6 ms·

U.S. citizens ditch passports in record numbers due to high taxes

41 points by sinnerswing 13y ago

philiphodgen 13y ago
I'm quoted in the article and would be happy to answer questions about this. Our firm does a lot of this kind of work -- U.S. citizens and green card holders cutting all ties to the United States.
- seanmcdirmid 13y ago
  Why would this make sense for any country with taxes at or higher than the states, since you can write off taxes paid to foreign governments anyways? Yes, Singapore, Switzerland or Hong Kong, or any country like Afghanistan if you have enough power (Karzai), but for most of us? Also, 640 a year is hardly more than an anomaly statistically. I've been out for 7 years and haven't paid anything to the IRS yet, even without the FEIE I just deduct anyways. The only annoying thing is double taxation when I go back to the states on business trips.
  - jawngee 13y ago
    My company is a Hong Kong registered entity and there is no tax because no work is being performed in Hong Kong. Personal income tax in HK is like 15%, but only of you earned that income in HK. Some people I know who have setup a similar thing only pay themselves 50k USD a year and the company pays for the rest as expenses. It's a little more complicated then that, but that is the gist of it. Hong Kong and Singapore are set up to work like this. It's how all the mainland Chinese hide their money from the communists.
    - tosseraccount 13y ago
      And get it into a Schwab account.
    - stfu 13y ago
      Very interesting. How much is the setup / running costs for a system like this?
      - jawngee 13y ago
        About $1200. There are a ton of companies in HK that will set it up for you (that's all they do).
        nolite 13y ago
        I've been looking for a reputable one for this for a few months now.. hard to know since I have no connection. Can you give a recommendation?
    - seanmcdirmid 13y ago
      > Some people I know who have setup a similar thing only pay themselves 50k USD a year and the company pays for the rest as expenses. Technically those people are still on the hook for the expenses the company pays for them, sans the generous overseas housing deduction that congress recently implemented. I have the opposite problem really. All my money is held by the communists (well, in my China Merchants Bank account anyways).
    - gojomo 13y ago
      Are you a resident of HK or doing this as a citizen/resident elsewhere? I'd be interested in speaking with any experts/service-providers you could recommend for the process of setting up an HK-based company. (Contact info in my profile.)
  - admford 13y ago
    Same here, been out of the States for 15 years and family have our own business. We've been paying taxes locally and filing tax returns yearly for the States. There's a minimum which one can make before they have to pay taxes to the US (about $70-80,000 a year individually). For an average person or family, it's hard to reach this amount, and as said before you can write off taxes paid in a foreign country. Though the main problem would be if you're registered as a Professional and individual business (contractor/consultant). Then you're liable for taxes in both the country you live in, and the US. I've been made a number of offers of work as a contractor and had to refuse (due to low pay since companies didn't want to hire employees only contractors, the fact I'd have to pay for all benefits, and also on top of that pay taxes on what ever I made).
    - rubyrescue 13y ago
      it's $95,100 for 2012, per person. so 190,200 if you're married.
      - seanmcdirmid 13y ago
        Ah, I recently got married, does my wife have to be a US citizen?
        dalke 13y ago
        Perhaps http://americansabroad.org/issues/taxation/us-tax-implications-of-a-non-american-spouse/ http://americansabroad.org/issues/taxation/us-tax-implicatio... will help?
  - philiphodgen 13y ago
    Yes it is a a small number. Canary in a coal mine, really. The people who leave go everywhere. Including high tax locations. Income tax is not usually the issue. Estate tax is a big reason. So are the tax penalties imposed by the US for trivial paperwork problems. Hint. You Aussies in the USA have a big big problem with your superannuations.
    - mech4bg 13y ago
      Do you mean Australian super or 401(k)? Would love to get some more detail on this.
  - socialist_coder 13y ago
    What is the double taxation on business trips?
    - mprovost 13y ago
      You get paid for your time by your foreign employer and pay foreign taxes on that income, but the US won't let you deduct that as foreign earned income since you were in the US at the time. Even if you take a holiday to the US you are reducing the amount of foreign earned income that you can deduct for the year.
  - dalke 13y ago
    I am a self-employed US citizen living in Sweden, so I can relate some of the paperwork. I manage it because I had a good accountant before I left the US, and she handles all of the paperwork. First, be aware that only the US and Eritrea taxes its citizens on their world-wide income, no matter where they live. If I were a South African citizen living in Sweden then I wouldn't have to pay taxes back to South Africa. But I am a US citizen, so I have to file taxes for both countries. Of that, $95,100 in 2012 is tax free, so I only pay taxes on what I make over that. Which I did one year, so that was fun trying to figure out how to pay the IRS from an overseas bank account. The US has a bunch of bilateral agreements on income taxes so that I don't have double taxation. However, there's only a handful of countries with bilateral social security agreements with the US. Luckily, Sweden is one of them; I needed to get a form to prove that