
Americans Renouncing Citizenship Hits New Record; Tax Bill Won't Change That - Myrmornis
https://www.forbes.com/sites/robertwood/2017/11/03/americans-renouncing-citizenship-hits-new-record-tax-bill-wont-change-that/
======
sublupo
I know several people who were born abroad and raised abroad but are US
citizens because their parents are citizens. Every year they have to report
every cent that they own. In foreign bank accounts, foreign retirement funds
and foreign investments. They have to file taxes every year, which means
paying several hundred dollars for a tax attorney. They are unable to open
several local bank accounts and several of them won't even hire US citizens
for any possible job at the bank.

If renouncing citizenship was free then they would do it in a heartbeat, but
alas the US wants to steal even more money from them.

~~~
hourislate
When I was living and working outside the USA, I found the process quite
simple and straight forward. As long as you didn't earn over 127k USD (limit
has increased) you were fine and didn't have to pay any additional taxes. If
you earned more you were entitled to all the write offs you would get in the
US. It was basically just filing a 1040 and 1 other form. I never had to pay
any additional taxes that I already payed in the country I was living and
working.

I'm not sure why anyone would need a tax lawyer? The process is very simple
and explained in detail on the IRS website.

[https://www.irs.gov/individuals/international-
taxpayers/u-s-...](https://www.irs.gov/individuals/international-
taxpayers/u-s-taxpayers-residing-outside-the-united-states)

~~~
a2tech
People that write these articles always fall into a few camps 1) they don't
understand their tax position 2) they've received some extremely dodgy advice
3) they're trying to be 'clever' with their money or 4) are extremely wealthy
and have very complicated finances and they're trying to dodge US taxes but
retain the benefits of citizenship

~~~
slededit
Is holding a mutual fund in your home country dodgy?

It subjects you to the punitively complex PFIC rules. These are largely a
protectionist measure for the US financial system but you get caught up in
them regardless.

To do your US taxes correctly as an ex-pat is really complex. If you just file
a 1040 you’ve missed a number of forms to document your foreign holdings.

------
DoofusOfDeath
When I was growing up, one of the arguments made for why the Soviet Union's
people weren't free was the existence of an exit tax [0].

I'm curious if anyone has / shall sue the U.S. government on Constitutional
grounds regarding these policies.

[0] [https://www.nytimes.com/1972/09/28/archives/jews-ask-
nixon-t...](https://www.nytimes.com/1972/09/28/archives/jews-ask-nixon-to-bar-
credits-to-soviet-until-exit-taxes-end.html)

~~~
jkaplowitz
What would the constitutional argument be?

~~~
everdev
As a US citizen you're taxed even if you stop living in the US. In many
states, you have to show proof of residency to vote, so there's taxation
without representation.

You have to renounce your US citizenship to stop being taxed on income you
earn abroad.

~~~
wl
There's nothing in the US constitution that prohibits taxation without
representation.

~~~
SilasX
There's a lot in its existence's justification that does...

~~~
DoofusOfDeath
IANAL, so I'll just ask: has the SCOTUS made rulings that they justified based
on the Declaration of Independence _rather than_ the U.S. Constitution?

~~~
eesmith
[https://en.wikipedia.org/wiki/Declarationism](https://en.wikipedia.org/wiki/Declarationism)
. I also found
[http://www.members.tripod.com/candst/doisussc.htm](http://www.members.tripod.com/candst/doisussc.htm)
which says "that there are at least 100 United States Supreme Court cases that
mention the words "Declaration of Independence" somewhere in the dicta of that
opinion. Yet, not one single case can be found where the authority for the
holding in that case was the Declaration of independence."

------
throwaway676890
>Their American status can make them untouchable by many banks. Many foreign
banks do not want American account holders.

This is an understatement.

Some years ago, I was a citizen of Pakistan and had a green card in the US. I
never had any accounts in Pakistan. My father in Pakistan had passed away, and
I traveled there to visit family. All of my share of the inheritance money was
sitting in my brother's account in Pakistan. So we went together to a bank to
open an account in my name and transfer my share of the inheritance over.

Now in Pakistan people have an ID card similar to the Social Security Card.
They provide a different one for overseas Pakistanis. So when they asked for
my ID card, I gave them my overseas ID card. Things were going smoothly until
the person got to the address field.

"Oh, I see you live in the US?"

"Yes."

"Sorry, we cannot open a bank account for you."

I talked a bit more, and explained to them that I'm a Pakistani citizen, and
not a US one. Nope. The laws were clear. No bank accounts for US based persons
without special approval from some senior officials.

I asked would this apply even if I didn't have a green card and was merely a
student in the US?

Yup.

The reason they gave me? US tax laws.

