# Taxation without representation



## cescolar

Isn't that what started the USA war of independence?

Then, how come, according to Wikipedia, _"The United States is the only country in the world which taxes based on citizenship rather than residency, on worldwide income of individuals, in the same manner as residents. Eritrea also taxes the foreign income of its nonresident citizens but at a much lower rate than for residents"_
We expats do not get any representatives in Washington, but are still required to pay USA taxes!

It seems unconstitutional to me, or at least against the spirit of the foundation of the nation...

But how can we change the law, since we don't have reps in Washington?
The american way: start a lobby!


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## Bevdeforges

There is at least one lobby - I've met the lobbyist, and he's sponsored by AARO and ACA, two US expat groups. However, both groups have board members who are "international tax lawyers" and who insist that there is no way Congress will even consider changing the basis for taxation.

Oh, and by the way, the "no representation" argument doesn't fly. Technically since you can still vote even while living overseas (in the last district in which you lived before leaving the US), you do have a representative in Congress. Now, whether or not the Congresscritter realizes he or she has overseas constituents is another question. (Most don't know that.)

Personally, I'd prefer to see the US expat groups do a bit more in the area of civil disobedience.
Cheers,
Bev


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## BBCWatcher

U.S. citizens who move from one of the 50 states to a home overseas can continue voting in all U.S. federal elections: House of Representatives, Senate, and White House (President). That includes special elections to fill vacancies in the House and Senate. And that's exactly the same set of federal elections as any other eligible voter. U.S. state and local elections are not necessarily open to U.S. citizens living overseas, but U.S. state and local taxes don't apply to overseas residents.

U.S. citizens living overseas can vote in the Democratic Party's primary to select that party's presidential candidate. That major party has a specific "Democrats Abroad" voting opportunity for those overseas Americans who are registered with the party. The Republican Party does not have a comparable voting option, at least not at this time.

To net it out, aside from participation in the Republican Party's presidential nominating contest, Americans living overseas have full federal voting rights which are identical to Americans living within the 50 U.S. states, assuming prior residence in one of those states. There's identical democratic representation with lower taxation.


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## CdnAllTheWay

This ignores the many who are deemed US taxpayers, required by the US to pay taxes, and file information forms to Treasury, who have never lived in the US.


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## cescolar

I believe that you must claim your intention to eventually return to the States in order to be able to vote...they do ask that question when you try to register to vote from abroad...


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## Bevdeforges

cescolar said:


> I believe that you must claim your intention to eventually return to the States in order to be able to vote...they do ask that question when you try to register to vote from abroad...


In what jurisdiction? I was never asked about my intention to return when I last registered to vote. Check the standard Federal voter registration form and I don't believe there is any question about intention to return.
Cheers,
Bev


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## Bevdeforges

CdnAllTheWay said:


> This ignores the many who are deemed US taxpayers, required by the US to pay taxes, and file information forms to Treasury, who have never lived in the US.


In some states (not all) you may be eligible to register to vote - from the address your parents were eligible to use (i.e. the last address before they left the US). I only wish they would publicize this with half the enthusiasm with which the IRS publicizes their authority.
Cheers,
Bev


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## BBCWatcher

Not entirely. This Web site helpfully summarizes the U.S. federal voting rights for U.S. citizens who have never previously resided in the U.S. There are gaps, yes, but a majority of U.S. citizens who have never lived in the U.S. are still eligible to vote in U.S. federal elections.

Keep in mind there are Americans who live in the U.S. who cannot vote in federal elections and/or who do not have democratic representation. They include individuals who acquired U.S. nationality by virtue of birth in American Samoa (including Swains Island). Residents of the District of Columbia do not have voting representation in either the House of Representatives or the Senate. (They send a delegate to Congress who cannot vote.) Americans residing in Puerto Rico, Guam, the U.S. Virgin Islands, and the CNMI do not have voting representation in Congress and cannot vote in presidential elections. In many jurisdictions prisoners and felons cannot vote. There are also massive distortions in voting "potency" depending on where you live (or previously lived).

In short, the U.S. representative democracy is not perfect, but U.S. citizens living overseas are treated rather well considering all these imperfections.

With respect to whether federal office holders are aware they have constituents living overseas: yes, most definitely. Candidates and office holders are most definitely aware of fundraising opportunities, for example. It's also entirely routine for federal office holders traveling overseas to meet with U.S. citizens living overseas. For example, in the last presidential election it was widely known that Mitt Romney spoke in multiple venues with Americans living overseas -- at least those willing to contribute to his campaign. More recently (and to pick another example) Nancy Pelosi, the Minority Leader in the U.S. House of Representatives (and former Speaker of the House), met with Americans in London during her recent trip. The Democratic Party has a specific representative in Congress (Carolyn Maloney) who is designated by the party to specifically address issues of concern to U.S. citizens residing overseas, and she does.

The fact is that most countries in the world do not have any practical (non-travel) way for its citizens living overseas to vote in their elections. The U.S. is way ahead of most countries in that respect. Not perfect, but it compares well.


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## Nononymous

CdnAllTheWay said:


> This ignores the many who are deemed US taxpayers, required by the US to pay taxes, and file information forms to Treasury, who have never lived in the US.


Those are the ones engaged in civil disobedience - probably 95 percent of them never file. 

And although I'm a proud civil-disobedient myself, some points of clarification: one, while they are required to file US taxes, only a small minority would ever need to pay anything, due to tax treaties etc.; two, I believe all US citizens have voting rights - for those who've never lived in the States it would be in the district their parents last lived or something like that.