as a self-employed person I was covered. Being self-employed overseas makes things more complicated. From what I can tell, if I had moved to New Zealand then I would be paying social security to both countries. I also need to report the maximum value of each of my accounts, because of the FBAR requirements. Some people have gotten in trouble with it. See http://www.thelocal.se/39522/20120306/ http://www.thelocal.se/39522/20120306/ for some examples. ("the penalty for non-compliance of FBAR is $10,000 per bank account per year, with the IRS looking back six years"). Have you filed your FBAR statement? Then there's problems with the banks. Swedish banks really don't want customers who are US citizens, because the US requires a lot of extra paperwork from the bank. FACTA makes this worse. I am a permanent residence here, with an account which was opened before the new requirements went into place, but last month I spent an anxious 30 minutes at the bank while they figured things out. There are more complications for a US citizen who wants to invest in a company. I think there's more reporting obligations for the company in that case. And of course I pay for a CPA to handle things, since there's no way I would keep track of the relevant laws myself. It ends up being this odious choice - how much are you willing to pay and how much hassle will you put up with in order to keep your citizenship? The even worse case is for someone who is an American citizen by birthright, but was born, raised, and lives outside of the US, with no intention of going to the US. I think these people are still supposed to file taxes and deal with all of this mess - and are potentially subject to huge fines for not having done so already, should the IRS decide to go after them. Also, it makes sense for a few corner-case reasons. The Wikipedia page on "Renunciation of citizenship" mentions that Vincent Cate 'renounce[d] his US citizenship to avoid the possibility of violating US laws that may prohibit US citizens from "exporting" encryption software.'
- billpaetzke 13y ago
  For those that are solidly American (e.g. 3rd+ gen), what are their options of where to go? Or is the only way to marry someone of the target country or have millions to get an investor/monied-type visa?
  - philiphodgen 13y ago
    You buy a passport or you go to a country where you can get permanent residency and they you stay long enough to qualify for citizenship. Or yeah. Marriage. :-)
    - clamprecht 13y ago
      What is your opinion of the "economic citizenship" programs in countries such as Nevis & St. Kitts, Dominica, etc?
      - philiphodgen 13y ago
        Those are the traditional choices.
      - seanmcdirmid 13y ago
        Switzerland's cantons will let you work out a deal on citizenship and a flat rate on how much taxes you pay.
  - beachstartup 13y ago
    * solidly American (e.g. 3rd+ gen),* and where exactly does one's US citizenship start becoming "unsolid"?
    - jfb 13y ago
      I read it more to mean, a US citizen with highly attenuated ties to another country; after 3rd generation, you aren't likely to have immediate family overseas, &c. At least, I hope that's what was meant.
- MichaelGG 13y ago
  I'm not a citizen, but have a friend that has dual US/Canadian citizenship. If he renounces the US side, will they harass or prohibit him from entering the US again? What are the downsides?
  - koenigdavidmj 13y ago
    For those who are so inclined you are not permitted to possess or purchase a firearm if you have renounced US citizenship.
    - scott_karana 13y ago
      That sounds likely enough, but do you have a source? edit: nevermind, it's in 18 U.S.C. § 922 : US Code - Section 922
      - rosser 13y ago
        Link, with anchor, to the specific clause: http://www.law.cornell.edu/uscode/text/18/922#d_7 http://www.law.cornell.edu/uscode/text/18/922#d_7
      - koenigdavidmj 13y ago
        I only knew it because that is one of the questions that you answer on a Form 4473 (the form used for background checks at gun stores). There is a whole list of questions to which you must answer in the negative, and that was one of them.
    - dllthomas 13y ago
      ... presuming you're in the US.
  - gnoway 13y ago
    Finding a job in the US would be more difficult, presumably.
    - seanmcdirmid 13y ago
- cadalac 13y ago
  Are most people leaving simply immigrants who got US citizenship vs real Americans with American parents? Are the majority leaving to the Middle-East? (Edit: just saw from a post that people are leaving to many different locations.)
  - Torgo 13y ago
    I read some articles by a company that helps facilitate this, and their claim was these people tend to be expatriates that over time have had less and less connection to the country of their birth that the citizenship and taxation issues have become more trouble keeping than dropping.
- cpursley 13y ago
  Interesting. Do you ever have clients pursuing the PT / 5-flag theory? https://en.wikipedia.org/wiki/Perpetual_tourist https://en.wikipedia.org/wiki/Perpetual_tourist
- rdl 13y ago
  I'm curious if anyone does it now for reasons entirely unrelated to taxes or inheritance or finance or the hassle of filing taxes/regulatory in general, but purely as a political protest or something like that. I only know one person (who wasn't otherwise a criminal) who renounced for what seemed like totally non-financial, non-administrative reasons: Vince Cate, back in the 1990s, when he was my neighbor in Anguilla and wanted to work on crypto stuff during the ITAR ban days.
  - jlgreco 13y ago
