures salaries and there are 10's if not 100's of thousands of them around the world esp. supporting the wars in Iraq and Afghanistan. I don't think you would find a lot of support for reducing their taxes to zero.
This site explains the basics. It most definitely does apply to US contractors.
http://www.hrblock.com/tax-answers/services/jsp/article.jsp?...
However, we've seen plenty of examples of American corporations setting up offices in foreign countries to avoid paying U.S. taxes -- what's to prevent the highest paid individuals from doing something similar to avoid their tax burden if this taxation policy was changed?
Someone who doesn't have dual citizenship is certainly going to complain about the tax paperwork, but they're not in a position to do much about it. They're not a big enough voting bloc to effect change and they're certainly not going to renounce their citizenship over it without having citizenship in another powerful western country to fall back on.
What is that based on?
My concern is that if I was a US citizen, the bank might close my account for the reasons cited in the article. So now I won't be able to get citizenship (and e.g. vote, get a US passport) until my loans are completely paid off and I can close the account.
I will say that my "plan" is if I ever leave indefinitely, that I will renounce my citizenship. Having to file US taxes is extremely painful even for someone with "simple" taxes like me (one job, no additional sources of income, few deductions). Before I moved to the US I never had to fill out a single tax form (ever). Americans just love pointless bureaucracy like no other...
I'll be damned if I am filing US taxes from abroad. I just refuse to on principle alone.
So when you're a US citizen, they will close your bank account, and you will not be able to become a US citizen anymore? I don't quite follow.
- I am currently a green card holder
- I can remain in the US indefinitely, I only have to pay $500 to renew my green card every 10 years, inform them if I am abroad for over 6 months, and not commit any serious crimes.
- I can apply for US citizenship in 2-4 years. US citizenship grants me some rights and takes away from restrictions.
- If I apply/gain for US Citizenship my bank abroad might close my account due to the US government rules (see the article).
- So instead I won't apply, will remain on a green card, and will wait until the account can be closed in 7-10 years time.
- Once the account is closed I can apply for US Citizenship if I wish.
Not trying to be pedantic, just genuinely curious (I'm a GC holder myself): Why should the USCIS care about your foreign bank account?
If you change status from a permanent resident to a citizen it won't magically cause your bank account to close, but you might now be on their "list" and the US government can move easily bully a bank into closing the account of one of "their" nationals. It has nothing to do with the USCIS, and everything to do with the IRS.
there is the tale of a french game developer who did what you said, and the IRS still managed to froze his foreign bank account.
basically, he gave up his US residency. Moved back to his native france, joined a game company that turned huge. on the IPO(?) the IRS got france to hold his assets because he was evading taxes, by renouncing the residency.
..i'm trying to find the history or the names. but failing, i'm sure someone here can help...
(I realize it may not be an option, but if you already have a fairly clear plan to stay in the US, it would seem worth pursuing, maybe even just to avoid all the money transfer fees)
Pretty hard to compete with that.
But if the loans aren't all that large, maybe it's still worth spending an extra $1000. A specific analysis of a real situation is what I was interested in.
If holding additional citizenship becomes a burden, people simply drop it.
I do think many people think the term is becoming archaic. For people who live and call a country which they are not citizen in their home, it's definitely not archaic. Becoming a US citizen was one of the most important days of my life.
Why? For what benefit? I haven't seen a reason yet to even consider doing that.
Also, laws may change in the future that further restrict the entitlements permanent residents have. Permanent residents can be deported. I've been subject to extra screening in customs.
There's a lot of reasons to be a US citizen if you're planning on staying in this country for life.
I've changed countries once, at this point it wouldn't really be assumed I'm planning on staying anywhere for life.
I still think citizenship ought to be something you choose but in reality it is usually something that happens to you, based on where you emerged into the world and what citizenship your parents hold. This is not going to change for the foreseeable future.
It really depends on where you are born.As an american,you can move almost freely across the world.That's not the case if you're born in some god forsaken place in Africa for instance.Being born in the "right place" is definitely a privilege.Trust me.
> but there seems to be a growing trend to simply follow the wealth--whether it be money, standard of living, etc.
It has always been that way.There's nothing new about that.People have been moving where there are better opportunities for centuries.