~~~
miscreanity
The cost and risk banks take to ensure that US citizens comply with US law is
absurdly draconian. It is massively safer for a bank to simply deny
participation than to risk fines and expulsion from the global financial
system that would effectively cripple it. Banks and other businesses globally
are forced to become extensions of the US government without receiving funding
to do so.

This is economic warfare. The United States is a great place and the people
are amazing (as people have been everywhere I've travelled), but the
institutions have essentially enslaved the population and strong-armed the
rest of the world.

Thankfully, it ends soon with internal reform or collapse under its own
paranoia and resource-intensive policing. I'm expecting this within a decade
and am hopeful that it is the former.

~~~
throwaway676890
Do you have any details about this? My impression was that the Pakistani
government felt that requiring US based people to report details of foreign
accounts was a way to gather intelligence about other countries, and they
didn't want to give them a way to do it. I did not think it was that Pakistani
banks themselves had any reporting requirements to the US.

~~~
eesmith
[https://www.theguardian.com/money/2014/sep/24/americans-
chas...](https://www.theguardian.com/money/2014/sep/24/americans-chased-by-
irs-give-up-citizenship-after-being-forced-out-of-bank-accounts)

> The Foreign Accounts Taxation Compliance Act required all foreign banks to
> disclose the financial information of any American with assets over $50,000
> sitting in banks outside of the US.

> Steep penalties add muscle to the law. If a foreign bank – not just in
> Canada, but anywhere – fails to report even a single US citizen as a
> customer to the IRS, the US Treasury department would withhold 30% of the
> banks’ US income as penalty.

~~~
gamblor956
I actually work in this field, and I interact with banks regularly.

The FATCA requirements are actually quite simple, and the theoretical
penalties are just that--theoretical.

As a practical matter, the FATCA US customer report is satisfied by a relative
spartan list of names, tax ids, account numbers, and balances. In other words,
something a simple report should be able to generate in about .000001 seconds.

If a bank can't handle that type of compliance, you should take your money
elsewhere because it indicates serious internal control issues.

~~~
eesmith
Your answer seems to be that "yes, banks and other businesses globally are
forced to become extensions of the US government without receiving funding to
do so" (quoting miscreanity) and "Pakistani banks themselves [have] reporting
requirements to the US" (quoting throwaway676980) ... so long as they have an
account in the US (my link). I believe that includes Swift accounts?

I don't think they are really asking about the ease by which a bank should be
able to generate that report, but rather the necessity to do so.

------
jiveturkey
summary: expats are renouncing due to the difficulty of filing US taxes
abroad. the article doesn't state it directly, but likely these are people who
have decided to permanently move abroad, whose lives have changed, and don't
want the burden of filing US taxes any longer.

it's a useless article. the fact that there is a "record" is meaningless at
these insignificantly small numbers. the fact that tax reform won't change it
is just clickbait. congress doesn't and shouldn't care about such a
meaninglessly small number of people.

~~~
apercu
> congress doesn't and shouldn't care about such a meaninglessly small number
> of people.

Maybe "doesn't care" is accurate. "Shouldn't care" is a pretty ignorant
statement.

~~~
DoofusOfDeath
> Maybe "doesn't care" is accurate. "Shouldn't care" is a pretty ignorant
> statement.

AFAICT, the GP was stating a political/civics position. Are you literally
saying that it's based on ignorance, or just that you disagree with the
position?

~~~
pegasus
Some opinions betray ignorance. I'd say this is one case of that.

------
twblalock
The sad thing is that the renouncers often don't mind paying tax, they just
can't deal with the crazy amount of paperwork and costs involved, especially
if they have investment income.

~~~
apercu
Yea, typically we don't owe. Many of us live in "socialist" countries with
higher taxes so we get credited for that. Where it hits us in accounting fees
and (after FATCA) an inability to have investments outside of registered
retirement plans. Also a bunch of other crap. Imagine having an additional
tens of thousands of dollars of accounting fees in your lifetime because
'murica.

~~~
pmiller2
Can anyone expand on this inability to have investments outside of registered
retirement plans?” I have never heard of this.

~~~
MandieD
I'm an American who is a permanent resident of Germany, and the main reason is
that the level of assets a normal middle-class wage earner can accumulate
(think six figures) is not worth it to banks here to deal with the US-mandated
paperwork, and so none of them will sell me stocks, mutual funds or index
funds, despite my openness with both the country of my residence and the
country of my birth. The only realistic savings mechanism I have given
Europe's current near-zero interest rates is real estate; I can buy property,
but I'm a bit hesitant to do that at the moment, given the disparity between
purchase prices and actual rents. After FATCA started being enforced more
heavily, there were Americans whose banks closed their checking accounts!
Fortunately, I've not had a problem with very basic financial services, but no
one wants to open a brokerage account for me once that American passport comes
out.