    One of the cornerstones for Socrates' defense of the rule of law was that any adult who did not like the law was free to leave, without being taxed for doing so. I find it interesting that there are clearly so many in this country who have very deep disagreements with the law, but so few seem to leave. Of course I do not blame them; simply moving somewhere more agreeable to you is not as simple as Socrates may have you believe...
    - rdl 13y ago
      I've "left" a few times (I think I've lived outside the US longer than I've lived in the US, at least after age 14), but as a US Citizen, the most egregious aspects still apply to me wherever I am. And renouncing one's citizenship is a far bigger step than leaving, or never having had it in the first place. Also, many of the problems with the US are actually global externalities and hurt non-citizens/non-residents abroad even more than they affect US citizens or those within the US. We essentially are responsible for the global war on drugs, for instance. It's hard to figure out what things would cause me to be so angry at the USG to renounce citizenship but not to remain in the US and use all means to try to fix the problem. e.g. if there were a genuine Hitler/Stalin/Mao-level takeover of the US, I wouldn't be content to just flee somewhere and try to avoid it; the only reason to leave would be temporarily to raise funds/forces to try to fix it. But I really don't see anything like that happening in the US -- much more likely just a long slide into comparative irrelevancy like the UK has done over the past 60-80 years.
  - mprovost 13y ago
    Kind of. "Mr Wilfred alleges he is a victim of a CIA conspiracy after he had acted as a whistleblower to expose alleged corruption in the agency." http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10877269 http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&obj...
Mc_Big_G 13y ago
Does a flat tax (with reasonable deductions) hurt anyone besides the super rich? It seems like it would solve a lot of problems and close a lot of tax loopholes. Imagine if we could nearly eliminate the IRS.
- gnoway 13y ago
  A few thoughts: 1. If you accept current economic theory, a flat tax actually hurts poor people more because it's regressive. It's regressive because each percentage point of tax means more to the poor person than it does to the rich. 15% of 1M is a lot of money compared to 15% of 30K, but the 30K earner feels that a lot more. 2. The IRS would not be eliminated. There would probably still be a federal entity responsible for managing the tax income at the federal level 3. The IRS would not be eliminated. There are a lot more taxes besides personal income taxes. 4. We basically already have most of what you're really thinking about with adopting a flat tax. The majority of tax information is already given to the IRS by your employer, bankers, etc. Most people don't really need to file a tax return, since they are just writing down numbers they got from forms which the IRS also gets copies of. Eliminating the personal income tax return in these situations has been discussed, but Intuit and some bright lights on the right/republican side of the aisle believe its a terrible idea and are fighting against it. 5. Does this response really have anything to do with people renouncing citizenship to avoid taxes on foreign income? Would replacing a rule heavy progressive taxation system with a simple flat tax really change someone's opinion on having to pay it?
  - dragonwriter 13y ago
    A few nitpicks: > If you accept current economic theory, a flat tax actually hurts poor people more because it's regressive. A flat tax is not "regressive" by either of the usual definitions (by the standard definition, a "regressive" tax takes a either a higher total percentage or a higher marginal percentage at lower incomes.) It still hurts poor people compared to a progressive tax system, because it isn't progressive, so the burden on the poor, at any given total revenue level, is greater than in a progressive system. > It's regressive because each percentage point of tax means more to the poor person than it does to the rich. 15% of 1M is a lot of money compared to 15% of 30K, but the 30K earner feels that a lot more. While this decreasing-marginal-utility based argument for why flat taxes are bad for poor people is both consistent in outline with the current theory and well supported by empirical research on the marginal utility of income, calling this "regressive" is inconsistent with the usual definition of "regressive" when it comes to taxation.
lifeisstillgood 13y ago
Oh come on guys. Every country has some tax blip that makes it foolish for a small number of people to live in that regieme. Fine. Lets not extrapolate that out to headlines designed to be read as "millions are throwing away their citizenship - its all because we are over taxed!" Plus please realise America is a low-tax country compared to Europe and Australia because it has a minimal welfare state, compared to Europe and Australia.
- cjh_ 13y ago
  It is more that the USA is one of the few countries that taxes on citizenship rather then residency, so this means that if you are living in another country you are still dealing with USA tax laws as well the tax laws of your country of residency.
  - doktrin 13y ago
    It's worth noting that the US has tax agreements with most developed nations, which in theory limits the dual-taxation burden. In practice, it's allegedly quite a bit of hassle and paperwork and a net expense (regardless of tax agreement).
    - mjn 13y ago
      If you're doing a lot of convoluted business dealings, I imagine it could be a hassle, but for a regular professional expatriate employee I have not found it complex. I earn a salary; I pay Danish taxes on that salary; I deduct the Danish taxes paid from my U.S. tax obligation as a Foreign Tax Credit; and the net result is negative so I pay no U.S. tax. It would be even easier if I spent less than 35 days/year in the U.S. and qualified for the $95k foreign income exclusion. But even though I don't (I spend ~2 months/yr in the U.S. in an average year), it's still easy enough.
