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The conversation here at this moment seems to be focused solely on whether or not it is complicated or costly to keep filing US taxes. This misses the point in

by voisin 5y ago

The conversation here at this moment seems to be focused solely on whether or not it is complicated or costly to keep filing US taxes. This misses the point in that the US is the _only_ developed country to impose worldwide taxation on its citizens regardless of where they live. The only other country to do so is Eritrea and the US has routinely criticized them for doing so. Moreover, it makes expats ineligible for certain retirement savings in their country of domicile (as the US does not recognize pre-tax deductions for these investments, like those countries do not recognize investments in 401k’s). It also makes it challenging for expats to find banks willing to serve them because elf the added complexity. All of this adds up to making Americans less attractive abroad than say Aussies or Brits, which surely has some negative impact on US competitiveness. And for what? Even the IRS estimates the savings in lost taxes to be a mere fraction of the costs of enforcement. This makes literally zero sense. None. Cut your nose off to spite your face.

matttproud 5y ago
American who‘s been abroad for a decade: I 100% agree. It introduces a lot of friction, complexity, and annoyance. Beyond taxation, the limitations with American institutions when being domiciled abroad put you into a terrible edge-case with needing to crutch on someone stateside with an address. So much stupidity. One addendum: while FATCA is newish and bad, the concept of taxation of Americans abroad dates back to the Civil War period. FATCA only made an existing injury worse.
- em3rgent0rdr 5y ago
  > "the concept of taxation of Americans abroad dates back to the Civil War period" I'm not surprised, but could you provide some references on this...I am curious to read.
  - withinboredom 5y ago
    Just guessing, but I assume the Union wanted to continue to tax the Confederates who no longer lived in the Union because even though the succeeded from the Union, they were still Union citizens by birth.
    - sterlind 5y ago
      seems unlikely. the Union didn't recognize the legitimacy of Confederate secession (hence, you know, the war.) the Emancipation Proclamation only applied to rebel states, as an example. they may have had trouble collecting taxes, what with the bullets and all, but amending the tax code doesn't help that.
      - withinboredom 5y ago
        Someone actually expanded on it down the page as a way to punish deserters.
        voisin 5y ago
        …which is exactly what the US criticizes Eritrea for doing with its citizenship based taxation! The only other country in the world to do this.
soperj 5y ago
>some negative impact on US competitiveness Negative impact on US citizen's competitiveness, which means they're less likely to get jobs outside of the US. Which means more looking for jobs domestically, leading to lower cost of labour for corporations inside the US.
- voisin 5y ago
  Well I suppose that’s one interpretation but I think it misses the forest for the trees. Everything I’ve come across has discussed how it exacerbated trade imbalances due to a relatively lower proportion of Americans living abroad than citizens of other nationalities. Americans want to trade with Americans, like Chinese want to trade with Chinese. So having Americans abroad in bigger numbers helps for trade which I think would have a much bigger impact than some small reduction in labour costs locally.
  - soperj 5y ago
    Why would the multinationals that set the agenda in the US care about any of that?
    - nostrademons 5y ago
      Most of them make more money abroad than they do in the U.S. Setting up foreign branches is critical for their ability to reach new markets. Most of these branches are setup by U.S. citizens or permanent residents who have a deep history with their U.S-based employer and often personal connections with the executives at the home office. It is much easier to retain and pay these people if the bureaucratic hoops for retaining American citizenship abroad are less, and they will be less tempted to jump ship and set up competing businesses that jumpstart a foreign country's industry if it's convenient for them to stay American citizens.
      - soperj 5y ago
        Once they've set up the foreign branch, they don't really care if they retain them. Most foreign branches aren't staffed by Americans. This is also a 1 time thing in each country that they start a branch in, not an on going concern. >they will be less tempted to jump ship and set up competing businesses that jumpstart a foreign country's industry The number of instances of this happening has to be close to zero.
KennyBlanken 5y ago
Some of her points are valid but the melodrama drawing analogies to stress from the death of a spouse, describing nearly breaking into tears every so often, and describing the consequences of her actions as something "done to her" are absurd.
- crumpled 5y ago
  This comment has a sexist smell. I wonder if the same criticism would be leveled at an identical story written by a man. Obviously, I have no idea what goes on in other peoples heads.
  - elefanten 5y ago
    This comment has a blindered, dogmatic smell. If the only tool you have is a hammer…
  - Dudeman112 5y ago
    Honestly? It would be worse if they were a man. People don't take kindly to men being "weak".
  - brighton36 5y ago
    As does yours. Chasing Boogeymen and demons online doesn't do anyone any good. Yourself, myself, or the poster.
- digbybk 5y ago
  Citizenship is a meaningful thing to most people. Of course it's a legal fiction, but so is marriage. Personally I've never given up a citizenship, but I imagine that it'd be an emotional experience.
  - jkfdrsak 5y ago
    Marriage is voluntary and almost always necessitates an emotional element.
Rapzid 5y ago
In practice the 2021 108k per person foreign earned income exclusion is reasonably large and uncomplicated to claim. After that the list of countries we have tax treaties with is pretty large: https://taxsummaries.pwc.com/united-states/individual/foreign-tax-relief-and-tax-treaties https://taxsummaries.pwc.com/united-states/individual/foreig...
- throw63738 5y ago
  In practice US citizens have it difficult to even open simple bank account. Most foreign companies prefer not to deal with US gov.
  - welder 5y ago
    Yes! Banks in Germany would flatly say "we can't help you" when I pulled out my US passport. The only one I could get was Number26, which is technically only an online bank account.
    - usr1106 5y ago
      N26 is in the headlines for money laundering incompliance. Probably not at all related to average American expats, but as soon as they strengthen their processes they might find it the easiest not to do business with a couple of Americans.
