A news report says that many wealthy people are giving up their US citizenship in order to live in places that tax them less.
As many as 8,000 US citizens are projected by immigration officials to renounce in 2012, or about 154 a week, versus 3,805 in 2011, or about 73 per week.
“High-net-worth individuals are making decisions that having a US passport just isn’t worth the cost anymore,” said Jim Duggan, a lawyer at Duggan Bertsch, which specializes in protecting assets of the wealthy.
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Duggan said scores of tax-haven nations and island regimes around the world eagerly welcome disenchanted rich Yanks with quick citizenship, business deals and protections from the US Justice Department and the IRS.Among the popular spots: Australia, Norway, Singapore, Cayman Islands, Costa Rica, Guernsey and Antigua.
This is the logical consequence of what I wrote about last year (see here and here) about the emergence of a transglobal oligarchy that does not feel a sense of belonging to any one place. They are now a new form of international gated community, living together virtually surrounded by their wealth rather than walls, feeling more comfortable with other wealthy people all over the globe who share their goals of making and keeping more money than with those with whom they share history. For the oligarchy, the world is split along economic lines rather than national, ethnic, and religious ones.
In one sense this is a progressive thing, since the older divisions were often the cause of conflicts. The negative aspect is that the transglobal oligarchy is likely to collude in a squeezing of the middle and working classes all over the world, pitting those in one region against the other in their efforts to drive down wages. Class warfare is now occurring on a global scale.
Wouldn’t this kind of tank an economy? If you pull huge amounts of capital out of a system (the amount of taxes required) wouldn’t it then fall to the next lower rung to make up the lost capital?
I think it is time to freeze their assets. They enjoyed the fruits of living in the US while making a lot of money under those taxpayer subsidies. Now that they are being asked to contribute back to what they freely used, they are taking the greedy bastard approach and leaving.
People (especially the media) need to be calling these jerks out for what they are. Morally bankrupt parasites.
These people are far more immoral than the majority of people put behind bars. They didn’t do what they did out of ignorance, fear, or desperation. They used the system typically in many different ways to their advantage without giving back to continue growing what we have. How many of those rich jerks leveraged 10 or 20 year tax-free deals to build out stores…only to abandon those stores when the tax-free deal ran out? Dozens of examples like that feed these people.
They deserve nothing less than our utter contempt.
Norway? If they’re anything like Sweden, I’d expect them to have a much higher tax rate than the USA. And Wikipedia seems to agree:
http://en.wikipedia.org/wiki/Taxation_in_Norway
Is there any reason why “good riddance” wouldn’t be an appropriate response to this news?
It’s deplorable that the very wealthy, of whatever nationality, use offshore tax havens to evade paying taxes to their home country. Wealthy Britons also channel their money through countries such as the Cayman Islands to avoid their tax obligations.
The difference is that the British tax avoiders do not have to renounce their citizenship in order to do this. Nor do citizens of any other country except the United States.
And this is because the U.S., unlike virtually every other nation in the world, requires its citizens who are resident outside the U.S. to file tax returns as if they were living within the U.S. It also taxes their foreign-earned income, above a certain threshold.
As a result, any U.S. citizen living outside the U.S. and earning more than the equivalent of $95,100 has to pay tax to BOTH the country where they are resident AND to the U.S. government.
And even if an ex-patriate U.S. citizen isn’t earning enough to be taxed twice, they have to declare all of their bank accounts and investments such as pensions in their country of residentce to the U.S. Treasury, which has a track record of imposing huge and punitive fines on anyone who makes an honest mistake.
My wife is an ex-patriate American. She has lived in Britain for 20 years, and will probably spend the rest of her life here. The potentially serious penalties for failing to exactly satisfy the reporting requirements of the IRS and Treasury have caused her — and me — sleepless nights in recent months. She could escape this by becoming a British citizen, but she steadfastly refuses to give up her American citizenship, despite the grief that the IRS and Treasury reporting rules have caused.
So, not all of the 8000 Americans who will renounce their U.S. citizenship this year are billionaire tax cheats. Many of them are ex-patriate Americans earning very average salaries, who have had enough of the arcane and intrusive IRS and Treasury reporting rules which are imposed on them, and who simply wish to escape the ever-present threat of being bankrupted by an disproportionate and arbitrary fine for making an insigificant and honest error when filing.
If they give up U.S. citizenship, then what is their legal status regarding continued residence in the U.S.? Will they be required to emigrate? Seems like the ICE could deny them the ability to live and work here while paying no federal taxes.
8000 people a year who can no longer give unlimited funds to superr pacs
In oncology, the technical term for this is ‘metastasis’. Congratulations, America, you have finally reached Stage IV! Now you’re spreading your success around to the rest of the world. We may expect to see more of your success replicated in the countries blessed by the arrivals of your ultra-elite professional moneybags.