      - doktrin 13y ago
        Interesting. Thanks for sharing your perspective. That's certainly encouraging.
ajross 13y ago
FTA: In total, more than 670 U.S. passport holders gave up their citizenship [...]in the first three months of this year Not understanding how a fact like this even rises to the level of a sentence in a related article, much less the lede. Can someone please explain to me how a tax policy which has a net effect of reducing its tax base by 0.002% (rough guess, assuming I didn't slip a digit) is something worth talking about at all? I mean, the IRS is going to lose more revenue to people upset with US food choices...
- _delirium 13y ago
  Also worth noting: during that same period, around 165,000 formerly non-Americans naturalized as U.S. citizens. A 250:1 ratio of people joining to people disaffiliating ain't bad. Some countries have major problems with an exodus of qualified people and an inability to attract people to the country, but the U.S. is not really in that category. Quite the opposite: there are many qualified, intelligent people wanting to move to the country, but who are currently blocked by immigration law from doing so.
  - obviouslygreen 13y ago
    That's only an interesting counterpoint if those people more than counteracted the taxable assets/income of the ones leaving. I would not take that as a given.
    - seanmcdirmid 13y ago
      For 165,000 * M >= 640 * N, N would have to me much greater than M. I think its a win. But this isn't accurate, the 165k who naturalized were probably already visa or greencard holders and paying taxes. A more accurate way to measure this is to look at how many visas that support employment are issued each year, which is probably greater than 165K.
- mech4bg 13y ago
  Where do you get the 0.002% figure from? The number of people divided by the population of the US? If so, that's not a meaningful figure - you should be examining the tax they would pay compared to the tax base, which could be many times higher. The reason this is news is because it's incredibly wealthy and high profile people with a large amount of assets to tax that are giving up their passports.
mikeyouse 13y ago
Ugh, this article again? It crops up every quarter without fail. If one of these could actually provide some sort of analysis or evidence for their conclusions, that'd be pretty great. Each time it's published, they relay a few anecdotes about 1 or 2 mildly famous people renouncing citizenship. They then give a trend in absolute numbers without addressing population changes, and finally go on to blame taxes or whatever else for the trend that they assure is happening. Is expatriation increasing? Maybe? Who knows with this quality of reporting. The question of how to treat international taxation is almost entirely separate from expatriation. If people aren't taking the easy step and relocating to different states due to tax differences[1][2][3], I doubt it's the main reason they're renouncing citizenship. [1] - http://www.stanford.edu/group/scspi/_media/working_papers/Varner-Young_Millionaire_Migration_in_CA.pdf http://www.stanford.edu/group/scspi/_media/working_papers/Va... [2] - http://www.cbpp.org/cms/?fa=view&id=3556 http://www.cbpp.org/cms/?fa=view&id=3556 [3] - http://publicassets.org/press/press-releases/new-study-jobs-not-taxes-stimulate-migration/ http://publicassets.org/press/press-releases/new-study-jobs-...
- mech4bg 13y ago
  Good points, but regarding moving states - that doesn't address large federal taxes, or taxes on things that aren't taxed in other countries (death tax, gift tax).
  - mikeyouse 13y ago
    True, but if tax regime had a significant impact on migration, it should have an incremental impact at all scales, offset by the expense / difficulty of actually migrating. If one lives in California and earns enough to be in the top bracket (>$1mm/year), they could save a marginal 10% by relocating to Nevada. It's only a four hour drive to Tahoe, so you would expect to see a fair portion of people doing so. However, there is almost no evidence that this actually occurs. Expatriation is just migration on a larger scale. The expense and complexity are obviously higher, but the basic incentives are identical. I have no doubt that at some very-high net worth, it makes sense to renounce and move abroad, but is it worth wasting energy on the few people a year who will do so?
mjn 13y ago
I wonder if that "due to high taxes" causal explanation can be quantified a bit better. Not every person who renounces U.S. citizenship does so for tax reasons. I could believe it's 98% though, or maybe 80%; I have no idea. Is there any way to estimate the proportion who renounce for various reasons? A non-tax category in which I know people who've renounced is those who have issues with dual citizenship. Denmark, for example, does not permit dual citizenship. So if you are an American who moves to Denmark and eventually wishes to naturalize, you must renounce your American citizenship. Perhaps more commonly, if you are born with dual Danish-American citizenship (Danish parents but born in the U.S.), you can keep the dual citizenship until age 22, but then at age 22 must apply for permanent Danish citizenship, and at least officially they will, as with the naturalization case, require you to renounce your American citizenship (though in practice it seems not everyone actually does so).
gamechangr 13y ago
This is BS. A total of 932 gave up their passport in 2012. This quarter has been high, so we are taking about a couple hundred in a country of 310,000,000

