View Full Version : Americans giving up US citizenship over taxes per Yahoo article.
http://finance.yahoo.com/news/should-you-renounce-your-citizenship-144048875.html
Just wanted feedback on this.
Do you think people are justified over leaving the US because of higher taxes,or are they acting out of greed?
Will this trend have a noticable negative effect on tax revenue,or is it just a passing fad?
Mods feel free to move this if your so inclined. I wasn't sure where the best forum for it would be.
It's their choice - it's legal. As more income gets concentrated in fewer hands, I expect the likelihood of it will go up.
That said I have a couple questions - can one give up citizenship without being a citizen of somewhere else? Can someone be "citizenless"?
What are the possibilities and ramifications of giving up citizenship - but coming back to reside in the US under some sort of visa?
The United States, in it's infinite wisdom, taxes the incomes of all it's citizens living, and working, abroad. So, wealthy or well-to-do expatriates living in Europe or South America or Canada or wherever might be reluctant to pay the 39% rate this country imposes on them simply for being Americans. In many cases the cost of citizenship far outweighs the advantages.
Our government's tendancy to see it's citizens as an ATM machine makes you wonder who works for who.
ToomuchStuff
2-14-13, 12:46pm
That said I have a couple questions - can one give up citizenship without being a citizen of somewhere else? Can someone be "citizenless"?
What are the possibilities and ramifications of giving up citizenship - but coming back to reside in the US under some sort of visa?
This sent me off in search of something I remembered from 7th or 8th grade history class (and couldn't find). As there was a person evicted from America, expatriated, and if I remember correctly, the country he was working for (thought spying for Britain in the war of 1812), wouldn't take him. So he was on navel ships until his death, outside of US waters.
But yes, one can become a stateless person, although, not everyone will recognize this in all circumstances. Think the Jews, in WWII. Germany considered them not citizens but the rest of the world did consider them as German. This does happen in all sorts of countries conflicts (especially religious).
If you were to be a former US citizen, and you requested a visa to return (say visiting a relative), you could be denied. If you still came, then you would be equal to an illegal immigrant in status.
ApatheticNoMore
2-14-13, 1:36pm
They can do whatever if it's legal I guess. I would hope they had additional reasons besides taxes but. For the average person, as opposed to the super rich, there are a whole LOT of reasons they would be better off in MANY other countries than the U.S. and taxes is the least of them! But one can love people and the land and so on, and stay, without any loyalty whatsoever to the larger forces at work in this particular loony bin of a country.
I have to wonder where are these places that you don't pay tax? If you don't pay income tax, you probably pay taxes on goods and services. You probably pay taxes on property. If you don't pay capital gains tax, you probably DO pay tax on earned income.
I live in Canada. I am an American. I pay taxes in Canada (and if you want to talk about who pays a LOT in taxes, ask me....). Because of a tax treaty between the US and Canada, the first 90K of income I make in Canada is not taxed in the US. Since I am unlikely to make more than that, I effectively pay no US taxes. But do I EVER pay taxes.....starting with 13% "harmonized sales tax" (both federal and provincial taxes together) on virtually EVERY item or service I could purchase. That means rent on my office....I pay HST. A visit to the counselor? HST. Any goods I might purchase....
Anyway, people relinquishing citizenship to save money...bah. Good for them. It isn't a problem I am ever likely to have, even living in another country.
treehugger
2-14-13, 2:08pm
I have to wonder where are these places that you don't pay tax? If you don't pay income tax, you probably pay taxes on goods and services. You probably pay taxes on property. If you don't pay capital gains tax, you probably DO pay tax on earned income.
This is what I wonder, too. It also makes me think about Americans having a long history of not wanting to pay taxes. So many examples pre-Revolutionary war, and then again and again with the creation of new states in the new republic. History books are full of descriptions of early Americans moving here and there to avoid taxes. Sure, you can always go somewhere else, but you'll end up paying taxes there, too.
Kara
I live in Canada. I am an American. I pay taxes in Canada (and if you want to talk about who pays a LOT in taxes, ask me....). Because of a tax treaty between the US and Canada, the first 90K of income I make in Canada is not taxed in the US.
Most countries do not require any form of income taxes from their citizens living abroad. Imagine if you made a couple hundred thousand dollars in Canada, were subjected to all of the Canadian taxation as well as American taxation on the amount over $90K. Would it be worthwhile to renounce your US citizenship to save that $40K or so in taxes?
Or perhaps you don't like your taxes going to building the world's most insane machine of war....
Or perhaps you don't like your taxes going to building the world's most insane machine of war....