    - ryanlol 5y ago
      > which is technically only an online bank account. Which is technically also a normal bank account.
  - Rapzid 5y ago
    It depends on the country and the financial institution. I'm a permanent resident of another country and had no problem opening an account there(on vacation there the first time no less). Another user here reports a very easy experience opening an account with an institution in the Netherlands.
- voisin 5y ago
throw63738 5y ago
》This misses the point in that the US is the _only_ developed country to impose worldwide taxation on its citizens regardless of where they live Not really. Norway does that for 3 years after leaving. Australia is very opinionated and may not allow people to change tax residency, even after physically moving out...
- xunn0026 5y ago
  Of course, nowadays Australia won't even let people physically leave at all!
  - Scoundreller 5y ago
    I thought leaving was easy, but returning was the complicated part.
    - xunn0026 5y ago
      Nope: > If you are an Australian citizen or a permanent resident you cannot leave Australia due to COVID-19 restrictions unless you have an exemption.
  - pgreenwood 5y ago
    You can leave at will if you're not an Australian citizen or a permanent resident. If you are, then you currently need an exemption, e.g for work or business, or you're going to live in another country.
    - xunn0026 5y ago
      Does this seem... reasonable? Citizens aren't allowed to leave unless they have 'compelling reasons' and provide evidence. People used to escape communism for such reasons.
      - Linosaurus 5y ago
        It probably cuts down on the number of citizens who wish to enter from covid land.
cletus 5y ago
I don't disagree with the spirit of what you're saying. This is a burden for expat US citizens. A few notes and corrections though: > Moreover, it makes expats ineligible for certain retirement savings in their country of domicile (as the US does not recognize pre-tax deductions for these investments, like those countries do not recognize investments in 401k’s). This is true but unrelated to taxing worldwide income. Basically, there has to be bilateral/multilateral agreements between countries about how to treat contributions to and distributions from retirement accounts and these are very few and far between. The US and Canada have such agreements but the US and Australia do not. So Australian superannuation accounts generally can't ever be closed so you have to keep reporting them to the US government every year, whether you're a citizen or not. Even those on work visas have to do this. Worse, it's unclear how gains in such accounts should be treated for US income tax purposes. There are literally no laws and no case law on the subject so everyone just has to guess. > It also makes it challenging for expats to find banks willing to serve them because elf the added complexity. So this is also mostly true but again (mostly) unrelated to taxing worldwide income. This is because of FATCA [1]. The US uses access to the US financial system as a wedge to get foreign financial institutions to report accounts of US citizens so being a US citizen imposes a reporting requirement on foreign banks that many don't want to deal with. It's easier not to offer services to US citizens. But again, FATCA reporting requirements aren't really the same thing as taxing worldwide income. > ... lost taxes to be a mere fraction of the costs of enforcement. The point here unfortunately isn't really to enforce anything. It's so if the US decides to get you, it's something else they can prosecute you for. > This makes literally zero sense. That's not strictly true either. The idea is that US citizenship is so beneficial that it justifies these costs. It's true that a US passport gives you a lot of access to various countries. I believe the US passport is right up there in the top 10 passports. I'd hazard a guess and say the only reason it's not even higher is Middle Eastern countries. Also, the State Department will make some efforts to recover and evacuate US citizens in certain circumstances. Is this worth the hassle? Probably not but for some it is, I'm sure. Still, there's definite room for improvement. [1]: https://www.irs.gov/businesses/corporations/foreign-account-tax-compliance-act-fatca https://www.irs.gov/businesses/corporations/foreign-account-...
- capitainenemo 5y ago
baryphonic 5y ago
If makes sense if we relax an assumption that the IRS and the agents therein are interested in optimizing tax revenue.
arcticbull 5y ago
There's a ton of related frictions too, FATCA makes it impossible for US persons (including citizens) to open a bank account in a many foreign countries, especially European ones. SEC regulations preclude Americans from opening foreign brokerage accounts. Any aggregate bank account balances over $10,000USD at any time in the calendar year requires filing with FinCEN - [edit] and failure to do so may result in forfeiture of up to 50% of the balance of said accounts. Starting a business while abroad is especially painful as you are the beneficial owner of a controlled foreign corporation, and the tax reporting there is its own special hellscape.
bingohbangoh 5y ago
I've always thought it was something like a middle finger to americans who leave. "You're not part of this project, get out and stay out." There was a bill in the 1990s to permanently ban any Americans who renounce from coming back, which is hardcore. But we're also a country that to war over a few states leaving. Whatever the reasons, it was equally hardcore to sacrifice so many to stop it. Maybe an intense dislike of people leaving is embedded in our blood.
- arcticbull 5y ago
  Humorously enough, it was actually brought in as a way of punishing deserters in the civil war. [1] > Civil War lawmakers were clearly suspicious of Americans who chose to live overseas, especially during the nation's most desperate hour. In his fascinating study of citizenship-based taxation, Kirsch offers a particularly apt quote from one Union lawmaker: "If a man draws his income from our public debt, or from property here, and resides in Paris, skulking away from contributing his personal support to the Government in this day of its extremity, he ought to pay a higher income tax."3 [1] http://www.taxhistory.org/thp/readings.nsf/ArtWeb/3AF72D29CABEB75085257D1B0041C874?OpenDocument http://www.taxhistory.org/thp/readings.nsf/ArtWeb/3AF72D29CA...
- porknubbins 5y ago
  I would say countries that prohibit dual citizenship are much more punitive towards those who leave. In the case of the US, compared to say Western Europe, we are so much more inward looking that policy towards expats is mostly one of neglect to even consider their interests.