41 points by sinnerswing 13y ago

I'm quoted in the article and would be happy to answer questions about this. Our firm does a lot of this kind of work -- U.S. citizens and green card holders cutting all ties to the United States.

seanmcdirmid 13y ago
Why would this make sense for any country with taxes at or higher than the states, since you can write off taxes paid to foreign governments anyways? Yes, Singapore, Switzerland or Hong Kong, or any country like Afghanistan if you have enough power (Karzai), but for most of us? Also, 640 a year is hardly more than an anomaly statistically. I've been out for 7 years and haven't paid anything to the IRS yet, even without the FEIE I just deduct anyways. The only annoying thing is double taxation when I go back to the states on business trips.
- jawngee 13y ago
  My company is a Hong Kong registered entity and there is no tax because no work is being performed in Hong Kong. Personal income tax in HK is like 15%, but only of you earned that income in HK. Some people I know who have setup a similar thing only pay themselves 50k USD a year and the company pays for the rest as expenses. It's a little more complicated then that, but that is the gist of it. Hong Kong and Singapore are set up to work like this. It's how all the mainland Chinese hide their money from the communists.
  - tosseraccount 13y ago
    And get it into a Schwab account.
  - stfu 13y ago
    Very interesting. How much is the setup / running costs for a system like this?
    - jawngee 13y ago
      About $1200. There are a ton of companies in HK that will set it up for you (that's all they do).
      - nolite 13y ago
        I've been looking for a reputable one for this for a few months now.. hard to know since I have no connection. Can you give a recommendation?
  - seanmcdirmid 13y ago
    > Some people I know who have setup a similar thing only pay themselves 50k USD a year and the company pays for the rest as expenses. Technically those people are still on the hook for the expenses the company pays for them, sans the generous overseas housing deduction that congress recently implemented. I have the opposite problem really. All my money is held by the communists (well, in my China Merchants Bank account anyways).
  - gojomo 13y ago
    Are you a resident of HK or doing this as a citizen/resident elsewhere? I'd be interested in speaking with any experts/service-providers you could recommend for the process of setting up an HK-based company. (Contact info in my profile.)
- admford 13y ago
  Same here, been out of the States for 15 years and family have our own business. We've been paying taxes locally and filing tax returns yearly for the States. There's a minimum which one can make before they have to pay taxes to the US (about $70-80,000 a year individually). For an average person or family, it's hard to reach this amount, and as said before you can write off taxes paid in a foreign country. Though the main problem would be if you're registered as a Professional and individual business (contractor/consultant). Then you're liable for taxes in both the country you live in, and the US. I've been made a number of offers of work as a contractor and had to refuse (due to low pay since companies didn't want to hire employees only contractors, the fact I'd have to pay for all benefits, and also on top of that pay taxes on what ever I made).
  - rubyrescue 13y ago
    it's $95,100 for 2012, per person. so 190,200 if you're married.
    - seanmcdirmid 13y ago
      Ah, I recently got married, does my wife have to be a US citizen?
      - dalke 13y ago
        Perhaps http://americansabroad.org/issues/taxation/us-tax-implications-of-a-non-american-spouse/ http://americansabroad.org/issues/taxation/us-tax-implicatio... will help?
- philiphodgen 13y ago
  Yes it is a a small number. Canary in a coal mine, really. The people who leave go everywhere. Including high tax locations. Income tax is not usually the issue. Estate tax is a big reason. So are the tax penalties imposed by the US for trivial paperwork problems. Hint. You Aussies in the USA have a big big problem with your superannuations.
  - mech4bg 13y ago
    Do you mean Australian super or 401(k)? Would love to get some more detail on this.
- socialist_coder 13y ago
  What is the double taxation on business trips?
  - mprovost 13y ago
    You get paid for your time by your foreign employer and pay foreign taxes on that income, but the US won't let you deduct that as foreign earned income since you were in the US at the time. Even if you take a holiday to the US you are reducing the amount of foreign earned income that you can deduct for the year.
- dalke 13y ago
  I am a self-employed US citizen living in Sweden, so I can relate some of the paperwork. I manage it because I had a good accountant before I left the US, and she handles all of the paperwork. First, be aware that only the US and Eritrea taxes its citizens on their world-wide income, no matter where they live. If I were a South African citizen living in Sweden then I wouldn't have to pay taxes back to South Africa. But I am a US citizen, so I have to file taxes for both countries. Of that, $95,100 in 2012 is tax free, so I only pay taxes on what I make over that. Which I did one year, so that was fun trying to figure out how to pay the IRS from an overseas bank account. The US has a bunch of bilateral agreements on income taxes so that I don't have double taxation. However, there's only a handful of countries with bilateral social security agreements with the US. Luckily, Sweden is one of them; I needed to get a form to prove that as a self-employed person I was covered. Being self-employed overseas makes things more complicated. From what I can tell, if I had moved to New Zealand then I would be paying social security to both countries. I also need to report the maximum value of each of my accounts, because of the FBAR requirements. Some people have gotten in trouble with it. See http://www.thelocal.se/39522/20120306/ http://www.thelocal.se/39522/20120306/ for some examples. ("the penalty for non-compliance of FBAR is $10,000 per bank account per year, with the IRS looking back six years"). Have you filed your FBAR statement? Then there's problems with the banks. Swedish banks really don't want customers who are US citizens, because the US requires a lot of extra paperwork from the bank. FACTA makes this worse. I am a permanent residence here, with an account which was opened before the new requirements