I would also be very surprised if taxes in Australia were lower than the US
David,
I know nothing about your wife’s situation, and very little about taxation of US ex-pats in general. If I ask a few clarifying questions I hope any ignorance they betray is forgiven.
1. Does your wife pay UK tax @ X% to HMRC + US tax @ Y% to the IRS or is it X% to HMRC plus (Y-X)% to the IRS? Basically, does the US discount any taxes your wife pays to the UK government?
If it’s the former, you might as well ignore the rest of this (assuming you’re giving it any attention at all) and quite frankly I’m horrified and can’t understand any working ex-pat who doesn’t renounce their citizenship as it doesn’t seem worth it to me.
2. If it’s the latter do you think this is, in and of itself, unfair? Surely your wife still has the right to vote in US elections and enjoys all the privileges and protections of being a US citizen -- should she not pay something towards that protection?
3. The main criticisms I have of UK taxation are the complexity* and that in a dispute the burden of proof is on the taxpayer to prove they’ve paid correctly rather than on HMRC to prove you owe them (reversing the norm of “innocent until proven guilty”).
I’m fairly confident the first part also applies to the US tax code -- does the second also? Or are you worried solely** about the difficulty of (and penalties for failing to) complying with the reporting requirements and how hard it is to know whether you’re getting it right or not?
4. If the tax code of both countries (or at least that of the US) were simplified to the point that an average adult with an average education could understand it would your wife be happy (or at least not unduly unhappy) about paying her US taxes (minus whatever she’d already paid in the UK)?
(* -- I suspect mainly due to all the loopholes various oligarchic groups have successfully lobbied for.
** -- That’s not to minimise how worrying I imagine that can be.)
That’s not how taxation works. Countries that are sovereign in their monetary systems do not need to tax their citizens in order to get income; by definition of fiat currency, they create their own currency de novo as they please. (It’s another matter for political units that aren’t sovereign monetarily, that is, they use and depend on currency under someone else’s control. Like the members of the European Monetary Union, or individual states of the USA.)
The drawback of this emigration is more a cultural matter than a fiscal one — a matter of the ultra-rich congealing together as a supranational social class that does not feel itself beholden to anyone or anything else.
no reason why a foreign citizen can’t stay in the USA, provided they have or can get a residency permit (green card). if they can’t get that, then they could get deported to their country of citizenship like anyone else who overstays their visa or immigrates illegally.
either way they would need another citizenship first, of course; i don’t think it’s even possible to renounce your U.S. citizenship if it would render you stateless.
Back in 2009 Mano wrote:
Maybe they are taking up the challenge.
It’s as if a tax regime that’s already tuned to allow them to keep as much of their money as they could possibly ever want -- isn’t good enough for them.
What do they need it for? You can only drive one lamborghini at a time, and even if it’s solid gold a toilet is still a toilet. What’s wrong with these people that there simply isn’t enough “enough” for them?
My wife presently doesn’t earn enough to pay U.K. taxes, let alone U.S. taxes. But if she were earning more than the $95,100 threshold (the “foreign-earned income exclusion”) then she would pay U.S. taxes on all earnings over $95,100 in addition to the U.K. taxes that she had already paid on that income. In short, any income over $95,100 would be taxed twice, at the full rate in both countries.
The United States is the only country (apart, I believe, from Yemen) which taxes its overseas citizens in this way. All other countries have mutual tax agreements which work on the principle that ex-pats pay taxes only in their country of residence. That seems fair to me — you should pay taxes in the country where you enjoy the benefits of tax-funded services and facilities, such as paved roads, healthcare, public libraries and so forth.
Your comment about my wife’s eligibility to vote in U.S. elections is, if I may say so, a red herring. Are you seriously suggesting that being eligible to vote should depend on whether a person pays taxes? In any case, when my wife paid U.K. taxes, it didn’t entitle her to vote in U.K. elections.
Thanks David, I clearly had no idea the US double-taxed people in that way. I’d say when you’re in a club whose only other member is Yemen that’s a strong clue you’re doing it wrong…except I suspect Yemeni ex-pats actually have it easier as I can’t see their tax office having quite the same organisation, resources and reach as the IRS. So US citizens are probably uniquely badly served in this.
On your last point (am I saying that your eligibility to vote should depend on whether a person pays taxes?) -- no. Along with voting i also mentioned the privileges and protections of being a US citizen. As you say, your wife has voluntarily foregone some goods & services paid for by US taxes (paved roads, health care & public libraries among them), however by retaining US citizenship she has kept others. Consular support & protection almost anywhere in the world is one, as is the reasonable expectation that the US military might rescue her (and any other Americans) should she (they) suddenly find herself in a war-zone or in the midst of a natural disaster (New Orleans after Katrina notwithstanding). She also retains the right to return to the US at any time to once more enjoy those paved roads & public libraries.
