Posted on 07/16/2008 6:01:01 AM PDT by 1rudeboy
Congress increases the ransom expats must pay to escape the taxman
QUEUES of frustrated foreigners crowd many an American consulate around the world hoping to get into the United States. Less noticed are the heavily taxed American expatriates wanting to get out—by renouncing their citizenship.
In Hong Kong just now, they cannot. “Please note that this office cannot accept renunciation applications at this time,” the consulate's website states. Apart from sounding like East Germany before the fall of the Berlin Wall, the closure is unfortunately timed. Because of pending legislation on President Bush's desk that is expected to become law by June 16th, any American who wants to surrender his passport has only a few days to do so before facing an enormous penalty.
That penalty is buried in an innocuous piece of legislation with the veto-proof name, Heroes Earnings Assistance and Relief Tax (HEART) act. The new law means active American soldiers will benefit from tax relief. To pay for that, Congress has turned on expats, especially those who, since new tax laws in 2006, have become increasingly eager to give up their citizenship to escape the taxman.
Under the proposed legislation, expatriates surrendering their citizenship with a net worth of $2m or more, or a high income, will have to act as if they have sold all their worldwide assets at a fair market price. If the unrealised gains on these assets exceed $600,000, capital-gains tax will apply. A study by the Congressional Budget Office guesses that the new law will progressively net the government up to $286m over five years. It is unclear, however, why people would suffer the consequences if they did not expect to save money in the long run by escaping American taxes.
That expats want to leave at all is evidence of America's odd tax system. Along with citizens of North Korea and a few other countries, Americans are taxed based on their citizenship, rather than where they live. So they usually pay twice—to their host country and the Internal Revenue Service. As this makes citizenship less palatable, Congress has erected large barriers to stop them jumping ship. In 1996 it forced people who renounced citizenship to continue paying income taxes for an extra ten years. Theoretically, the new law allows for a cleaner break.
But even as the law tries to prevent people from renouncing their citizenship, it may have the opposite effect. Under the new structure, it would make financial sense for any young American working overseas with a promising career to renounce his citizenship as early as possible, before his assets accumulate. For everyone else, plunging stock and property prices mean now may be as good a time as any to hand back the passport, says Kurt Rademacher, a partner at Withers, a global tax-planning firm.
In Hong Kong the temptation for Americans to switch citizenship is particularly strong, because of the territory's low taxes. On the other hand, banks and other firms who want to hire Americans may find it harder to do so, even though greater China is one of the world's fastest-growing regions. It places Americans in the awkward position of weighing their patriotism against their vocation.
“Flood the country with people who do not pay taxes, and drive away those who do. Brilliant.”
Doesn’t make any sense. Congress seems to think they own the people and that the people cannot make their own decisions.
I thought that Americans who work abroad only had to pay the difference between foreign tax and the US tax to the IRS. Is that not correct?
That depends whether the foreign jurisdiction has a tax treaty with the U.S.
This strikes me as whining, by malcontent Euro-weenies and hard-core America haters.
Who in their right mind would want to renounce US citizenship, unless they’re not American, rather they’re holding a dual citizenship of convenience — gaming the citizenship system for some sort of gain. Now they want to use a renunciation of half (or some fraction) of a multiple-nationality, and aren’t getting off tax-free.
Renounce US citizenship???
Dumbest thing anyone, could ever do!
Dumbest thing anyone, could ever do!
I wish more liberals would follow through on their promises to do this. :)
The unintended consequences of Congress trying to take more money from productive citizens so they can show how generous they can be with other people's money. The only thing "progressive" about this policy is that the citizens will progressively produce less wealth and the tax plan will progressively produce less revenue.
Tempted to renounce your citizenship, “free trade” boy?...
Nah. Someone has to stand and fight the Socialists. Da, comrade?
Just pay your taxes and remain silent, citizen. Someone will be by shortly to explain it’s your patriotic duty.
While others, are giving our factories to them.
Fire the US workers. Ship the factory to China. Import then, what used to be American.
For a few dollars more...
Who’s in bed with communists?
Better look in the mirror.
The issue is that the United States Congress intentionally puts American companies - and individual Americans - at a disadvantage competing overseas by making Americans more expensiove to hire than Australians, Canadians, British, Germans, Japanese or durned near any other nationality you care to name.
How is this?
Because these countries don’t tax their citizens on money they earn while working abroad, assuming that they stay out of the country for a period of (ususally) one year. The US taxes us brutally, and two years ago in the latest “tax cut” they made it worse; punitive, in fact.
So, when I look around me here where I work in an undisclosed foreign location, I see Canadians, Australians, Indians, Brits, Russians, Chinese - the full smorgasboard. But few Americans.
