3 ms·

By your own admission you are not a tax lawyer. Perhaps this is why you are conflating two different things, income and assets. All US income for 10 years af

by temphn 15y ago

By your own admission you are not a tax lawyer. Perhaps this is why you are conflating two different things, income and assets. All US income for 10 years after expatriation was subject to US income tax for 10 years Yes, and that was bad enough, but what is new is this: they take progressive amounts on *assets* above the inflation-indexed $600k exemption up to a top rate of 35% (same as the estate tax). The 50% thing is a special case for future deferred income from a US asset; you pay 30% up front and 30% on distribution, which comes out at 51% That is a tax on assets in addition to income. Assets. Meaning everything you've built up to this point, not just your continuing revenue streams while overseas. An asset tax for expatriation is a new development in American history.

anigbrowl 15y ago
Then maybe you should have made that clear in your original post, rather than claiming that expatriation was 'free,' as if there were no costs at all. If you read the IRS instructions a little more carefully (or peruse the more detailed treatment at http://www.irs.gov/publications/p519/ch04.html#en_US_publink1000222368 http://www.irs.gov/publications/p519/ch04.html#en_US_publink...) you'll see that liquidation or exchange of any US assets, including property, were booked as gains prior to 2008. For the majority of people (ie: not multi-millionaires) it has become easier and cheaper to take up citizenship elsewhere than it used to be. The worldwide taxation approach of the IRS is an anomaly, but a long-standing one rather than some recent innovation. You have yet to show that the increase in voluntary expatriation is correlated with high earnings, much less caused by them.
- temphn 15y ago
  > You have yet to show that the increase in voluntary expatriation is correlated with high earnings, much less caused by them. http://www.time.com/time/world/article/0,8599,1983238,00.html http://www.time.com/time/world/article/0,8599,1983238,00.htm... While a small number of Americans hand in their passports each year for political reasons, the new surge in permanent expatriations is mainly because of taxes. http://www.nytimes.com/2010/04/26/us/26expat.html http://www.nytimes.com/2010/04/26/us/26expat.html Amid mounting frustration over taxation and banking problems, small but growing numbers of overseas Americans are taking the weighty step of renouncing their citizenship. http://blogs.wsj.com/wealth/2011/06/13/are-taxes-causing-the-rich-to-renounce-their-citizenship http://blogs.wsj.com/wealth/2011/06/13/are-taxes-causing-the... The IRS doesn’t tell us why people expatriate, or who they are or where they go. Lawyers say most are wealthy Americans who have expatriated to all manner of countries. EDIT: Look, I'm as put off by deeply nested arguments as the next person. My empirical points are primarily two fold. One, the new exit tax is both substantial and yet also just the beginning. Two, many are seeing the writing on the wall and trying to get out while the tax is "only" 51% of assets. Given the discussion in the United States about raising taxes on the successful* to balance the budget, do you really think this is an irrational decision on their part? Or that it is irrational to infer that this is part of their decision-making process, especially given copious media reports to this effect?
  - anigbrowl 15y ago
    Hardly conclusive. From the same WSJ article: Other attorneys who specialize in helping the Americans expatriate say the reason is that the IRS is cracking down on overseas bank accounts and offshore income. There is a population of U.S. citizens who live overseas and may never have paid U.S. taxes on their non-U.S. earnings and non-U.S. accounts. Now that the IRS is enforcing the rules, with criminal penalties for scofflaws, the overseas residents would prefer to expatriate rather than pay. ...and a great many of the comments (by people who have actually left, as opposed to people venting their spleen) say the paperwork is more onerous than the taxes. The Time article contains several factual errors, such as ignoring the fact that most countries have tax treaties with the US which prevent double taxation, and stating that the allowable visiting period for US expatriates is 90 days rather than 120 (which is 90 more than what it used to be- perhaps sloppy copyediting is to blame). The NYT article quotes one person who has been abroad 20 years and renounced citizenship after 10, which must logically have been back in 2000 or 2001. I fail to see how this provides any insight into current behavior. It strikes me as somewhat telling that both stories use the example of people living in Switzerland, a country famous for banking privacy, and somewhat infamous for acting as a tax shelter. I'm not sure that typifies the expatriate experience at all. Not that I don't think taxes are an entirely irrelevant factor, mind. This paper offers a rather more plausible explanation, albeit a dry one: that low-tax entrepots with high standards of living risk becoming unaffordable for US residents unless consumption taxes can be offset against income, and recommending repeal of taxing on citizenship rather than residency (which I support, incidentally). http://www.aca.ch/joomla/images/pdfs/taxnotes.pdf http://www.aca.ch/joomla/images/pdfs/taxnotes.pdf
    - danssig 15y ago
      >There is a population of U.S. citizens who live overseas and may never have paid U.S. taxes on their non-U.S. earnings and non-U.S. accounts. This really pisses me off. If I don't live in the US why on earth would I pay taxes on my non-US earnings? No other first world country expects this and no country has a right to it. Am I slave who's very soul belongs to the US government? >Now that the IRS is enforcing the rules, with criminal penalties for scofflaws Scofflaws? If I ignore laws of countries I don't live in I'm a scofflaw?