If I had eight figures to manage, no matter where I was actually resident,
they'd probably figure out how to deal with the bureaucracies on both sides of
the ocean...

~~~
pmiller2
That’s interesting. What prevents you from just opening a Vanguard account
like any other American? Friction on the German side?

~~~
MandieD
I have my retirement accounts from back when I was still living in the US, but
I cannot add to them.

Anything I make on a non-retirement account has to be reported to the _German_
tax authorities, too - and I'll probably have to pay German taxes on those
gains when I pull money out of them. Germany taxes all income earned by its
residents, no matter where the source, but if my husband (German citizen) were
a US resident, they would not tax what he earned in the US.

~~~
miscreanity
I am considering citizenship options for the same reasons - access to
financial instruments that US institutions such as the SEC prohibit, despite
some of those instruments being far better than can be obtained domestically.

It can be difficult to achieve but the optimal situation is to be a citizen of
a minimal or tax-free country, reside in a separate country and do business or
work in a third.

Treating countries/governments like companies that have to vie for your
business is a perspective that helps protect oneself and family.

------
z2
Is it odd that the IRS is mandated to publish the full names of all who
renounce US citizenship? Not that names are necessarily private information,
but most other times when government agencies publish names, it's a wanted
persons list.

~~~
apercu
You should hear the "patriots" who try to justify the stupid US laws in any
online discussion. I've been called a traitor for living in Canada.

~~~
LyndsySimon
Yeah, I don't get it either. I'm an anarchist, and would love to one day be
able to renounce my citizenship and purposefully become stateless. Doing so
requires _significant_ financial resources though, and I doubt my family
situation will ever allow it.

Still, discussion of that desire has led to many aggressive but interesting
conversations on both right- and left-leaning platforms.

------
toweringgoat
Ah, that classic list of countries that only contains USA and Eritrea.

------
adventured
This article is dated and didn't contain full-year numbers. The tax bill does
in fact appear to have considerably changed the rate of Americans renouncing
their citizenship: renunciations plunged by 71% in the fourth quarter of 2017
vs the fourth quarter of 2016, 16% in 1Q18 (vs 1Q17), and 38% in 2Q18 (vs
2Q17).

The tax bill became a near-certainty in the fourth quarter of 2017, and was
formally passed at the end of the year.

Here's the rest of the story:

"For the first time in five years, the number of Americans renouncing their
citizenship decreased in 2017, government records show. Renunciations for the
year fell 5.1 percent, to 5,133 — after a four-year climb to a record 5,411 in
2016, according to the IRS."

"But the real story lies in the fourth quarter, when the number of
renunciations tumbled 71 percent from the same period in 2016."

Further, for the first quarter of 2018, it fell considerably:

"The total for the first quarter of 2018 was 1,099."

That compares to the 2017 rate of 1,313. A decline of 16%.

In the second quarter of 2018, 1,090 persons renounced their citizenship, a
huge drop from 1,759 in Q2 of 2017. A decline of 38%.

Full year 2018 expectations would be for roughly a 29% decline vs the record
2016 figures (around ~3,800 vs the 5,411 for 2016).

[https://nypost.com/2018/02/09/fewer-americans-gave-up-
their-...](https://nypost.com/2018/02/09/fewer-americans-gave-up-their-
citizenship-in-2017/)

[https://www.forbes.com/sites/robertwood/2018/05/14/fewer-
ame...](https://www.forbes.com/sites/robertwood/2018/05/14/fewer-americans-
renounce-citizenship-but-taxes-still-drive-them/)

------
rootusrootus
We should make it free and then immediately exchange 1:1 with new immigrants
who want to come to the U.S.

------
NTDF9
"Your tax deficits at work"

Reference: [https://www.alamy.com/stock-photo/your-tax-dollars-at-
work.h...](https://www.alamy.com/stock-photo/your-tax-dollars-at-work.html)

------
emilfihlman
What happens if you don't pay?

~~~
DoofusOfDeath
> What happens if you don't pay?

I guess you'd be an illegal emigrant?

It's very disappointing to contrast how I now perceive the actions of the U.S.
federal government with the view I was fed growing up in the 1970s.

------
iron0013
"Some observers may want to blame President Trump for the spike, but it is
much more likely that longstanding tax issues are the real culprits." he
claimed, completely sans evidence or even a coherent argument

