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Not taxes that you would owe if you weren't renouncing, or if you kept a green card for less than 8 years. You could make the same argument for the $2350 fee as

Not taxes that you would owe if you weren't renouncing, or if you kept a green card for less than 8 years. You could make the same argument for the $2350 fee as "yes you have to pay the costs that the USCIS incurred processing your renunciation." After all the USCIS generally operates on a cost recovery basis. [1] > USCIS funding comes primarily from fees we charge applicants or petitioners requesting immigration or naturalization benefits. These fee collections fund the cost of fairly and efficiently adjudicating immigration benefit requests. [1] https://www.uscis.gov/about-us/budget-planning-and-performance https://www.uscis.gov/about-us/budget-planning-and-performan...

Retric 3y ago
Capital gains is deferred every year that you don’t sell an asset, but that doesn’t mean it isn’t an obligation. The only way to avoid it in the US is to die at which point your beneficiaries get to enjoy a tax loophole. If renouncing citizenship would get you out of that obligation people would do so regularly as a tax break then reapply.
- arcticbull 3y ago
  Or keep a green card for less than 8 of the 15 years preceding abandonment. This is the crux of my argument: it feels punitive to impose the tax only on people who spend a long time in the US.
  - Retric 3y ago
    You pay income tax every year. Capital gains was accrued but the IRS defers taxing that as a tax break allowing you to compound interest on money you owe. When you leave they want all accounts to zero out which seems eminently reasonable.
    - arcticbull 3y ago
      Respectfully that's not the argument I'm making. I don't think taxing people when their obligations end is inherently wrong. I think the choice to apply it only to people with 'stronger/longer term connections' to America is meant to disproportionately disincentivize renunciation in the same way that a high fixed fee does/did. [edit] It's mostly problematic for people who find themselves subjects of the IRS, being born abroad for instance - and they may never have even realized their obligations. They are stuck with paying the IRS forever or renouncing and paying capital gains tax on all their assets. Meanwhile, someone who lives in the US for 8 years as an LPR and decides to leave is free to go after filing an I-407 and picking up their 1040-C sailing permit. The whole taxation on the basis of citizenship instead of residency is fundamentally unfair and broken IMO.
      - Retric 3y ago
        Taxing on residency creates a massive loophole. What if Jeff Bezos gains residency in a country without capital gains and sells all his Amazon Stock then moves back to the US. The year he’s gone saves him 25 billion in taxes for doing little more than sitting on an island somewhere. Now, if you taxed capital gains when they occurred rather than when the asset was sold then I would absolutely agree it should be tied to residency. But by deferring it for decades suddenly there’s a major incentive to get out of that obligation.
        arcticbull 3y ago
        Capital gains are due at disposition. If Bezos leaves America then he only owes the value accrued during his time in America. Any more than that there's no basis for whatsoever. If he wants to rule Amazon from the Bahamas and not spend enough days in the US each year to pass the substantial presence test, then go for it. If Bezos paid up when he relinquished residency and then Amazon went down, should he get a refund? 10 years later? Why not - why should he only owe money if it goes up? He can do the same exact thing by renouncing his citizenship today and paying the capital gains due, today. It's not a 'loophole' that doesn't already exist. In fact, that's exactly what Eduardo Saverin did. [1] [1] https://www.reuters.com/article/us-facebook-taxes-idUSBRE84G11A20120517 https://www.reuters.com/article/us-facebook-taxes-idUSBRE84G...
- georgyo 3y ago
  Beneficiaries still have to pay an inheritance tax. The loophole is putting all your assets into a trust and declaring beneficiaries of the trust. When you die the beneficiaries only have to pay capital gains from value at the time the trust was _created_. IE the closer to death the trust was created the less tax they pay. There is slow moving efforts to remove this loophole.