went into place, but last month I spent an anxious 30 minutes at the bank while they figured things out. There are more complications for a US citizen who wants to invest in a company. I think there's more reporting obligations for the company in that case. And of course I pay for a CPA to handle things, since there's no way I would keep track of the relevant laws myself. It ends up being this odious choice - how much are you willing to pay and how much hassle will you put up with in order to keep your citizenship? The even worse case is for someone who is an American citizen by birthright, but was born, raised, and lives outside of the US, with no intention of going to the US. I think these people are still supposed to file taxes and deal with all of this mess - and are potentially subject to huge fines for not having done so already, should the IRS decide to go after them. Also, it makes sense for a few corner-case reasons. The Wikipedia page on "Renunciation of citizenship" mentions that Vincent Cate 'renounce[d] his US citizenship to avoid the possibility of violating US laws that may prohibit US citizens from "exporting" encryption software.'
billpaetzke 13y ago
For those that are solidly American (e.g. 3rd+ gen), what are their options of where to go? Or is the only way to marry someone of the target country or have millions to get an investor/monied-type visa?
- philiphodgen 13y ago
  You buy a passport or you go to a country where you can get permanent residency and they you stay long enough to qualify for citizenship. Or yeah. Marriage. :-)
  - clamprecht 13y ago
    What is your opinion of the "economic citizenship" programs in countries such as Nevis & St. Kitts, Dominica, etc?
    - philiphodgen 13y ago
      Those are the traditional choices.
    - seanmcdirmid 13y ago
      Switzerland's cantons will let you work out a deal on citizenship and a flat rate on how much taxes you pay.
- beachstartup 13y ago
  * solidly American (e.g. 3rd+ gen),* and where exactly does one's US citizenship start becoming "unsolid"?
  - jfb 13y ago
    I read it more to mean, a US citizen with highly attenuated ties to another country; after 3rd generation, you aren't likely to have immediate family overseas, &c. At least, I hope that's what was meant.
MichaelGG 13y ago
I'm not a citizen, but have a friend that has dual US/Canadian citizenship. If he renounces the US side, will they harass or prohibit him from entering the US again? What are the downsides?
- koenigdavidmj 13y ago
  For those who are so inclined you are not permitted to possess or purchase a firearm if you have renounced US citizenship.
  - scott_karana 13y ago
    That sounds likely enough, but do you have a source? edit: nevermind, it's in 18 U.S.C. § 922 : US Code - Section 922
    - rosser 13y ago
      Link, with anchor, to the specific clause: http://www.law.cornell.edu/uscode/text/18/922#d_7 http://www.law.cornell.edu/uscode/text/18/922#d_7
    - koenigdavidmj 13y ago
      I only knew it because that is one of the questions that you answer on a Form 4473 (the form used for background checks at gun stores). There is a whole list of questions to which you must answer in the negative, and that was one of them.
  - dllthomas 13y ago
    ... presuming you're in the US.
- gnoway 13y ago
  Finding a job in the US would be more difficult, presumably.
  - seanmcdirmid 13y ago
cadalac 13y ago
Are most people leaving simply immigrants who got US citizenship vs real Americans with American parents? Are the majority leaving to the Middle-East? (Edit: just saw from a post that people are leaving to many different locations.)
- Torgo 13y ago
  I read some articles by a company that helps facilitate this, and their claim was these people tend to be expatriates that over time have had less and less connection to the country of their birth that the citizenship and taxation issues have become more trouble keeping than dropping.
cpursley 13y ago
Interesting. Do you ever have clients pursuing the PT / 5-flag theory? https://en.wikipedia.org/wiki/Perpetual_tourist https://en.wikipedia.org/wiki/Perpetual_tourist
rdl 13y ago
I'm curious if anyone does it now for reasons entirely unrelated to taxes or inheritance or finance or the hassle of filing taxes/regulatory in general, but purely as a political protest or something like that. I only know one person (who wasn't otherwise a criminal) who renounced for what seemed like totally non-financial, non-administrative reasons: Vince Cate, back in the 1990s, when he was my neighbor in Anguilla and wanted to work on crypto stuff during the ITAR ban days.
- jlgreco 13y ago
  One of the cornerstones for Socrates' defense of the rule of law was that any adult who did not like the law was free to leave, without being taxed for doing so. I find it interesting that there are clearly so many in this country who have very deep disagreements with the law, but so few seem to leave. Of course I do not blame them; simply moving somewhere more agreeable to you is not as simple as Socrates may have you believe...
  - rdl 13y ago
    I've "left" a few times (I think I've lived outside the US longer than I've lived in the US, at least after age 14), but as a US Citizen, the most egregious aspects still apply to me wherever I am. And renouncing one's citizenship is a far bigger step than leaving, or never having had it in the first place. Also, many of the problems with the US are actually global externalities and hurt non-citizens/non-residents abroad even more than they affect US citizens or those within the US. We essentially are responsible for the global war on drugs, for instance. It's hard to figure out what things would cause me to be so angry at the USG to renounce citizenship but not to remain in the US and use all means to try to fix the problem. e.g. if there were a genuine Hitler/Stalin/Mao-level takeover of the US, I wouldn't be content to just flee somewhere and try to avoid it; the only reason to leave would be temporarily to raise funds/forces to try to fix it. But I really don't see anything like that happening in the US -- much more likely just a long slide into comparative irrelevancy like the UK has done over the past 60-80 years.
- mprovost 13y ago
  Kind of. "Mr Wilfred alleges he is a victim of a CIA conspiracy after he had acted as a whistleblower to expose alleged corruption in the agency." http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10877269 http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&obj...