by temphn 15y ago

anigbrowl 15y ago

Then maybe you should have made that clear in your original post, rather than claiming that expatriation was 'free,' as if there were no costs at all. If you read the IRS instructions a little more carefully (or peruse the more detailed treatment at http://www.irs.gov/publications/p519/ch04.html#en_US_publink1000222368 http://www.irs.gov/publications/p519/ch04.html#en_US_publink...) you'll see that liquidation or exchange of any US assets, including property, were booked as gains prior to 2008. For the majority of people (ie: not multi-millionaires) it has become easier and cheaper to take up citizenship elsewhere than it used to be. The worldwide taxation approach of the IRS is an anomaly, but a long-standing one rather than some recent innovation. You have yet to show that the increase in voluntary expatriation is correlated with high earnings, much less caused by them.

temphn 15y ago
> You have yet to show that the increase in voluntary expatriation is correlated with high earnings, much less caused by them. http://www.time.com/time/world/article/0,8599,1983238,00.html http://www.time.com/time/world/article/0,8599,1983238,00.htm... While a small number of Americans hand in their passports each year for political reasons, the new surge in permanent expatriations is mainly because of taxes. http://www.nytimes.com/2010/04/26/us/26expat.html http://www.nytimes.com/2010/04/26/us/26expat.html Amid mounting frustration over taxation and banking problems, small but growing numbers of overseas Americans are taking the weighty step of renouncing their citizenship. http://blogs.wsj.com/wealth/2011/06/13/are-taxes-causing-the-rich-to-renounce-their-citizenship http://blogs.wsj.com/wealth/2011/06/13/are-taxes-causing-the... The IRS doesn’t tell us why people expatriate, or who they are or where they go. Lawyers say most are wealthy Americans who have expatriated to all manner of countries. EDIT: Look, I'm as put off by deeply nested arguments as the next person. My empirical points are primarily two fold. One, the new exit tax is both substantial and yet also just the beginning. Two, many are seeing the writing on the wall and trying to get out while the tax is "only" 51% of assets. Given the discussion in the United States about raising taxes on the successful* to balance the budget, do you really think this is an irrational decision on their part? Or that it is irrational to infer that this is part of their decision-making process, especially given copious media reports to this effect?
- anigbrowl 15y ago
  Hardly conclusive. From the same WSJ article: Other attorneys who specialize in helping the Americans expatriate say the reason is that the IRS is cracking down on overseas bank accounts and offshore income. There is a population of U.S. citizens who live overseas and may never have paid U.S. taxes on their non-U.S. earnings and non-U.S. accounts. Now that the IRS is enforcing the rules, with criminal penalties for scofflaws, the overseas residents would prefer to expatriate rather than pay. ...and a great many of the comments (by people who have actually left, as opposed to people venting their spleen) say the paperwork is more onerous than the taxes. The Time article contains several factual errors, such as ignoring the fact that most countries have tax treaties with the US which prevent double taxation, and stating that the allowable visiting period for US expatriates is 90 days rather than 120 (which is 90 more than what it used to be- perhaps sloppy copyediting is to blame). The NYT article quotes one person who has been abroad 20 years and renounced citizenship after 10, which must logically have been back in 2000 or 2001. I fail to see how this provides any insight into current behavior. It strikes me as somewhat telling that both stories use the example of people living in Switzerland, a country famous for banking privacy, and somewhat infamous for acting as a tax shelter. I'm not sure that typifies the expatriate experience at all. Not that I don't think taxes are an entirely irrelevant factor, mind. This paper offers a rather more plausible explanation, albeit a dry one: that low-tax entrepots with high standards of living risk becoming unaffordable for US residents unless consumption taxes can be offset against income, and recommending repeal of taxing on citizenship rather than residency (which I support, incidentally). http://www.aca.ch/joomla/images/pdfs/taxnotes.pdf http://www.aca.ch/joomla/images/pdfs/taxnotes.pdf
  - danssig 15y ago
    >There is a population of U.S. citizens who live overseas and may never have paid U.S. taxes on their non-U.S. earnings and non-U.S. accounts. This really pisses me off. If I don't live in the US why on earth would I pay taxes on my non-US earnings? No other first world country expects this and no country has a right to it. Am I slave who's very soul belongs to the US government? >Now that the IRS is enforcing the rules, with criminal penalties for scofflaws Scofflaws? If I ignore laws of countries I don't live in I'm a scofflaw?