  - Retric 3y ago
    Critically, in years when estate taxes existed they treated cash identically to stocks so it was still a loophole. 13 million in appreciated assets counts the same as 13 million in cash. You only pay estate tax on the 80k over the $12.92 million threshold even their capital gains would have been 1.5 million that goes away. If you inherit an asset your tax basis is its value when the owner died. This may be significantly less than what it is when you actually receive the asset, but it’s likely higher than when that person originally purchased it. PS: Estates may chose an alternate date 6 months after someone died, which again generally helps.
  - throw0101a 3y ago
    > Beneficiaries still have to pay an inheritance tax. Only on amounts above US$ 12.9M (federally), but there is no tax if the estate passes to the spouse: * https://www.investopedia.com/estate-tax-exemption-2021-definition-5114715 https://www.investopedia.com/estate-tax-exemption-2021-defin... * https://www.investopedia.com/terms/i/inheritancetax.asp https://www.investopedia.com/terms/i/inheritancetax.asp How many estates are above that? In 2021, "only 2,584 estates paid a positive federal estate tax." * https://en.wikipedia.org/wiki/Estate_tax_in_the_United_States https://en.wikipedia.org/wiki/Estate_tax_in_the_United_State... * https://www.irs.gov/statistics/soi-tax-stats-estate-tax-filing-year-tables https://www.irs.gov/statistics/soi-tax-stats-estate-tax-fili...
- OJFord 3y ago
  > Capital gains is deferred every year that you don’t sell an asset I think that's a slightly odd way to think about it, the tax is due when you actually have a capital gain, which in the ordinary course of just owning something you don't. Of course, many countries don't want to miss out on that just because you moved before you sold, so change in tax residency becomes an event that triggers it as if it had been sold. What's unusual about the US (currently) is that citizens worldwide are considered resident for tax purposes (as other countries would call it I suppose, since it's typically more about residency than citizenship) whatever their living and working arrangement and wherever else tax may be due. If it weren't for that, probably nothing about renouncing citizenship would be controversial, because it would be a much more niche desire. Surely the main reason to do it is because you moved and wish to be free of 'doing taxes' (maybe you moved somewhere where that's not even something you have to think about!) in the US?
  - Retric 3y ago
    Your property taxes are adjusted to changes in the value of the land. So, you might owe twice as much on some investment property after you build a hotel, but capital gains on that land isn’t assessed every year. Arguably it’s simply a question of practicality as nobody can accurately assess how much a painting is worth until it’s sold. Still, it definitely incentivizes bonds which pay on maturity rather than every year.
  - seanmcdirmid 3y ago
    > What's unusual about the US (currently) is that citizens worldwide are considered resident for tax purposes (as other countries would call it I suppose, since it's typically more about residency than citizenship) whatever their living and working arrangement and wherever else tax may be due. For most people who aren't insanely rich or aren't getting most of their income via a trust fund, this isn't very relevant. You have the foreign income exclusion (somewhere north of $100k now) and the foreign taxes paid deduction to insulate you from playing taxes in the states. The problem becomes when you are making > $100k in a low tax place like Singapore or Dubai, but even then there is a housing deduction that works for most working class people. > Surely the main reason to do it is because you moved and wish to be free of 'doing taxes' (maybe you moved somewhere where that's not even something you have to think about!) in the US? It isn't hard to file if you have simply income to consider. I did it by hand for many years, it took around 15-30 minutes a year.
- throwawaymaths 3y ago
  Suppose you renounce citizenship, pay your capital "gains" taxes on some stock, and then the stock goes to zero the next day (or, rather, goes below your purchase price). Are you entitled to a refund?
  - Retric 3y ago
    That’s identical to someone selling a stock then falling to set aside capital gains and losing it all gamboling at a craps table. Whenever you have a tax obligation like this, sell the stock and set the money aside. In the case of renouncing citizenship you can sell all your stock before you leave because you’re facing the same tax liability either way. The only risk is if you do something stupid.
    - throwawaymaths 3y ago
      Wrong. That's not how capital gains works. Capital gains is assessed at the sale of the underlying instrument. In your gambling example, if your underlying instrument went to below purchase price, you would owe nothing, or better yet, it would yield s deferrable tax credit.