Mc_Big_G 13y ago

Does a flat tax (with reasonable deductions) hurt anyone besides the super rich? It seems like it would solve a lot of problems and close a lot of tax loopholes. Imagine if we could nearly eliminate the IRS.

gnoway 13y ago
A few thoughts: 1. If you accept current economic theory, a flat tax actually hurts poor people more because it's regressive. It's regressive because each percentage point of tax means more to the poor person than it does to the rich. 15% of 1M is a lot of money compared to 15% of 30K, but the 30K earner feels that a lot more. 2. The IRS would not be eliminated. There would probably still be a federal entity responsible for managing the tax income at the federal level 3. The IRS would not be eliminated. There are a lot more taxes besides personal income taxes. 4. We basically already have most of what you're really thinking about with adopting a flat tax. The majority of tax information is already given to the IRS by your employer, bankers, etc. Most people don't really need to file a tax return, since they are just writing down numbers they got from forms which the IRS also gets copies of. Eliminating the personal income tax return in these situations has been discussed, but Intuit and some bright lights on the right/republican side of the aisle believe its a terrible idea and are fighting against it. 5. Does this response really have anything to do with people renouncing citizenship to avoid taxes on foreign income? Would replacing a rule heavy progressive taxation system with a simple flat tax really change someone's opinion on having to pay it?
- dragonwriter 13y ago
  A few nitpicks: > If you accept current economic theory, a flat tax actually hurts poor people more because it's regressive. A flat tax is not "regressive" by either of the usual definitions (by the standard definition, a "regressive" tax takes a either a higher total percentage or a higher marginal percentage at lower incomes.) It still hurts poor people compared to a progressive tax system, because it isn't progressive, so the burden on the poor, at any given total revenue level, is greater than in a progressive system. > It's regressive because each percentage point of tax means more to the poor person than it does to the rich. 15% of 1M is a lot of money compared to 15% of 30K, but the 30K earner feels that a lot more. While this decreasing-marginal-utility based argument for why flat taxes are bad for poor people is both consistent in outline with the current theory and well supported by empirical research on the marginal utility of income, calling this "regressive" is inconsistent with the usual definition of "regressive" when it comes to taxation.

lifeisstillgood 13y ago

Oh come on guys. Every country has some tax blip that makes it foolish for a small number of people to live in that regieme. Fine. Lets not extrapolate that out to headlines designed to be read as "millions are throwing away their citizenship - its all because we are over taxed!" Plus please realise America is a low-tax country compared to Europe and Australia because it has a minimal welfare state, compared to Europe and Australia.

cjh_ 13y ago
It is more that the USA is one of the few countries that taxes on citizenship rather then residency, so this means that if you are living in another country you are still dealing with USA tax laws as well the tax laws of your country of residency.
- doktrin 13y ago
  It's worth noting that the US has tax agreements with most developed nations, which in theory limits the dual-taxation burden. In practice, it's allegedly quite a bit of hassle and paperwork and a net expense (regardless of tax agreement).
  - mjn 13y ago
    If you're doing a lot of convoluted business dealings, I imagine it could be a hassle, but for a regular professional expatriate employee I have not found it complex. I earn a salary; I pay Danish taxes on that salary; I deduct the Danish taxes paid from my U.S. tax obligation as a Foreign Tax Credit; and the net result is negative so I pay no U.S. tax. It would be even easier if I spent less than 35 days/year in the U.S. and qualified for the $95k foreign income exclusion. But even though I don't (I spend ~2 months/yr in the U.S. in an average year), it's still easy enough.
    - doktrin 13y ago
      Interesting. Thanks for sharing your perspective. That's certainly encouraging.

ajross 13y ago

FTA: In total, more than 670 U.S. passport holders gave up their citizenship [...]in the first three months of this year Not understanding how a fact like this even rises to the level of a sentence in a related article, much less the lede. Can someone please explain to me how a tax policy which has a net effect of reducing its tax base by 0.002% (rough guess, assuming I didn't slip a digit) is something worth talking about at all? I mean, the IRS is going to lose more revenue to people upset with US food choices...