This is in stark contrast to 30 years ago when the foreign earned income exclusion still meant something, when 80% of my co-workers were Americans, bringing home foreign exchange, and importantly, supporting secondary American industries.
Why would Congress do such a stupid thing?
I tell you that our Congress can’t be trusted to put America’s interests first. These guys work on a strict self-interest basis. If it helps them get reelected to the gravy train, they’re for it. Otherwise, forget it. If it’s an issue that can be demagogued, it will be. The Democrats are worse than the Republicans, but both parties are contemptible on this issue.
I figured that someone would appear to defend the Tax Code.
President Hu called your office while you were propagandizing in favor of firing Americans.
There’s been a change in your talking points.
Please call him back.
You better. You know what communists do to their people, if they don’t listen.
You are, their people. Make no mistake.
The richest will always be able to afford legal help to find the loophole they need. It is the barely wealthy and middle class who will suffer, yet be unable to flee.
Are you sucking off the government teat? Are you afraid I’ll upset your gravy train? Why so personal?
Nothing personal.
Why so determined to import?
TERM LIMITS, NOW AND FOREVER!
Even if it requires a constitutional amendment!
Why so determined to prevent me from spending my own money?
“While others, are giving our factories to them.”
Yep, fine to send billions of dollars in capital investment overseas along with thousands of US jobs, and then ship things formerly made in the US back to the US for sale, but you individuals sure better not try to leave with a million or two.
This is just one more case illustrating how our government has been bought and paid for by corporate interests, but I guess the affluent individuals just haven’t been ponying up with the campaign contributions.
Because it’s made, by firing my fellow countrymen.
That’s why.
You must lead a miserable existence if you think my private transactions impact you to the point where you need to restrain them.
Well, I’m pretty happy actually.
I have however seen enough of what is happening, to realize the damage (present and future) which misnamed “free trade” (actually a MASSIVE unreciprocated, one-way transfer of wealth, jobs and assets out of America) is doing to our nation and our future.
You are clearly, a propagandist for that monstrosity.
It is not so much your private transactions which need to be restrained.
It is the wholesale sell-out of our national industrial infrastructure - to people actually hostile to us.
It is very close, to treason. Don’t hide behind Randisms.
You, and people like you, are selling Americans out.
Returning to the original article for a moment...
What “private transactions” are you referring to?
Your planned renunciation, of your American citizenship?
I can’t believe someone would reounce their US citizenship over some taxes...and try to obtain citenship in some country like Hong Kong. It would be different if they were coming from a repressive country.
If the chicom’s confiscate their possessions some day they should not be allowed to reenter the US.
Man..People without a country.
Certainly not a decision that should be made lightly. And I agree: if things go to suck you should get in line.
Our government has been bought and paid for alright, but not by corporations.
Tell me, how much longer before greedy kulaks such as myself are lined-up against a wall under your ideal economic system? How much more of my money will I need to hand over to the Federal Government to satisfy your need for a nanny?
“Our government has been bought and paid for alright, but not by corporations.”
Lol, why so mysterious? Are you going to provide any hints as to the wisdom you possess?
So let me get this straight. This applies to someone who is blessed enough to be born in the greatest country on Earth who wants to specifically renounce their citizenship? F#$k them.
My observations lead me to belive that our government has been bought and stolen by socialists, folks like George Soros comes to mind, and our government is doing the selling - not the big corporations.
If Corporate America is adapting to the socialist agenda, it is to survive.
I’m not trying to get into a “which came first” discussion but socialism started influencing the American economy long before the corporations started leaving America.
Either way though, the surest way to keep up the exodus out of America, is to keep raising taxes and passing more legislation on citizens and corporations alike.
Right now, the surest way for Americans to keep their hard earned money just don’t play the game, which by the way, is illegal.
I don't see why everyone's getting so upset . . . as if we cannot challenge the government's tax policy at risk of being called unpatriotic? We should just throw up our hands and say, "screw 'em, let's tax them to death?"
I'm not upset. I'm happy that it's like this. You've gotta understand. I'm a libertarian extremist. I think that we as a country could survive taxing people 80% less than we do now. But, if someone wants to crap away the blessing of being an American citizen, they're a whore as far as I'm concerned and I'm not going to shed a tear over them being raped one last time as they leave. Good riddance.
And my point is, as a matter of public policy, our government should encourage its productive citizens to remain here instead of driving them off.
Whether you agree with their decision or not, how can you justify taxing them on all of their foreign assets just because they are American citizens?
This "law" is so much BS. It's pure spite. The expats I knew and associated with had cut all ties with the US years ago and started a new life overseas. There are whole enclaves in the Philippines and Panama.
Ask yourself, how is the IRS going to enforce this law in a foreign country? A- they can't unless the expat is dumb enough to return to US soil.
