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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

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...
  - Retric 3y ago
    > If Bezos leaves America then he only owes the value accrued during his time in America. That’s equivalent to what the IRS is doing only moving things forward to residency vs citizenship. The current system is actually better for Bezos or other multi billionaires because they can move anywhere around the world and keep deferring capital gains until death when it disappears.
    - arcticbull 3y ago
      Indeed but worse for all the accidental Americans, expats, and lord help you if you want to start a business while living abroad.
      - Retric 3y ago
        Fair enough. Though this is a serious edge case. 2k people renounced American citizenship in 2019 some years it’s ~10k but only a fraction have any kind of meaningful capital gains liability. The general cases is Americans who get to defer liability not expats with a surprising bill.
        arcticbull 3y ago
        Hey thanks for talking through this. Appreciate your perspective.

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...
- Retric 3y ago
  > If Bezos leaves America then he only owes the value accrued during his time in America. That’s equivalent to what the IRS is doing only moving things forward to residency vs citizenship. The current system is actually better for Bezos or other multi billionaires because they can move anywhere around the world and keep deferring capital gains until death when it disappears.
  - arcticbull 3y ago
    Indeed but worse for all the accidental Americans, expats, and lord help you if you want to start a business while living abroad.
    - Retric 3y ago
      Fair enough. Though this is a serious edge case. 2k people renounced American citizenship in 2019 some years it’s ~10k but only a fraction have any kind of meaningful capital gains liability. The general cases is Americans who get to defer liability not expats with a surprising bill.
      - arcticbull 3y ago
        Hey thanks for talking through this. Appreciate your perspective.