by voisin 5y ago

matttproud 5y ago

American who‘s been abroad for a decade: I 100% agree. It introduces a lot of friction, complexity, and annoyance. Beyond taxation, the limitations with American institutions when being domiciled abroad put you into a terrible edge-case with needing to crutch on someone stateside with an address. So much stupidity. One addendum: while FATCA is newish and bad, the concept of taxation of Americans abroad dates back to the Civil War period. FATCA only made an existing injury worse.

em3rgent0rdr 5y ago
> "the concept of taxation of Americans abroad dates back to the Civil War period" I'm not surprised, but could you provide some references on this...I am curious to read.
- withinboredom 5y ago
  Just guessing, but I assume the Union wanted to continue to tax the Confederates who no longer lived in the Union because even though the succeeded from the Union, they were still Union citizens by birth.
  - sterlind 5y ago
    seems unlikely. the Union didn't recognize the legitimacy of Confederate secession (hence, you know, the war.) the Emancipation Proclamation only applied to rebel states, as an example. they may have had trouble collecting taxes, what with the bullets and all, but amending the tax code doesn't help that.
    - withinboredom 5y ago
      Someone actually expanded on it down the page as a way to punish deserters.
      - voisin 5y ago
        …which is exactly what the US criticizes Eritrea for doing with its citizenship based taxation! The only other country in the world to do this.

soperj 5y ago

>some negative impact on US competitiveness Negative impact on US citizen's competitiveness, which means they're less likely to get jobs outside of the US. Which means more looking for jobs domestically, leading to lower cost of labour for corporations inside the US.