Hardly a formality for citizens of countries that aren't any fun to live in and aren't easy to leave. Ask a Syrian or a North Korean if citizenship is a formality.
When times are good it might, but just ask Americans who were in Liberia or Sierra Lione recently, or who were in Georgia in 2007, or who were in Ukraine until this year. Citizenship doesn't matter until it really, really matters. In Israel there are increasingly stories about families wondering about whether getting or attempting to get a second citizenship is a form of cowardice or a pragmatic acknowledgement of events on the ground.
We may be living in a peace bubble: http://www.cato.org/publications/cato-online-forum/primacy-f... . I hope that isn't the case. If however it is, citizenship really, really matters.
Let me reiterate that moving towards a safer and more developed world in which citizenship doesn't matter much is great and I hope we do it. But that progress is not guaranteed and is not universal.
They would probably tell you that the US State Department charges people for being rescued rather than doing it for free like other governments, and that the bill has a habit of being absurdly large and in some cases (like evacuation via aircraft carrier) can result in bankruptcy and people wishing they had not been rescued.
http://travel.state.gov/content/passports/english/emergencie...
Departure assistance is expensive. U.S. law 22 U.S.C. 2671(b) (2) (A) requires that any departure assistance be provided "on a reimbursable basis to the maximum extent practicable.” This means that evacuation costs are ultimately your responsibility; you will be asked to sign a form promising to repay the U.S. government. We charge you the equivalent of a full coach commercial fare on a comparable mode of transportation at the time that commercial travel ceases to be a viable option. You will be taken to a nearby safe location, where you will need to make your own onward travel arrangements. Typically, you will not have an opportunity to select the destination to which we will take you; it will be to the nearest safe location (only in rare circumstances will that be to the United States). If you are destitute, and private resources are not available to cover the cost of onward travel, you may be eligible for emergency financial assistance.
https://goatpath.wordpress.com/2011/02/11/how-much-can-an-ev...
As far as I can tell once you leave US borders, unless you intend to return permanently one day there are no benefits to being a US citizen and lots of downsides.
By the way one thing I keep reading about re: FATCA is that the State Dept seems to be underreporting the numbers of people who are giving up citizenship.
This is where the problem is. The rules are just so damn hard and complex. I lived in HongKong for a couple of years outside US and expat tax is nothing short of nightmare even when you know you won't owe a penny to the IRS. The tax in HongKong is as simple as it gets and Yes US is a much bigger country and all that but I fail to understand why things are so complex. I love my accountant but sometimes I wonder would she exist if I can do my own taxes in a matter of a few clicks ?
Coming back to giving up US passports point, well good for the author but like someone else mentioned, the value of US citizen or even a Permanent Residency (green card) is really high even though you have to go through so much trouble just to file the damn taxes. Unless you are tremendously successful already with tons of money and not to worry about your financial future AND can choose to live anywhere, sure giving up the US passport will be much easier. Otherwise, it will take serious guts.
The article is wrong in that:
>We are the only country (except, arguably, Eritrea) that taxes all of its citizens on worldwide income
Nope. South Africa does this too...the rules are very forgiving though so it tends to be OK anyway despite it being technically "world-wide income".
http://www.sars.gov.za/ClientSegments/Individuals/Tax-Stages...
It boils down to the definition of "resident" under SA law. I studied this at varsity and we can debate it...but lets rather not. My point was simply that SA tax laws have "taxed on global income" rules...contrary to what the article suggests.
That said, of course all countries try to catch tax dodgers, but they go about that in a different way than the US does.
I do identify with my birth country to an extent, but definitely no more or no less than any of the other places I've lived in since I left. I'm afraid this might upset some people, but the piece of paper in my pocket has value only insofar as I can't get a better deal somewhere else.
I've grown pretty tired of "ownership through urination" and I know my multi-cultural friends all feel the same. I know this is mostly down to historical baggage but I really, really wish we could do something about it.
I'm genuinely curious, are there any recognized countries without actual land/borders?
I think the closest you can get is SMOM: http://en.wikipedia.org/wiki/Sovereign_Military_Order_of_Mal...
>Does this mean I don't have to pay my national tax?
>No, you must pay that proportion of your national tax officially allocated to peaceful pursuits.