Ex-pat Brits retain different rights & privileges but substantially the same deal, as do citizens of every other country on a (somewhat bumpy) sliding scale (with Yemenis probably somewhere near the bottom!). So I don’t think there’s anything fundamentally wrong with being expected to make some contribution to the cost of providing those rights/services, providing that an overriding principle of fairness is maintained. “Fairness” is always going to be disputed, but I think deducting your local taxes (plus perhaps some level of “non-resident discount”) from your home country tax bill and paying whatever, if anything, remains isn’t too far from it.
Of course that does nothing to address the stupendously unfair complications built in to the current codes, but that’s another matter.
Thanks for correcting me though. I now feel foolish for assuming there might be this one small area where the tax rules approached fairness in some way. I should have known better.
This is what I was thinking, and yet they will still be shareholders in corporations which are registered in the US and can make superpac contributions.
It only counts if they renounce their holdings along with their citizenship. John Galt took his money with him and properly left such that he no longer had any remaining interests in the “parasitic” culture he so despised.
Or liquidate, rather than renounce.
I’m guessing that most people are blissfully unaware of the double-taxation problems that ex-pat Americans face. I only know about it because I’m married to an ex-pat American.
Alas, that’s not the only problem facing ex-pat Americans. The U.S. government is trying to extend its reach to include the non-American spouses of ex-pat Americans: a couple of years ago, Congress passed the Foreign Account Tax Compliance Act (FATCA), which requires financial institutions outside the U.S. to provide the U.S. Treasury with details of all accounts held by ex-pat Americans, with severe penalties for non-compliance.
We’re not talking about U.S.-based banks here. FATCA targets banks which may have no links to the U.S. other than having ex-pat Americans as their customers. My wife and I hold a joint account with a British building society (like a credit union) which operates only within the U.K., yet under FATCA, the U.S. Treasury expects it to provide details of our joint account, because one account holder is a U.S. citizen.
I don’t know how you would feel about this kind of intrusion into your personal financial affairs by a foreign government, but it pisses me off in a big way. My wife shares my anger, not only because she agrees that it’s an unwarranted intrusion, but also because a growing number of European banks are closing accounts held by ex-pat Americans in order to avoid any kind of FATCA entanglements. My wife is deeply worried that our joint account may be closed for this reason.
Some ex-pat Americans have renounced their citizenship because of the looming threat of FATCA to themselves and their non-American partners. For the moment, my wife refuses to take such a step. I admire her devotion to the country of her birth, but if our roles were reversed, I’m not sure that I’d regard U.S. citizenship as something worth keeping when my government is apparently hell-bent on making my life as difficult as possible.
You are correct that strictly speaking, governments with a fiat currency do not need to tax in order to spend. This is a key element of modern monetary theory and the reason why worrying about national deficits of arbitrary size is meaningless.
However, you’ve left out a couple of important caveats. Excessive deficit spending can still become a problem, due to inflation. This occurs particularly when the economic system is already saturated and the new dollars being fed into the private sector generate less and less additional productivity per capita. Saturation can be measured through a variety of factors, including the employment rate, interest and investment rates, real value of goods and services produced, and quite a few others.
Second, and importantly, the government can’t stop taxing (or greatly reduce it) because it is the existence of such taxes that generate demand for the currency itself. The elimination of taxation would allow pretty much any powerful private entity to at least partly replace the common currency with their own scheme. Some may argue that the use of the national currency could be mandated by law, but this is practically impossible to enforce without using a system that it is at least as invasive as taxes — for example, outlawing barter.
I don’t think tying the right to vote to whether or not you pay taxes is wrong at all, unless it’s done in such a way as to disenfranchise the poor. If you make enough money -- and 90,000 dollars sounds like a FORTUNE to me --
I have no sympathy at all for your situation, and if you feel like you’ve been rudely treated or intruded upon by governments demanding financial information. I can see a good reason why a bank account jointly held by a US citizen and someone else -- how do we know this foreign bank account isn’t a way an American citizen can end up with money from illegal activities or money laundering.
Also, I come from a well-traveled and educated family full of professional whiners, and I’m sick of privileged people who don’t need to worry where their next meal is coming from. D Harper, you’re life is a lot cushier than people who aren’t so privileged to be members of the jet and ex pat set. Get some perspective.
Just to add the connection between paying taxes and voting -- if a person has assets and is unwilling to fund the government, why should they get a say in it?