      - Retric 3y ago
        You must have misunderstood something, renouncing citizenship is a taxable event the same way selling stock is. Thus: > That’s identical to someone selling a stock then falling to set aside capital gains You might think the only way to be forced to pay capital gains is on sale, but you’re literally complaining about people being forced to pay capital gains for something else.

Retric 3y ago

Capital gains is deferred every year that you don’t sell an asset, but that doesn’t mean it isn’t an obligation. The only way to avoid it in the US is to die at which point your beneficiaries get to enjoy a tax loophole. If renouncing citizenship would get you out of that obligation people would do so regularly as a tax break then reapply.

arcticbull 3y ago
Or keep a green card for less than 8 of the 15 years preceding abandonment. This is the crux of my argument: it feels punitive to impose the tax only on people who spend a long time in the US.
- Retric 3y ago
  You pay income tax every year. Capital gains was accrued but the IRS defers taxing that as a tax break allowing you to compound interest on money you owe. When you leave they want all accounts to zero out which seems eminently reasonable.
  - arcticbull 3y ago
    Respectfully that's not the argument I'm making. I don't think taxing people when their obligations end is inherently wrong. I think the choice to apply it only to people with 'stronger/longer term connections' to America is meant to disproportionately disincentivize renunciation in the same way that a high fixed fee does/did. [edit] It's mostly problematic for people who find themselves subjects of the IRS, being born abroad for instance - and they may never have even realized their obligations. They are stuck with paying the IRS forever or renouncing and paying capital gains tax on all their assets. Meanwhile, someone who lives in the US for 8 years as an LPR and decides to leave is free to go after filing an I-407 and picking up their 1040-C sailing permit. The whole taxation on the basis of citizenship instead of residency is fundamentally unfair and broken IMO.
    - Retric 3y ago
      Taxing on residency creates a massive loophole. What if Jeff Bezos gains residency in a country without capital gains and sells all his Amazon Stock then moves back to the US. The year he’s gone saves him 25 billion in taxes for doing little more than sitting on an island somewhere. Now, if you taxed capital gains when they occurred rather than when the asset was sold then I would absolutely agree it should be tied to residency. But by deferring it for decades suddenly there’s a major incentive to get out of that obligation.
      - arcticbull 3y ago
        Capital gains are due at disposition. If Bezos leaves America then he only owes the value accrued during his time in America. Any more than that there's no basis for whatsoever. If he wants to rule Amazon from the Bahamas and not spend enough days in the US each year to pass the substantial presence test, then go for it. If Bezos paid up when he relinquished residency and then Amazon went down, should he get a refund? 10 years later? Why not - why should he only owe money if it goes up? He can do the same exact thing by renouncing his citizenship today and paying the capital gains due, today. It's not a 'loophole' that doesn't already exist. In fact, that's exactly what Eduardo Saverin did. [1] [1] https://www.reuters.com/article/us-facebook-taxes-idUSBRE84G11A20120517 https://www.reuters.com/article/us-facebook-taxes-idUSBRE84G...
georgyo 3y ago
Beneficiaries still have to pay an inheritance tax. The loophole is putting all your assets into a trust and declaring beneficiaries of the trust. When you die the beneficiaries only have to pay capital gains from value at the time the trust was _created_. IE the closer to death the trust was created the less tax they pay. There is slow moving efforts to remove this loophole.
- Retric 3y ago
  Critically, in years when estate taxes existed they treated cash identically to stocks so it was still a loophole. 13 million in appreciated assets counts the same as 13 million in cash. You only pay estate tax on the 80k over the $12.92 million threshold even their capital gains would have been 1.5 million that goes away. If you inherit an asset your tax basis is its value when the owner died. This may be significantly less than what it is when you actually receive the asset, but it’s likely higher than when that person originally purchased it. PS: Estates may chose an alternate date 6 months after someone died, which again generally helps.