_delirium 13y ago
Also worth noting: during that same period, around 165,000 formerly non-Americans naturalized as U.S. citizens. A 250:1 ratio of people joining to people disaffiliating ain't bad. Some countries have major problems with an exodus of qualified people and an inability to attract people to the country, but the U.S. is not really in that category. Quite the opposite: there are many qualified, intelligent people wanting to move to the country, but who are currently blocked by immigration law from doing so.
- obviouslygreen 13y ago
  That's only an interesting counterpoint if those people more than counteracted the taxable assets/income of the ones leaving. I would not take that as a given.
  - seanmcdirmid 13y ago
    For 165,000 * M >= 640 * N, N would have to me much greater than M. I think its a win. But this isn't accurate, the 165k who naturalized were probably already visa or greencard holders and paying taxes. A more accurate way to measure this is to look at how many visas that support employment are issued each year, which is probably greater than 165K.
mech4bg 13y ago
Where do you get the 0.002% figure from? The number of people divided by the population of the US? If so, that's not a meaningful figure - you should be examining the tax they would pay compared to the tax base, which could be many times higher. The reason this is news is because it's incredibly wealthy and high profile people with a large amount of assets to tax that are giving up their passports.

mikeyouse 13y ago

Ugh, this article again? It crops up every quarter without fail. If one of these could actually provide some sort of analysis or evidence for their conclusions, that'd be pretty great. Each time it's published, they relay a few anecdotes about 1 or 2 mildly famous people renouncing citizenship. They then give a trend in absolute numbers without addressing population changes, and finally go on to blame taxes or whatever else for the trend that they assure is happening. Is expatriation increasing? Maybe? Who knows with this quality of reporting. The question of how to treat international taxation is almost entirely separate from expatriation. If people aren't taking the easy step and relocating to different states due to tax differences[1][2][3], I doubt it's the main reason they're renouncing citizenship. [1] - http://www.stanford.edu/group/scspi/_media/working_papers/Varner-Young_Millionaire_Migration_in_CA.pdf http://www.stanford.edu/group/scspi/_media/working_papers/Va... [2] - http://www.cbpp.org/cms/?fa=view&id=3556 http://www.cbpp.org/cms/?fa=view&id=3556 [3] - http://publicassets.org/press/press-releases/new-study-jobs-not-taxes-stimulate-migration/ http://publicassets.org/press/press-releases/new-study-jobs-...

mech4bg 13y ago
Good points, but regarding moving states - that doesn't address large federal taxes, or taxes on things that aren't taxed in other countries (death tax, gift tax).
- mikeyouse 13y ago
  True, but if tax regime had a significant impact on migration, it should have an incremental impact at all scales, offset by the expense / difficulty of actually migrating. If one lives in California and earns enough to be in the top bracket (>$1mm/year), they could save a marginal 10% by relocating to Nevada. It's only a four hour drive to Tahoe, so you would expect to see a fair portion of people doing so. However, there is almost no evidence that this actually occurs. Expatriation is just migration on a larger scale. The expense and complexity are obviously higher, but the basic incentives are identical. I have no doubt that at some very-high net worth, it makes sense to renounce and move abroad, but is it worth wasting energy on the few people a year who will do so?

mjn 13y ago

I wonder if that "due to high taxes" causal explanation can be quantified a bit better. Not every person who renounces U.S. citizenship does so for tax reasons. I could believe it's 98% though, or maybe 80%; I have no idea. Is there any way to estimate the proportion who renounce for various reasons? A non-tax category in which I know people who've renounced is those who have issues with dual citizenship. Denmark, for example, does not permit dual citizenship. So if you are an American who moves to Denmark and eventually wishes to naturalize, you must renounce your American citizenship. Perhaps more commonly, if you are born with dual Danish-American citizenship (Danish parents but born in the U.S.), you can keep the dual citizenship until age 22, but then at age 22 must apply for permanent Danish citizenship, and at least officially they will, as with the naturalization case, require you to renounce your American citizenship (though in practice it seems not everyone actually does so).

gamechangr 13y ago

This is BS. A total of 932 gave up their passport in 2012. This quarter has been high, so we are taking about a couple hundred in a country of 310,000,000