I see this as another petty governmental attempt at controlling the population. AFAIC- more power to those expats- they vote with their feet.
You can’t renew your passport overseas unless you prove taxes were paided. That’s how the bastards enforce it.
***
Congress increases the ransom expats must pay to escape the taxman.
This “law” is so much BS. It’s pure spite. The expats I knew and associated with had cut all ties with the US years ago and started a new life overseas. There are whole enclaves in the Philippines and Panama.
Ask yourself, how is the IRS going to enforce this law in a foreign country? A- they can’t unless the expat is dumb enough to return to US soil.
I see this as another petty governmental attempt at controlling the population. AFAIC- more power to those expats- they vote with their feet.
You are correct about Congress creating such an incentive though.
I understand that not all do it with the intention of avoiding U.S. taxes. It is simply a presumption the IRS is allowed by the courts. Sad, but true.
You only need that passport if you're going to return to the US. Otherwise, you can apply for a foreign passport. This can be easily done in the Philippines, for one.
When I was stationed in Germany, I could have applied for a German passport while I was in the military due to the amount of time I had resided in that country. Also, marrying a foreign national qualifies the US national to stay in the spouses country of origin.
There are too many ways around this BS. Congress thinks they are All-Knowing, All-Seeing, but in most cases, they are just F.O.S.
Ping for later
Bizarre, isn't it? Some of the comments on this thread make you wonder how these people wandered onto a limited government website.
I was going to say that what's going on is similar to the difference between the cheery "Buckle Up For Safety, Buckle Up!" commercials and the current mean-mouthed, gravel-voiced jackboot "Click It Or Ticket" campaigns.
Once they run the con on us and the new laws are firmly in place, the iron fist comes out of the velvet glove, and Big Brother's boot smashes into our faces again and again...
I was tempted last year to move entirely out of the U.S for the next decade. I had an internal debate about what would Christ do?
Then I remember what Christ did. He went into the heart of the enemy and was willing to lay his life down for all mankind. But he took risks first with his own heritage and people to save them and of course it was his own people who had Him crucified! He did not run off as a coward.
Now, very few of us will endure martyrship like Christ, but staying means you’re willing to sacrifice as a public servant. I am now running headlong into the fray and have already got some battle knicks. But I can protect my family (meaning we’ll eat and have roof) but I know it’s not going to be pleasant to fight the enemy within then have to square off against the puppet masters of Russia and China afterwards, all while in depressionary conditions to boot!
Sounds like an interesting challenge. Besides, how many jetski rides can I do before I get bored down there in Costa Rica :)
I believe this is really more about the top 1% who were expected to make there billions overseas and bring it back to American shores and simply decide to just offshore there entire operations at this point. A code of honor that existed was violated in this regard, but this corrupt Congress attempting to fix this way just accelerates the process of offshoring faster. Congress at this point should be discussing how to fix our economy with skilled job creation, particularly in energy, higher ed and commodities we can export overseas (sell the global customer what they want morons and TAX THAT!).
ut this corrupt Congress accepts bribes to the extreme from lobbying and it’s no coincidence the environmental lobby is heavily invested overseas. Dumb, irrational Democrats running this nation were always easily manipulated. Remember the 70’s and there repeated calls for capitulation with the communists in Russia?
“My observations lead me to belive that our government has been bought and stolen by socialists, folks like George Soros comes to mind, and our government is doing the selling - not the big corporations.
If Corporate America is adapting to the socialist agenda, it is to survive.”
I think when we look at some complex situation, there is rarely just one explanation for what might be happening. The socialists have definitely weaseled their way into every institution in the US and certainly in every area of government.
But the big corporation are working on several goals that cause them to seek the maximum influence in Washington. They might have been forced to compete with foreign corporations started in the 1950s as Japan and other nations began gaining access to the US market. Then the corporations started fighting back by seeking cheaper labor to cut costs and to compete with growing imports. But also, after a time, the corps. decided their best future growth opportunities were outside the US, So, in seeking cheaper labor and growth outside the US, they’ve been involved to the max with Congress and presidents to win trade agreements and other trade policies that facilitate those goals: access to cheap foreign labor, and untariffed access back to US markets, and the opportunity to grow sales revenues in foreign nations, especially China.
Plus, the Chamber of Commerce is one of the biggest pushers of amnesty for illegals.
Those reasons have resulted in a good number of our esteemed Reps. and Senators being bought and paid for by corporations and business in general.
Good summary.
I noticed you touched lightly on the chamber of commerce - but that is a whole other discussion ;-)
Regardless of the causes, the result is that unskilled desperately poor people want into the US while those who create, produce and pay taxes are trying to flee - the end result will be the same, a nation that is ripe for the picking.
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