- throw0101a 3y ago
  > Beneficiaries still have to pay an inheritance tax. Only on amounts above US$ 12.9M (federally), but there is no tax if the estate passes to the spouse: * https://www.investopedia.com/estate-tax-exemption-2021-definition-5114715 https://www.investopedia.com/estate-tax-exemption-2021-defin... * https://www.investopedia.com/terms/i/inheritancetax.asp https://www.investopedia.com/terms/i/inheritancetax.asp How many estates are above that? In 2021, "only 2,584 estates paid a positive federal estate tax." * https://en.wikipedia.org/wiki/Estate_tax_in_the_United_States https://en.wikipedia.org/wiki/Estate_tax_in_the_United_State... * https://www.irs.gov/statistics/soi-tax-stats-estate-tax-filing-year-tables https://www.irs.gov/statistics/soi-tax-stats-estate-tax-fili...
OJFord 3y ago
> Capital gains is deferred every year that you don’t sell an asset I think that's a slightly odd way to think about it, the tax is due when you actually have a capital gain, which in the ordinary course of just owning something you don't. Of course, many countries don't want to miss out on that just because you moved before you sold, so change in tax residency becomes an event that triggers it as if it had been sold. What's unusual about the US (currently) is that citizens worldwide are considered resident for tax purposes (as other countries would call it I suppose, since it's typically more about residency than citizenship) whatever their living and working arrangement and wherever else tax may be due. If it weren't for that, probably nothing about renouncing citizenship would be controversial, because it would be a much more niche desire. Surely the main reason to do it is because you moved and wish to be free of 'doing taxes' (maybe you moved somewhere where that's not even something you have to think about!) in the US?
- Retric 3y ago
  Your property taxes are adjusted to changes in the value of the land. So, you might owe twice as much on some investment property after you build a hotel, but capital gains on that land isn’t assessed every year. Arguably it’s simply a question of practicality as nobody can accurately assess how much a painting is worth until it’s sold. Still, it definitely incentivizes bonds which pay on maturity rather than every year.
- seanmcdirmid 3y ago
  > What's unusual about the US (currently) is that citizens worldwide are considered resident for tax purposes (as other countries would call it I suppose, since it's typically more about residency than citizenship) whatever their living and working arrangement and wherever else tax may be due. For most people who aren't insanely rich or aren't getting most of their income via a trust fund, this isn't very relevant. You have the foreign income exclusion (somewhere north of $100k now) and the foreign taxes paid deduction to insulate you from playing taxes in the states. The problem becomes when you are making > $100k in a low tax place like Singapore or Dubai, but even then there is a housing deduction that works for most working class people. > Surely the main reason to do it is because you moved and wish to be free of 'doing taxes' (maybe you moved somewhere where that's not even something you have to think about!) in the US? It isn't hard to file if you have simply income to consider. I did it by hand for many years, it took around 15-30 minutes a year.
throwawaymaths 3y ago
Suppose you renounce citizenship, pay your capital "gains" taxes on some stock, and then the stock goes to zero the next day (or, rather, goes below your purchase price). Are you entitled to a refund?
- Retric 3y ago
  That’s identical to someone selling a stock then falling to set aside capital gains and losing it all gamboling at a craps table. Whenever you have a tax obligation like this, sell the stock and set the money aside. In the case of renouncing citizenship you can sell all your stock before you leave because you’re facing the same tax liability either way. The only risk is if you do something stupid.
  - throwawaymaths 3y ago
    Wrong. That's not how capital gains works. Capital gains is assessed at the sale of the underlying instrument. In your gambling example, if your underlying instrument went to below purchase price, you would owe nothing, or better yet, it would yield s deferrable tax credit.
    - Retric 3y ago
      You must have misunderstood something, renouncing citizenship is a taxable event the same way selling stock is. Thus: > That’s identical to someone selling a stock then falling to set aside capital gains You might think the only way to be forced to pay capital gains is on sale, but you’re literally complaining about people being forced to pay capital gains for something else.