+1
Or perhaps you don't like your taxes going to building the world's most insane machine of war....
Actually, I could get behind that idea. I could pay the same in taxes in Germany, or even more in England, but know that my taxes are going towards health care and education, good roads, etc...
I say good enough for them. I'm sure the majority of cases are simply that it's too expensive to maintain dual citizenship. I'll just about bet these are people who don't live here anyway, so I really doubt it's a matter of people actually picking up and leaving the country over taxes.
I know several couples in the following situation:
- one spouse is a US citizen
- one is a foreign national, with assets of their own
- they live in the non-USA county
- the IRS decides they want to get their fingers into records of joint accounts, and even accounts owned by the non-US spouse
- the non-US partner says.... no, I don't think so, I'm not an American, the USA is not the boss of me.
Options are: become an outlaw, divorce, abandon US citizenship
Actually, I could get behind that idea. I could pay the same in taxes in Germany, or even more in England, but know that my taxes are going towards health care and education, good roads, etc...
Indeed. I'd be happy enough living in Canada or Iceland, knowing my tax dollars were going to Mostly Good Stuff and not Pork for Military and Industrialists.
The United States, in it's infinite wisdom, taxes the incomes of all it's citizens living, and working, abroad. So, wealthy or well-to-do expatriates living in Europe or South America or Canada or wherever might be reluctant to pay the 39% rate this country imposes on them simply for being Americans. In many cases the cost of citizenship far outweighs the advantages. Our government's tendancy to see it's citizens as an ATM machine makes you wonder who works for who.
Having lived in Guatemala for over a year, I realized how lucky I am to live in the US. How little I understood the privileges of inspected buildings that did not fall down in an earthquake, the due process of a criminal justice system that means death squads cannot take over a region or a country, the efficacy of the Post Office, the level of education offered to people of all ages, the clear water, air, regulated industries, armed forces, and most of all, the civil transfer of power that routinely happens in elections large & small.
Virtually NONE of these were available in Guatemala. Our government's view of the role of citizens in elections, establishment of public policy, in the execution of justice in the judicial system, and in civic life is a model -- yes, still imperfectly executed -- for our species.
I am amazed at how much our government provides for the little amount paid in taxes.
awakenedsoul
2-14-13, 9:55pm
I spent three years working in Europe. I had a working visa and paid taxes there. I filed exempt here. I think this is an interesting idea. I liked the article. As a woman, I appreciate the rights I have here. I also love Europe, though. I could see myself living as an expatriate in Austria or Switzerland...
I'm with bae on that one. :)
That being said. . . the reason that I would give up US citizenship is to not be taxed double.
Here is the issue.
I moved to NZ because we wanted to live here for a lot of reasons. And, it provided us with the opportunities that we didn't have in the US. So, we moved.
Like the PP, we don't yet earn enough to be taxed in the US, and we don't earn US income. So, we don't currently pay US taxes. But, at a certain point, we will.
So, it will look like this. I earn $80,000. I pay my NZ taxes, which will take me down somewhere around $55k or so (not really sure, just basically making that number up). But, because my income -- pre tax -- was $80k, the US taxes me on it. Luckily, I can deduct some stuff for living expenses or whatever (not totally clear on this -- it's why I hvae a US accountant) -- but it does mean that Uncle Sam will probably take another $15k or so and that leaves me with $40k. And you know, that's not a lot in a high COL country.
Now, that's just fake numbers, but it's the idea.
And here's the thing. This is just for the privilege of having a specific passport/citizenship. . . is it worth it?
I don't know. I might discover that being a NZ citizen (which gets me lots of reciprocity with Australia and easy access to Europe through the UK connections, as well as canada) is more of a benefit than being a US citizen for myself. DS may retain it until he can make such a decision.
I don't know if a $15k tax is worthwhile for me, you know? I don't live in the country, and I don't get the benefits of it. . . really. . . so. . .?
iris lily
2-14-13, 10:52pm
This is what I wonder, too. It also makes me think about Americans having a long history of not wanting to pay taxes. So many examples pre-Revolutionary war, and then again and again with the creation of new states in the new republic. History books are full of descriptions of early Americans moving here and there to avoid taxes. Sure, you can always go somewhere else, but you'll end up paying taxes there, too.
Kara
That is a completely inaccurate picture of 1) immigration patterns of the U.S. 2) the overriding concerns of Revolutionary era Americans
and what is wrong with not wanting to pay excess tax, anyway?
fidgiegirl
2-14-13, 10:52pm
The UN Universal Declaration of Human Rights pronounces in Article 15 that all people shall have the right to a nationality. The Declaration was made in 1948. I still don't know if someone could opt-out of having ANY citizenship . . . it wouldn't make much sense in a modern society, where you'd need a passport, etc. to move around, at least if using air. I suppose there would be ways around it over land.
http://www.un.org/en/documents/udhr/index.shtml
... and what is wrong with not wanting to pay excess tax, anyway?