I wouldn't dare travel without another passport as a backup, but I would love to live in a world where I could. And as an American, cutting out the 40% or whatever of my taxes that goes to MiniPax would make me ecstatic.
http://www.worldservice.org/docpass.html
Edit: Here's the list of countries that have accepted it. Part of me wonders if a substantial number of these are legitimate, or if they're just from very tired border agents.
So, instead, they prey on little folk.
Edit: for those actually interested in doing something, this group looks to be legit: http://americansabroad.org/
No, I found a good guy who really knows what he's doing up in Vicenza. But between his fee, and a day off work to go see him and get all my US stuff in order... it does start to add up.
> I would imagine any tax software should be able
Maybe, but I doubt it does it nearly as well as a competent accountant, who, for instance, knows how to read an Italian tax filing, and knows the details of the US-Italy tax treaty.
When it's sufficiently interesting, politics is ok, the problem is propaganda and discussing values that are a matter of taste.
https://news.ycombinator.com/item?id=6120530 is a pretty good summary of why I don't want to see politics here. I'll also add the "bullshit asymmetry principle": http://ordrespontane.blogspot.it/2014/07/brandolinis-law.htm... - which tends to become important as these discussions grow. It's super easy to say some inane thing, but to properly refute it requires research, links, statistics, reason... it's difficult. I don't think "good political discussions" are a stable state, either - it's something that might happen for a period of time, but then decay sets in.
That's a wild claim. The author is absent from New York and is free to visit http://www.elections.ny.gov/VotingAbsentee.html to learn about voting.
I knew this was a concern, but I didn't realize so much so that people were giving up their passports?
Reading through the comments, I see a lot of talk about "What are the common people to do?" and that the well off seem to be dancing around this problem?
Am I off base? I just don't see why I couldn't do the same, even as an 'Average' businessman.
I don't see any moral dilemma in moving my money around to the Caymans, or wherever need be to avoid this problem, either. Why is it presented as so difficult, when so many others seem to be doing this so successfully?
As much as I love the United States, having lived here my entire life, I am not going to let them fuck me over.
You can be making less than the exempted amount, and still be obligated to pay thousands simply to file a return.
Personally, I'm in favor of a simpler, flatter tax with fewer deductions. Right now the system rewards those who game it more aggressively, rather than rewarding those who behave in financial responsible ways. For example, having a house that one can barely afford with a huge mortgage is better tax-wise than having a modest home and saving/investing more. That seems entirely backwards to me.
[1] http://www.businessinsider.com/intuit-opposes-free-tax-filin...
That said, there is such a thing as a health propensity to save in economics. You want the growth, etc., but you also want demand to be somewhat resistant to short-term ups/downs. That can only be achieved if the consumers save enough in order to keep spending, even if the income is fluctuating.
In practice, this is very very difficulty and has to do with social norms/attitudes as much as with actual economics.
Personally though, the amount of pull back we had in spending in the 2008 crash was not fun. I'd rather forego a bit of growth in exchange for a more consistent demand and a financially more sound neighbors who will not drag me down with them if/when economy sputters.
I'm sure those tens of millions would be thrilled to only pay hundreds to a specialty USA startup instead of thousands to local tax accountants.
A theoretical annual market revenue of a billion bucks is not bad. A bit over three million customers is not totally unreasonable, and a third of a thousand dollars is disruptively cheaper but still multiplies out to a lot of revenue.
I'm actually kind of worried about tax evasion. Especially here, because jurisdiction shopping seems uniquely available to the wealthy.
I take the author's point that not everyone caught up in this is actively trying to evade taxes, but I'm also not especially saddened by paperwork hardship stories, nor am I moved by taxes on income after the first ~ $100,000 a year.
I'd find the arguments for change far more persuasive if they were accompanied by compelling suggestions on how to prevent tax fraud from people who can afford to buy a house abroad and spend X days a year in it.
I'm serious, I'm in your corner 100% if you just meet me half way, acknowledge these laws have some purpose. There's a problem they're trying to solve, take that seriously. Present a better solution for that problem, rather than just saying we should shrug our shoulders and tear the whole thing down.