voisin 5y ago
Well I suppose that’s one interpretation but I think it misses the forest for the trees. Everything I’ve come across has discussed how it exacerbated trade imbalances due to a relatively lower proportion of Americans living abroad than citizens of other nationalities. Americans want to trade with Americans, like Chinese want to trade with Chinese. So having Americans abroad in bigger numbers helps for trade which I think would have a much bigger impact than some small reduction in labour costs locally.
- soperj 5y ago
  Why would the multinationals that set the agenda in the US care about any of that?
  - nostrademons 5y ago
    Most of them make more money abroad than they do in the U.S. Setting up foreign branches is critical for their ability to reach new markets. Most of these branches are setup by U.S. citizens or permanent residents who have a deep history with their U.S-based employer and often personal connections with the executives at the home office. It is much easier to retain and pay these people if the bureaucratic hoops for retaining American citizenship abroad are less, and they will be less tempted to jump ship and set up competing businesses that jumpstart a foreign country's industry if it's convenient for them to stay American citizens.
    - soperj 5y ago
      Once they've set up the foreign branch, they don't really care if they retain them. Most foreign branches aren't staffed by Americans. This is also a 1 time thing in each country that they start a branch in, not an on going concern. >they will be less tempted to jump ship and set up competing businesses that jumpstart a foreign country's industry The number of instances of this happening has to be close to zero.

KennyBlanken 5y ago

Some of her points are valid but the melodrama drawing analogies to stress from the death of a spouse, describing nearly breaking into tears every so often, and describing the consequences of her actions as something "done to her" are absurd.

crumpled 5y ago
This comment has a sexist smell. I wonder if the same criticism would be leveled at an identical story written by a man. Obviously, I have no idea what goes on in other peoples heads.
- elefanten 5y ago
  This comment has a blindered, dogmatic smell. If the only tool you have is a hammer…
- Dudeman112 5y ago
  Honestly? It would be worse if they were a man. People don't take kindly to men being "weak".
- brighton36 5y ago
  As does yours. Chasing Boogeymen and demons online doesn't do anyone any good. Yourself, myself, or the poster.
digbybk 5y ago
Citizenship is a meaningful thing to most people. Of course it's a legal fiction, but so is marriage. Personally I've never given up a citizenship, but I imagine that it'd be an emotional experience.
- jkfdrsak 5y ago
  Marriage is voluntary and almost always necessitates an emotional element.

Rapzid 5y ago

In practice the 2021 108k per person foreign earned income exclusion is reasonably large and uncomplicated to claim. After that the list of countries we have tax treaties with is pretty large: https://taxsummaries.pwc.com/united-states/individual/foreign-tax-relief-and-tax-treaties https://taxsummaries.pwc.com/united-states/individual/foreig...

throw63738 5y ago
In practice US citizens have it difficult to even open simple bank account. Most foreign companies prefer not to deal with US gov.
- welder 5y ago
  Yes! Banks in Germany would flatly say "we can't help you" when I pulled out my US passport. The only one I could get was Number26, which is technically only an online bank account.
  - usr1106 5y ago
    N26 is in the headlines for money laundering incompliance. Probably not at all related to average American expats, but as soon as they strengthen their processes they might find it the easiest not to do business with a couple of Americans.
  - ryanlol 5y ago
    > which is technically only an online bank account. Which is technically also a normal bank account.
- Rapzid 5y ago
  It depends on the country and the financial institution. I'm a permanent resident of another country and had no problem opening an account there(on vacation there the first time no less). Another user here reports a very easy experience opening an account with an institution in the Netherlands.
voisin 5y ago

throw63738 5y ago

》This misses the point in that the US is the _only_ developed country to impose worldwide taxation on its citizens regardless of where they live Not really. Norway does that for 3 years after leaving. Australia is very opinionated and may not allow people to change tax residency, even after physically moving out...

xunn0026 5y ago
Of course, nowadays Australia won't even let people physically leave at all!
- Scoundreller 5y ago
  I thought leaving was easy, but returning was the complicated part.
  - xunn0026 5y ago
    Nope: > If you are an Australian citizen or a permanent resident you cannot leave Australia due to COVID-19 restrictions unless you have an exemption.
- pgreenwood 5y ago
  You can leave at will if you're not an Australian citizen or a permanent resident. If you are, then you currently need an exemption, e.g for work or business, or you're going to live in another country.
  - xunn0026 5y ago
    Does this seem... reasonable? Citizens aren't allowed to leave unless they have 'compelling reasons' and provide evidence. People used to escape communism for such reasons.
    - Linosaurus 5y ago
      It probably cuts down on the number of citizens who wish to enter from covid land.