Nothing at all. It's one's definition of excess that is the debate.
I think that, having now read the article, I could see the benefits to the extremely wealthy to move to countries where their income would not be taxed more -- particularly if it's a place where they want to live.
For small fry (like myself), it won't matter until i'm big fry. And honestly, the US is the only nation that taxes it's ex-pats this way from what I understand. So it only matters at that level for me, really.
ApatheticNoMore
2-15-13, 1:42am
... and what is wrong with not wanting to pay excess tax, anyway?
It's a very odd thing to base a decision on where to live on, taxes, meh, whatever, it's a very odd motivation. But if you're already not living in the U.S. for other reasons then I guess it makes sense.
It's a very odd thing to base a decision on where to live on, taxes, meh, whatever, it's a very odd motivation. But if you're already not living in the U.S. for other reasons then I guess it makes sense.
Perhaps not as odd as you would think.Granted,the Yahoo article addressed high income earners exclusively.But many not-so high income earners are leaving higher taxing states for lower taxing states.Jack S. over at SurvivalPodcast noted recently that it costs twice as much to rent a moving trailer to leave California and New York as it does to rent a trailer to move into these two states.The price discrepancy based on supply and demand.Many more leaving these states than entering them.
All the power to those wishing to better themselves.
flowerseverywhere
2-15-13, 12:28pm
It's a very odd thing to base a decision on where to live on, taxes, meh, whatever, it's a very odd motivation. But if you're already not living in the U.S. for other reasons then I guess it makes sense.
actually we considered all options when we retired. We decided to stay in the US for many overwhelming reasons, but moved to a different state. Our property taxes are 1/4 of NY for the same price house, and we no longer have the approx 7% tax on our income. Among retirees it is one of the considerations people make. RV'ers as well often change their home state to a very tax friendly one. And there are many expatriates in South America and different Asian countries. It was all part of our simple living formula, we are far from the wealth the article is talking about.
I also consider both the tax advantages of living/retirering in other states as well. But my understanding is that Calif, the state I live in, will tax my Calif state pension irregardless of what state I live in. And unless the state I live in is an income tax-free state, there is a possibility that it could also tax my pension. I don't know if that's the case or not but if I chose to leave Calif and give up my residency here, I'd look to move to a income tax free state just in case.
As far as giving up my US citizenship and living in another country, I believe that my government (Cal State) retirement pension will still be taxed by the USA Feds and Calif state even if I am a citizen of another country - and possibily taxed as well by whatever country I am a citizen off. That other country may also tax my currently fed and state tax-free military disability pension as they may consider that as taxable income. However I do know that if you live and work in a foriegn country, you can usually earn a fair amount of income from a job and not have to pay US taxes but will have to pay taxes in that country on your earned income. You also may have to pay taxes in both the USA and your country of citizenship on all your retirement income streams and social security earned in the USA. I'm sure some of the Ex-Pat websites like www.escapeartist.com deal with this a lot so probably more info there. Personally I would rather keep my US citizenship, and the many many many advantages we have here, even if I have to pay more in taxes.
gimmethesimplelife
2-16-13, 12:04am
They can do whatever if it's legal I guess. I would hope they had additional reasons besides taxes but. For the average person, as opposed to the super rich, there are a whole LOT of reasons they would be better off in MANY other countries than the U.S. and taxes is the least of them! But one can love people and the land and so on, and stay, without any loyalty whatsoever to the larger forces at work in this particular loony bin of a country.I couldn't agree with you more, ANM. I have posted many times about my long term goals of leaving the US - but tax rate never had anything to do with it. I find it ironic, however, that there are those on the upper end of the income/asset scale that want out, too.....very ironic, when it is the policies that help these folks that fuel my desire to be out of the United States. In a very dark and cynical way I even find this humorous.
My belief is that as the cost of living gets higher and higher and opportunities and jobs continue to dwindle, more people will start casting a critical eye upon their US citizenship. For some (after comparison shopping different countries and systems) it will continue to work, for others, it will be more practical to leave as they will perceive a better deal elsewhere, and for yet others they will just stay as it is the easiest of the options.