"The extraterritorial reach of the income tax dates from the Civil War, when the government wanted to prevent Americans from fleeing to Britain to avoid taxes."
- green card holder has all the obligations of citizens, none of the benefits
- you are start with lots of assets that are now taxable in the US, already overseas.
What are the consequences of not filing if you don't owe anything? It seems likely the IRS could eventually force backfiling, but have they issued any fines?
Also, with FACTA, foreign banks get screwed by the U.S. if they make a mistake on paperwork - really big fines.
Screw over everybody so a few wealthy folks don't "get away with anything".
As for actually paying taxes, that's fairly well covered in the comments: you don't unless you're making big bucks. The issue seems to be paying an accountant to do the paperwork. Yes, it is slightly more paperwork for an expatriate, but plenty of people in the US pay an accountant to do their taxes too (itemizations, deductions, capital gains, and lots of fancy accounting to reduce taxes). Accountants seem to be about $500, so the $5K figure is for the full service expat (the upper tier whose company pays for everything--or used to), or for those who have 2 businesses like the author. Heck, taxes for business owners in the US are probably $5K as well. For regular employees, it is also possible to download the forms online and file your taxes yourself. That's what I did when I lived abroad as a student and employee.
The new reporting by foreign banks for US citizens seems to be an actual issue. Making foreign banks deal with US bureaucracy sounds like a nightmare, and if they do refuse expat American customers, that might be a problem in day-to-day living. That probably does need some real-world solution, such as raising the limit to 20K for a basic checking account.
The complexity of the US tax forms comes from the innumerable deductions and allowances that are meant to encourage some form of economic behavior (e.g. buy solar panels or invest in local businesses). It's not an ideal system, but it does provide a lot of flexibility and it's one way for the gov't to set economic policy in a county that frowns on more direct gov't involvement.
Finally, on the moral side of the issue, I don't see any problem with a country keeping tabs on the wealth of its citizens who are free to come and go. It's the tyranny of the IRS: rich and poor alike must file. Nobody argues they shouldn't pay taxes when they are in the US, but in order to do that properly, you can't turn a blind eye to what happens to their money when they happen to be out of the country. As other commenters have said, having US citizenship is an insurance of some sorts, and if/when you move back, the irs wants to know where you stashed all your foreign earnings.
I think the US is unique in this regard: lots of wealth, lots of freedoms including travel, lots of tax deductions, and a ruthless IRS that is known to go after the rich and the poor alike. Other countries would probably like to have the power to enforce their tax regimes abroad, but can't.
The issue at hand that induces an increasing number of dual citizens to drop their American citizenship is that the U.S. government is supposedly forbidden from both prying into the private affairs of individuals and from compelling involuntary servitude, yet it does so on a massive scale with respect to its citizens living abroad.
These people are often paying more in tax to their local sovereign authority than they would if resident in one of the United States, and would thus owe no money to the U.S. even if they earned 100 times more. They are not trying to avoid the expense of taxes. They are trying to avoid the annual ordeal of stripping naked before their distant federal overlords in a humiliating ritual designed to show that they are guilty of no crime, absent any individualized suspicion of wrongdoing.
They should enjoy the presumption of innocence that the U.S. is compelled by its foundation law to extend, and be able to keep their private affairs private until there is enough specific evidence that a crime has been committed to issue specific warrants. The federal U.S. government has instead been acting as a bully and an ass, with no discernable goals other than to demand obedience and enforce compliance, for far too long.
They can tax foreign-domiciled citizens as much as they like, for now. Rather than question that here, I would very much like to remove their ability to levy their onerous information reporting requirements on those people and upon the foreign persons that would very much like to do business with them without some nosy busybody rudely inserting himself into the transaction to interfere.
When people who supposedly represent our interests act in such a fashion, it reflects extremely poorly upon the nation as a whole. While foreign entities currently tolerate the behavior, it is only because they lack more viable alternatives.
But beyond the behavior, those expatriates have firsthand knowledge of how other nations operate their taxation systems. And they know that the U.S. system is almost always worse when measured by the scale and complexity of the paperwork. There is no particular technical reason why it is that way. But every time a reform is proposed, the media narrative magically transforms it into an issue about money and fairness rather than transparency, privacy, simplicity, efficiency, or any of the other standards that show it to be a colossal failure when compared with any other modern economy on the planet.
