Business Week has an interesting article entitled Wealthy Americans Queue to Give Up Their Passports. Of course, they failed in two areas:
- They didn't define "wealthy"
- They didn't provide evidence that it was "wealthy" Americans giving up their citizenship
I pay taxes. I live in France, so of course I pay lots of taxes. My taxes pay for French policemen, French firemen, French health care, French roads, and so on. I have no problem paying French taxes because there's a clear benefit from them. It's not that I don't want to pay US taxes, but I want to have those taxes to be proportional the benefits that I receive.
Historically, paying tribute often meant that you had been subjugated by a foreign power and you paid money to them, not for services rendered, but to stop them from invading you again. If you pay them for services rendered, that's taxation. If you pay them by compulsion and get nothing in return, that's paying a tribute. American expats are forced to pay tribute to the US government.
Imagine yourself as the typical middle-class US expat: you don't have a huge amount of spare cash on hand (particularly now) and you probably won't owe the US government much, if any, money in taxes due to the Earned Income Exemption. Except that you have to file anyway. You now have to file Form 8938 along with your tax return and possibly a Form TD F 90-22.1. Form 8938 and Form TD F 90-22.1 contain roughly the same information, but it's collected in different ways, at different times, and is sent to different organizations. If you make a mistake on one of them, you could be viewed as a tax avoiding felon, even if wading through this mess is naturally complicated.
Of course, there's also the prospect of OVDI, but many Americans find themselves facing their life savings being wiped out by OVDI, despite the US government having previously done very little to publicize these laws. Walk into a consulate on a routine matter and you don't get handed a list of what forms you need to fill out, to whom you have to send them and when they must be sent. Calling the IRS back in the states results in a "let me get back to you" but you never hear from them again.
You're supposed to just magically "know" this information (and God have mercy on your soul if you didn't know you were required to file a required Form TD F 90-22.1 because the IRS will show no mercy whatsoever). And while you're at it, just try finding US tax experts outside the US. Just filing a minimal "I don't owe any tax" return can easily cost you $2,000. If you have to go the OVDI route, you could easily face up to $16,000 in filing costs without owing any money!
Of course, if any income isn't "earned income", then you can't claim the standard exclusion. Only a third of the world's nations have tax treaties with the US, so many people don't even have those to fall back on. I know one American lady whose lived in France for 20 years, bought a French house with her French husband, paid for it with a French income and then sold it — only to face capital gains taxes in both France and the US. And it also cost her a bundle to find a tax advisor for her paperwork.
So yeah, many US expats are giving up their US citizenship over punitive tax measures. It's hell to deal with. It's wonderful living over here, but the US is turning our taxes into a nightmare.
Unfortunately, the Bloomberg article cited above perpetuates the myth that Americans living abroad are swimming in wealth and are just trying to screw Uncle Sam. We receive virtually no benefits from the US government and benefits we should get are either eliminated (such as the Medicare we've already paid for) or drastically reduced (such as Social Security). We are required to jump through hoops for Uncle Sam while millionaire tax dodgers in Congress strip us of our rights while telling people that we're the ones abusing the system.
So can someone please tell me specifically what concrete benefits we Americans abroad are getting from the US government? And don't give me any flag-waving nonsense. I can wave plenty of flags all day long, but they don't take care of my daughter when she's sick, my French taxes do that.