I'm personally looking forward to see how ObamaCare actually does work out, as access to health care and the lack many suffer of this, is one of my big reasons for wanting out. Time will tell.....Rob
gimmethesimplelife
2-16-13, 12:06am
Or perhaps you don't like your taxes going to building the world's most insane machine of war....another plus one here. Rob
gimmethesimplelife
2-16-13, 12:14am
I also consider both the tax advantages of living/retirering in other states as well. But my understanding is that Calif, the state I live in, will tax my Calif state pension irregardless of what state I live in. And unless the state I live in is an income tax-free state, there is a possibility that it could also tax my pension. I don't know if that's the case or not but if I chose to leave Calif and give up my residency here, I'd look to move to a income tax free state just in case.
As far as giving up my US citizenship and living in another country, I believe that my government (Cal State) retirement pension will still be taxed by the USA Feds and Calif state even if I am a citizen of another country - and possibily taxed as well by whatever country I am a citizen off. That other country may also tax my currently fed and state tax-free military disability pension as they may consider that as taxable income. However I do know that if you live and work in a foriegn country, you can usually earn a fair amount of income from a job and not have to pay US taxes but will have to pay taxes in that country on your earned income. You also may have to pay taxes in both the USA and your country of citizenship on all your retirement income streams and social security earned in the USA. I'm sure some of the Ex-Pat websites like www.escapeartist.com deal with this a lot so probably more info there. Personally I would rather keep my US citizenship, and the many many many advantages we have here, even if I have to pay more in taxes.Before I state what I am about to state, I need to preface this with the fact that I am not an accountant. Not by far.
That said, I thought there was an exemption of $80,000 in foreign earned income for Americans living overseas? In other words, no US taxes on the first eighty thousand dollars of income made elsewhere, and you get to keep the US passport if you want to. For myself, this seems quite generous (if it's true) as more than likely, under this scheme I will not owe the US money. As I have said many times before, my issues with the US revolve around healthcare - and how it can sometimes be doled out according to social class.
I really don't have a problem with US taxes - other than the fact that they are nightmarishly complex. Rob
You are correct Rob that you aren't taxed by the US on income earned from an overseas job until it reaches a certain point but my understanding (and that may be wrong) is that is only on "earned" income from overseas employment and not retirement or passive income (like pensions, SS, capital gains, interest income, etc...) that was derived in the US. I believe that those things may be taxable even if you reside in another country either as a US citizen ex-pat or as a non-US citizen. Again I could be wrong about that.
Pages 12-23
http://www.irs.gov/pub/irs-pdf/p54.pdf
Pages 12-23
http://www.irs.gov/pub/irs-pdf/p54.pdf
Thanks for posting that. Very interesting. Basicly what I got out of it (Chapter one of the first page) was that "Expatriation taxes apply to those who have given up their US citizenships or renounced their citizenship" but have some sort of income derived in the US - be that earned or non-earned. And then, if you are a US citizen working aboard and can meet the "tests" for foreign residency, etc..., then you don't have to pay US taxes on "earned" income from employment on the first $95K. In any case it's all pretty confusing and I couldn't quite figure out exactly how much tax you'd pay on non-earned income derived from the US (retirement income, capital gains, etc..) if you gave up your citizenship and lived out of the country. But my Mom, who was a German citizen until age 30 then became a naturalized US citizen residing in the USA, got German SS (as well as US SS) and, if it was higher, would have had to pay some taxes on the that to both places as non-earned income I believe. That may have changed now though with some kind of agreement between countries. But there is a possibility that one may get double taxed by income earned and non-earned if they lived or worked in another country whether they gave up their citizenship or not.
Simplicity
2-17-13, 9:00pm
Don't forget the initial what...34% income tax taken for every dollar before you even get your money. Then the mysterious hidden taxes on the gas - who knows what that is - 50% or so, I think, then the 13% HST that you mentioned, oh and the property taxes, whatever they are. Yeah, there's not much left of our money for us, is there?
I have to wonder where are these places that you don't pay tax? If you don't pay income tax, you probably pay taxes on goods and services. You probably pay taxes on property. If you don't pay capital gains tax, you probably DO pay tax on earned income.
I live in Canada. I am an American. I pay taxes in Canada (and if you want to talk about who pays a LOT in taxes, ask me....). Because of a tax treaty between the US and Canada, the first 90K of income I make in Canada is not taxed in the US. Since I am unlikely to make more than that, I effectively pay no US taxes. But do I EVER pay taxes.....starting with 13% "harmonized sales tax" (both federal and provincial taxes together) on virtually EVERY item or service I could purchase. That means rent on my office....I pay HST. A visit to the counselor? HST. Any goods I might purchase....
Anyway, people relinquishing citizenship to save money...bah. Good for them. It isn't a problem I am ever likely to have, even living in another country.
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