U.S. Expats Giving Up Citizenship to Lower Taxes.

MajorDrums · Dec 18, 2006

I briefly lived and worked in Japan a couple of years back. When I returned to the United States, I had to see if if I was subject to filing the U.S. tax form, Foreign Earned Income Exclusion, or Form 2555-EZ. At the time, I thought nothing of it; I figured it was because I was working for a company that is headquartered in the United States as a reason why I had to report my overseas income to the IRS. Then I came across this article:

http://www.iht.com/articles/2006/12/17/news/expat.php

I didn't realize that not only did the United States taxes its expats, irrespective of whether or not the companies they work for have no U.S. ties, but that the U.S. is the ONLY nation that does this. My basic understanding of having a local and national tax system is to provide goods and services for the people who live and work within their country, their place of residence. I don't know how the military and Embassies operate, but I would think they would also be subject to their respective home country's tax system, because they are at least protected by, if not fully operating under, their home country's laws. So U.S. expats are essentially being double-taxed, both by their place of residence and by the United States, simply because they hold U.S. citizenship. This doesn't make sense to me.

tourdeforce · Dec 18, 2006

MajorDrums said:
So U.S. expats are essentially being double-taxed, both by their place of residence and by the United States, simply because they hold U.S. citizenship. This doesn't make sense to me.

That's a simple surcharge to pay for the ordnance used by the Marines to blow sh!t up when they need to come in and rescue you.

Think of it as a munition re-stocking fee.

robeiae · Dec 18, 2006

I don't think the U.S. tax system is fair. Nor do I think it makes sense. So why should it make sense in this one instance?

As to the "why," it's because they can.

However, this is not right:

"My basic understanding of having a local and national tax system is to provide goods and services for the people who live and work within their country, their place of residence."

It's partly true, moreso for local taxes. But fed taxes should be seen as a fee. That's how it is in the Constitution. I agree expats should pay no U.S. income taxes. Neither should I.

dclary · Dec 18, 2006

If you're not going to tax the bottom 50% of your tax base because they're poor, you gotta tax someone, right?

Our tax system blows. Only people actively working to provide a better life for themselves and their employees have to shoulder the burden for our entire society.

TheGaffer · Dec 18, 2006

Go blow.

dclary · Dec 18, 2006

Yeah, I know... My taxes are gonna be especially scary this year. I had to come up with ALL sorts of new deductions.

MajorDrums · Dec 18, 2006

Tax laws in general are eye-glazing stuff for me, and I won't pretend to fully understand the inner-workings of the IRS. But this just jumped out at me as being glaringly obvious. It really IS the definition of "tax burden," because there isn't even an indirect benefit for those expats. Or maybe just being able to carry an American passport is enough of a benefit to continue to tax these individuals? What is it supposed to be like, some sort of "patriotic" duty tax? I talked about this with my mom, and the possibility of taxing expats, especially those with high foreign incomes, as maybe being a way for the U.S. government to keep taxes relatively lower than, say, wealthy European nations came about. We quickly realized that that didn't make any sense, because the sheer volume of working people we have in the United States, along with being the world's richest nation, should do it, I think (maybe. I dunno!). Also, many wealthy nations other than the United States have much higher taxes, mainly because they are more socialist when it comes to providing more services for its citizens. In the UK, employees get 6 weeks vacation; another country (is it Sweden?) provides, what, 6 months maternity leave for their female employees. And so on. It's easy to gripe about paying taxes, because no one likes to pay them, but this just seemed...wrong, in a basic common sense kind of way. :Shrug:

poetinahat · Dec 18, 2006

*and* expats register to vote in the last place where they were domiciled. For me, that means I could vote in the Boston and Massachusetts elections, even though I haven't lived there for thirteen years.

The tax thing is a pain, but there's no way I'm giving up my US citizenship. This year, I plan to become a dual citizen.

SpookyWriter · Dec 18, 2006

poetinahat said:
*and* expats register to vote in the last place where they were domiciled. For me, that means I could vote in the Boston and Massachusetts elections, even though I haven't lived there for thirteen years.

The tax thing is a pain, but there's no way I'm giving up my US citizenship. This year, I plan to become a dual citizen.

How will you manage this because dual citizenship generally means you have both the rights and citizenship of two countries by birth. For example: I was born in the UK to American parents, so I am recognized by both the UK and America as a citizen by birth. I hold both a British and American passport.

Now when I live in Europe I pay EU taxes and when in America I pay U.S. taxes. It's quite complicated, but so far I haven't had any issues.

Cheers

poetinahat · Dec 18, 2006

SpookyWriter said:
How will you manage this because dual citizenship generally means you have both the rights and citizenship of two countries by birth. For example: I was born in the UK to American parents, so I am recognized by both the UK and America as a citizen by birth. I hold both a British and American passport.

Now when I live in Europe I pay EU taxes and when in America I pay U.S. taxes. It's quite complicated, but so far I haven't had any issues.

Cheers

That's not always true about dual citizenship; birth is not the only way to be a citizen. Naturalization is common here, and there are countries that allow dual citizenship (such as the US and Australia). I've got several friends who hold two passports, and the officer at the Dept of Immigration actually suggested that I become a dual citizen - it costs the same as renewing my PR visa, and I won't have to do it every few years.

It's simple for me. I'm allowed to hold both a US and Australian passport. All I have to do is apply for Australian citizenship. Since I already have Permanent Resident status, it's just a formality. In fact, the Aussie govt encourages PR's to become citizens; they run periodic ad campaigns on TV.

It would be more difficult for me to become a dual citizen if I weren't already a PR; I qualified by marriage. (I'd have gotten it through work, but marriage was supposed to be a more straightforward route. It ended up being a PITA; turns out that, if you're already in the country, you're not seen as an urgent case.)