cletus 5y ago

I don't disagree with the spirit of what you're saying. This is a burden for expat US citizens. A few notes and corrections though: > Moreover, it makes expats ineligible for certain retirement savings in their country of domicile (as the US does not recognize pre-tax deductions for these investments, like those countries do not recognize investments in 401k’s). This is true but unrelated to taxing worldwide income. Basically, there has to be bilateral/multilateral agreements between countries about how to treat contributions to and distributions from retirement accounts and these are very few and far between. The US and Canada have such agreements but the US and Australia do not. So Australian superannuation accounts generally can't ever be closed so you have to keep reporting them to the US government every year, whether you're a citizen or not. Even those on work visas have to do this. Worse, it's unclear how gains in such accounts should be treated for US income tax purposes. There are literally no laws and no case law on the subject so everyone just has to guess. > It also makes it challenging for expats to find banks willing to serve them because elf the added complexity. So this is also mostly true but again (mostly) unrelated to taxing worldwide income. This is because of FATCA [1]. The US uses access to the US financial system as a wedge to get foreign financial institutions to report accounts of US citizens so being a US citizen imposes a reporting requirement on foreign banks that many don't want to deal with. It's easier not to offer services to US citizens. But again, FATCA reporting requirements aren't really the same thing as taxing worldwide income. > ... lost taxes to be a mere fraction of the costs of enforcement. The point here unfortunately isn't really to enforce anything. It's so if the US decides to get you, it's something else they can prosecute you for. > This makes literally zero sense. That's not strictly true either. The idea is that US citizenship is so beneficial that it justifies these costs. It's true that a US passport gives you a lot of access to various countries. I believe the US passport is right up there in the top 10 passports. I'd hazard a guess and say the only reason it's not even higher is Middle Eastern countries. Also, the State Department will make some efforts to recover and evacuate US citizens in certain circumstances. Is this worth the hassle? Probably not but for some it is, I'm sure. Still, there's definite room for improvement. [1]: https://www.irs.gov/businesses/corporations/foreign-account-tax-compliance-act-fatca https://www.irs.gov/businesses/corporations/foreign-account-...

capitainenemo 5y ago

baryphonic 5y ago

If makes sense if we relax an assumption that the IRS and the agents therein are interested in optimizing tax revenue.

arcticbull 5y ago

There's a ton of related frictions too, FATCA makes it impossible for US persons (including citizens) to open a bank account in a many foreign countries, especially European ones. SEC regulations preclude Americans from opening foreign brokerage accounts. Any aggregate bank account balances over $10,000USD at any time in the calendar year requires filing with FinCEN - [edit] and failure to do so may result in forfeiture of up to 50% of the balance of said accounts. Starting a business while abroad is especially painful as you are the beneficial owner of a controlled foreign corporation, and the tax reporting there is its own special hellscape.

bingohbangoh 5y ago

I've always thought it was something like a middle finger to americans who leave. "You're not part of this project, get out and stay out." There was a bill in the 1990s to permanently ban any Americans who renounce from coming back, which is hardcore. But we're also a country that to war over a few states leaving. Whatever the reasons, it was equally hardcore to sacrifice so many to stop it. Maybe an intense dislike of people leaving is embedded in our blood.

arcticbull 5y ago
Humorously enough, it was actually brought in as a way of punishing deserters in the civil war. [1] > Civil War lawmakers were clearly suspicious of Americans who chose to live overseas, especially during the nation's most desperate hour. In his fascinating study of citizenship-based taxation, Kirsch offers a particularly apt quote from one Union lawmaker: "If a man draws his income from our public debt, or from property here, and resides in Paris, skulking away from contributing his personal support to the Government in this day of its extremity, he ought to pay a higher income tax."3 [1] http://www.taxhistory.org/thp/readings.nsf/ArtWeb/3AF72D29CABEB75085257D1B0041C874?OpenDocument http://www.taxhistory.org/thp/readings.nsf/ArtWeb/3AF72D29CA...
porknubbins 5y ago
I would say countries that prohibit dual citizenship are much more punitive towards those who leave. In the case of the US, compared to say Western Europe, we are so much more inward looking that policy towards expats is mostly one of neglect to even consider their interests.