It really is very embarrassing to think that my Big Brother not only watches me in my every waking moment, but he also preemptively beats up every single one of my friends in the schoolyard, just to ensure that I can't even have a moment's peace on a sleepover.
I would swear it was a joke article but apparently he's serious. It takes all kinds to make a world.
It's reminiscent of Prop 13 in California. It was sold as a means to keep the elderly on fixed incomes in their homes, but it also applies to commercial real estate, and that was the purpose of the execrable thing.
Pass the bucket, I'm going to throw up.
So not only is it double taxation but it is taxation without representation, something that's generally considered bad...
As an American abroad, this makes little sense to me.
Rather than spread our votes out across the country by forcing us to vote where we last held residency, why not allow Americans abroad to elect their own representatives?
I have more in common with other Americans abroad than I do with the average voter in the state where I last lived nearly 20 years ago. We wouldn't expect a former New Yorker, now Texan to continue voting in New York's elections. But if someone moves from New York to, say, Mexico City, that's exactly what happens.
It would be nice if people simply voted and paid taxes where they live, and moving to another country was easy, removing the need to hold on to previous nationalities.
Taxation of expatriates which is something that literally no other developed nation does, and they seem to be doing fine.
This is reflected in the fact that now many banks abroad will simply not let Americans open account with them. Any other nationality is fine.
I support a reduced tax bill when you are living abroad but to say Americans should pay no taxes is ridiculous. They most likely had some direct/indirect benefits from being American and also can always return to a vibrant and economical strong society. It is like insurance, they should still have to pay some premium.
This isn't about tax avoidance-- as the article points out the first $97k earned abroad isn't taxed and above that it isn't double taxed.
The problem is that the regulations are absurd, not well documented, and the fines and penalties for innocent errors (such as not filing the right form at the right time for bank accounts on which you owe no tax) are extraordinary.
As an american who has spent an extended time abroad, we also suffer from the fact that the rules for banks are so bad that many countries simply won't open bank accounts for americans, because they aren't prepared for the hassle.
It's often quite difficult to live and work in a country and not have a local bank account. It makes getting and making payments to people in that country much more difficult.
He is advocating taxing avoidance clear as day.
I agree the rules and regulations should be better. But he is going one huge step further.
What's so extraordinary about "avoiding" to pay taxes for services you will not use?
If he doesn't want to have "being American insurance" then yes maybe he should give up his citizenship.
Had he argued just for less complex rules and regulations then I agree but that is not all he is advocating.
He is telling US taxpayers hey keep the country going, I am not going to contribute anything but I want to be able to easily comeback if I need to.
FTA: "My “in-person final loss of citizenship appointment” is scheduled for Jan. 14 at the United States Consulate here."
And once he comes back he will be liable to paying taxes.
Besides, is this Rhodes scholarship publicly financed? Because according to wikipedia it's funded by a private trust in England.
He clearly states US citizens abroad should not pay US taxes. (edit to add "US" which I thought was obvious)
That's not exactly true: he states that US citizens abroad should not pay US taxes. We already have to pay taxes in the places we live, just as non-US citizens living in the US still have to pay taxes in the US.
In your opinion: should that person pay US tax?
http://en.wikipedia.org/wiki/International_taxation#Individu...
I'm fairly sure America is the only country that taxes non-resident citizens. Why do you think America is right and every other country is wrong?
Of course, you're probably right. The real lesson here is to including supporting evidence and not just your feelings.
Yet other countries don't charge for this much more tangible privilege.
The US passport also isn't even in the top 10 most valuable ones to hold for travel https://www.henleyglobal.com/international-visa-restrictions...
The table in http://en.wikipedia.org/wiki/International_taxation#Individu... states "no" for "taxes foreign income of nonresident citizens" for China. Is that incorrect?
Even austrailia taxes worldwide income, America is not that unique here.
Taxing foreign income of tax-residents is, as you said, common, most first-world countries do it.
Do Chinese laws provide for taxing Singapore income of Chinese citizens who permanently live and work in Singapore?
If so, is it a matter of not recognizing the citizen is non-resident in China (e.g. claiming it is a "temporary" non-residency)?