UK citizenship, I understand, is trickier.

SpookyWriter · Dec 18, 2006

poetinahat said:
That's not always true about dual citizenship; birth is not the only way to be a citizen. Naturalization is common here, and there are countries that allow dual citizenship (such as the US and Australia). I've got several friends who hold two passports, and the officer at the Dept of Immigration actually suggested that I become a dual citizen - it costs the same as renewing my PR visa, and I won't have to do it every few years.

It's simple for me. I'm allowed to hold both a US and Australian passport. All I have to do is apply for Australian citizenship. Since I already have Permanent Resident status, it's just a formality. In fact, the Aussie govt encourages PR's to become citizens; they run periodic ad campaigns on TV.

It would be more difficult for me to become a dual citizen if I weren't already a PR; I qualified by marriage. (I'd have gotten it through work, but marriage was supposed to be a more straightforward route. It ended up being a PITA; turns out that, if you're already in the country, you're not seen as an urgent case.)

UK citizenship, I understand, is trickier.

Do yourself a favor and check the U.S. State Departments web site. I'm not sure if the U.S. will recognize your citizenship in another country by marriage. They have certain guidelines on how you can lose your U.S. citizenship.

ETA: UK citizenship was a breeze for me because all I needed was by certificate of birth abroad that the State Department issued me. I submitted the proper documents and got my British (EU) passport in a week. No problems...

poetinahat · Dec 18, 2006

SpookyWriter said:
Do yourself a favor and check the U.S. State Departments web site. I'm not sure if the U.S. will recognize your citizenship in another country by marriage. They have certain guidelines on how you can lose your U.S. citizenship.

Done. Years ago. It's okay.

SpookyWriter · Dec 18, 2006

Cool. Happy holidays to you and the family. Cheers...

blacbird · Dec 18, 2006

I lived and worked in the U.K. for three years back in the late 1980s. I was not taxed by the U.S. on income earned in the U.K. If that's done now, it is a change from my experience.

caw

MajorDrums · Dec 20, 2006

Bird of Prey said:
Yes. My understanding was that if you were out of the US for something like a year, there was no income tax taken.

Here's what I read in this article:

Concern about taxes among expatriates has surged since President George W. Bush signed into law a bill that sharply increases tax rates for Americans abroad with income of more than $82,400 a year. The legislation also increases taxes on employer-provided benefits like housing allowances.

The changes, enacted in May and tweaked by the Treasury Department under guidelines issued in October, apply retroactively to last Jan. 1.

Matthew Ledvina, an international tax lawyer in Geneva, said demand for legal counsel on the citizenship issue was coming largely from American citizens who hold second passports and who have minimal ties to the United States.

And:

The legal ritual of renunciation is largely unique to the United States because other countries base taxation on residency, not citizenship, said Ingmar Dörr, a tax lawyer with Lovells in Munich.

alleycat · Dec 20, 2006

You know, I should probably wake up before I read these thread.

At five in the morning I first read this as ". . . Giving Up Citizenship to Lower Texas".

MajorDrums · Dec 20, 2006

blacbird · Dec 20, 2006

So Dubya is raising taxes?

caw

greglondon · Dec 20, 2006

dclary said:
Only people actively working to provide a better life for themselves and their employees have to shoulder the burden for our entire society.

It's a finely nuanced opinion, to be sure. And vivid, too. I can just see the unmarried welfare moms selling their babies to buy more crack cocaine. And the babies they can't sell, they eat. And once fat on the meat of their children, they go to the welfare office to get a check and blow it on alcohal.

VeggieChick · Dec 20, 2006

ok, this may sound like a stupid question, but if you're abroad and working for a company with no US ties, how would the government know how much you're making? you can say you're not working. maybe you took a year off to write the next bestseller or found a rich partner and decided to leave the workforce. honestly, how would they know what you're doing? do people actually volunteer this information to the government?

alleycat · Dec 20, 2006

VeggieChick said:
ok, this may sound like a stupid question, but if you're abroad and working for a company with no US ties, how would the government know how much you're making? you can say you're not working. maybe you took a year off to write the next bestseller or found a rich partner and decided to leave the workforce. honestly, how would they know what you're doing? do people actually volunteer this information to the government?

I'm not sure, but there are treaties I believe where governments share information such as this.

But, as always, it's easy to cheap the IRS . . . the problem is if and when you get caught. Then you get a free trip to Atlanta . . . or a very big bill.

badducky · Dec 20, 2006

Yes, they do, VeggieChick. My uncle used to work for the IRS, and he left for the ATF because he discovered how terrifying it was to have so much power over other people's lives during an audit.

If the IRS person assigned to audit decides they don't like you, they can find a way to seriously harm you.

Want to know what's even worse?

Freelancers get double-taxed, too. We get taxed as an employer and as an employee of ourselves. So, if you're an expat freelancer... I explained this to my parents as to why I won't go live with my sister in Wiesbaden as anything but an occasional tourist.

U.S. Expats Giving Up Citizenship to Lower Taxes.

MajorDrums

Kidnapper

tourdeforce

robeiae

Touch and go

dclary

Unabashed Mercenary

TheGaffer

Docking Bay 94

dclary

Unabashed Mercenary

MajorDrums

Kidnapper

poetinahat

say it loud

SpookyWriter

poetinahat

say it loud

SpookyWriter

poetinahat

say it loud

SpookyWriter

blacbird

MajorDrums

Kidnapper

alleycat

Still around

MajorDrums

Kidnapper

blacbird

greglondon

Planet Wookie techno geek

VeggieChick

alleycat

Still around

badducky

No Time For Chitchat, Kemosabe.