U.S. Expatriates giving up their Citizenship to escape the Long Reach of the IRS

Posted by PITHOCRATES - August 11th, 2013

Week in Review

Once an American always an American.  As far as the IRS is concerned, that is (see Americans Giving Up Passports Jump Sixfold as Tougher Rules Loom by Dylan Griffiths, Bloomberg, posted 8/9/2013 on Yahoo! Finance).

Americans renouncing U.S. citizenship surged sixfold in the second quarter from a year earlier as the government prepares to introduce tougher asset-disclosure rules.

Expatriates giving up their nationality at U.S. embassies climbed to 1,131 in the three months through June from 189 in the year-earlier period, according to Federal Register figures published today. That brought the first-half total to 1,810 compared with 235 for the whole of 2008.

The U.S., the only nation in the Organization for Economic Cooperation and Development that taxes citizens wherever they reside, is searching for tax cheats in offshore centers, including Switzerland, as the government tries to curb the budget deficit. Shunned by Swiss and German banks and facing tougher asset-disclosure rules under the Foreign Account Tax Compliance Act, more of the estimated 6 million Americans living overseas are weighing the cost of holding a U.S. passport.

Just to clarify what this means, these are people who no longer live in the United States.  They earn their money outside of the United States.  And they pay taxes to the countries they live in on the income they earn while living there.  But they still hold onto their U.S. citizenship.  In case they want to return to the United States one day.  Where they may resume earning income there.  And paying taxes there.

Taxes are supposed to pay for the cost of government that is providing for you.  The military that protects the United States.  Social Security.  Etc.  Things these expatriates may in all likelihood never use.  True, they may benefit from the U.S. military keeping the peace in the world.  But no more than the people living in these other countries.  So this is not about financing the cost of benefits they are consuming.  It’s all about funding out of control government spending that they do not benefit from in the least.  Green energy subsidies.  The Obama stimulus.  Obamacare.  Food stamps.  And other federal assistance programs.  Benefits that are in most cases an ocean away from these people.  Yet the U.S. government wants to track these people down.  And make them pay taxes for stuff they’ll never use.  Unlike every other nation in the Organization for Economic Cooperation and Development.

The additional compliance costs for companies to ensure that Americans they hire are filing the correct U.S. tax returns and asset-declaration forms are at least $5,000 per person, said Ledvina.

For individuals, the costs are also rising. Getting a mortgage or acquiring life insurance is becoming almost impossible for American citizens living overseas, Ledvina said.

“With increased U.S. tax reporting, U.S. accounting costs alone are around $2,000 per year for a U.S. citizen residing abroad,” the tax lawyer said. “Adding factors, such as difficulty in finding a bank to accept a U.S. citizen as a client, it is difficult to justify keeping the U.S. citizenship for those who reside permanently abroad.”

So these people are not giving up their U.S. citizenship because they are greedy.  They’re doing it because it is too difficult and too costly for them and their employer if they hold onto their U.S. citizenship.  Of course, once they give up their citizenship the government loses all access to their money.  So what’s next?  Preventing people from ever leaving the United States?  Turning the U.S. into a police state?  Or would it be simpler just for the government to stop spending so much?

I think most people would prefer a government that spends less than living in a police state.

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The U.S. Starting to Chase the Wealthy and Job Creators out of the Country like the French

Posted by PITHOCRATES - May 13th, 2012

Week in Review

It’s just not the Socialist Hollande in France scaring the wealthy and job creators out of their country.  It’s happening in America, too (see Facebook’s Eduardo Saverin Joins Americans Renouncing Citizenship by Enjoli Francis posted 5/11/2012 on ABC News).

In 2011, billionaire Facebook co-founder Eduardo Saverin relinquished his U.S. citizenship and joined nearly 1,800 other Americans to do it last year — up from 235 in 2008…

Those in the expatriate community said that although Saverin’s move was likely a financial one — he paid an exit tax on the capital gains from his Facebook stock but the stock is now tax-free — they said expatriates who gave up their citizenship were driven by other factors.

Phil Hodgen, an international tax lawyer in Pasadena, Calif., said that since 2009, when more than 150 U.S. customers of Swiss banking giant UBS were investigated for alleged tax evasion, the IRS had been going after Americans abroad with foreign bank accounts with a vengeance.

He said that in the last three years, new and old rules had created an enormous amount of resentment — and paperwork expenses — for expatriates…

Peter Dunn, a popular blogger who gave up his U.S. citizenship, said the expatriates he spoke to were mostly standard middle-class U.S. citizens who were ready to retire or who had retired abroad. He said because of these “invasive” rules, they now feared substantial penalties from not reporting their finances correctly.

In an expanding welfare state your wealth isn’t yours.  It belongs to the people.  At least that’s the way governments look at it.  With ever expanding deficits and debt they’re trying to take as much wealth away from the wealthy as possible.  Despite the great things they create for us.  Such as Facebook.  For if it wasn’t for Saverin’s wealth he invested in Facebook we wouldn’t have it today.  But he believed in it.  And took a risk.  With his own money.  The way entrepreneurs do.  Something a lot of people do.  But few ever experience the success Saverin has.  And few will ever take these risks again if they are going to be hounded for the rest of their life by the tax authorities.

Of course those who want to tax the rich will look as these expatriates as the lowest of scoundrels.  Running away with their wealth instead of paying their ‘fair’ share of taxes.  Even though the amount in dollars they pay in one year is greater than most people will pay in taxes in a lifetime.  But these expatriates are the greedy ones.  For not letting us take all of their wealth. 

Of course should someone win the lotto it’ll be a different story.  For though we attack the rich we all want to be rich.  If not we wouldn’t be buying those lotto tickets, would we?  So, yeah, we hate the rich.  Right up until we become rich.  Then all this antagonism against the rich is just a silly misunderstanding.  And those taxes on the wealthy really are too high.  But until we become rich we’ll hate pretty much anyone who has more than us.  Be jealous of them.  And covet what they have.

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