Note also that for US persons abroad, the IRS has very limited powers to collect monies owed (other than US assets, obviously). In Canada, dual citizens are virtually immune from collection.

Meanwhile on the civil disobedience front, I made yet another trip across the border using my Canadian passport with US birthplace - this time driving. Fourth trip now since the warning, and once again, no questions asked. I'll be flying down in a few weeks, we'll see how that goes.


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## BBCWatcher

cescolar said:


> I believe that you must claim your intention to eventually return to the States in order to be able to vote...they do ask that question when you try to register to vote from abroad...


No. You are asked whether you intend to return or not, but your answer to that question does not affect your right to vote.

The Federal Voting Assistance Program has much more information.


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## Nononymous

> To net it out, aside from participation in the Republican Party's presidential nominating contest, Americans living overseas have full federal voting rights which are identical to America.


I imagine the intersection of those two sets - Americans living overseas, and individuals wishing to participate in a Republican primary - is extremely small. Possibly null.


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## BBCWatcher

Nononymous said:


> I imagine the intersection of those two sets - Americans living overseas, and individuals wishing to participate in a Republican primary - is extremely small. Possibly null.


Well, Americans living overseas who happen to be members of the Republican Party are sometimes able to vote in presidential primaries via absentee ballot, but that's not a universal right. Absentee voting is not possible in most caucus states, for example.

The Democratic Party conducts a "Democrats Abroad" primary open to all U.S. citizens who register with the party, and that primary selects real voting delegates to the party convention who must reside in the "district" (i.e. must be Americans living overseas). So even if you previously lived in a state that does not offer absentee voting in its primary or caucus, you can register as a Democrat and vote in the DA primary. (But you can only vote in one primary or caucus. You can't vote in the DA primary and via absentee ballot in a state primary. And you can't vote in both Democratic and Republican primaries/caucuses. That's fair, of course -- one person, one vote.)

The DA primary supports in-person voting in many cities around the world and absentee voting via the Internet, fax, and postal mail. It's been up-and-running for several election cycles now. I suspect the Republican Party will eventually follow suit, but it hasn't happened yet. For the moment the Republicans seem content to solicit "votes" (i.e. dollars) from Americans residing overseas. Apparently Republicans living overseas haven't withheld enough of their dollars to convince their party to start counting their votes.


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## Bevdeforges

Followed your link to the FVAP and found the following:



> The 2005 FPCA form allows overseas citizens to indicate they are either overseas “temporarily” or “indefinitely,” while the 2011 form allows overseas citizens to indicate whether the voter “intends” or “does not intend” to return. Either form is acceptable, but the choice of which form to use should be made thoughtfully by each voter. *Voters may choose to use either form. Both forms are valid. *


Apparently the forms have changed since I last registered to vote (sometime back in the 1990's) because I don't believe their was any question on the form related to what your intentions were regarding remaining overseas. And frankly, the questions are irrelevant.

I have noticed that lately they are recommending that any US citizen planning to vote in federal elections should re-register at the beginning of the calendar year in which they wish to vote. 
Cheers,
Bev


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## CdnAllTheWay

Nononymous said:


> Meanwhile on the civil disobedience front, I made yet another trip across the border using my Canadian passport with US birthplace - this time driving. Fourth trip now since the warning, and once again, no questions asked. I'll be flying down in a few weeks, we'll see how that goes.


Good to know. I may practice a little civil disobedience myself. The forms, time, and expense required to tell them I owe $0 just doesn't seem worth it. Just having to jump through the hoops to get an ITIN is ridiculous.


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## Nononymous

CdnAllTheWay said:


> Good to know. I may practice a little civil disobedience myself. The forms, time, and expense required to tell them I owe $0 just doesn't seem worth it. Just having to jump through the hoops to get an ITIN is ridiculous.


I would encourage you to explore this option and save yourself some headaches.

Depending on circumstances of course, if you are a dual citizen with no US assets or expectation of US inheritance, who has not nor wishes to live in the US, you really have no reason to bother with any of this. If you have been off the radar for a long time or never on the radar in the first place, then why get on?

Two caveats: 

FATCA may change the calculation. I'm hedging my bets, waiting to see what happens - I expect it will be greatly reduced in scope, at least for Canada, and failing that you can do your banking with credit unions that don't need to become compliant.

If you have a US birthplace and have not renounced US citizenship, you need a US passport to enter the US. That is the law, though it is not enforced with any great rigour (I regularly break it). In the past you could not renew your US passport without signing a little declaration that your taxes were up to date, on pain of a $500 perjury fine. Now, however, the passport application requires only your SSN (or zeroes if you don't have one) and country of residence. I highly doubt the IRS has the wherewithal to follow up on that information, when and if the State Department sends it over. So renewing your US passport is probably quite safe. 

In other words, the two caveats aside, for many people, myself among them, ignoring filing obligations and staying off the radar is a perfectly reasonable course of action. And should you ever find yourself dragged onto the radar, if you are a dual citizen you can take comfort in knowing that fines currently cannot be collected in Canada.


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## CdnAllTheWay

I'm on their radar due only to renouncing. They told me years ago I was not a citizen. I have nothing that would pop up as reportable under even the current version of FATCA. I'm not a covered expat, and I've made less than $3,000 US in two of the past number of years, the rest $0.


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## Nononymous

CdnAllTheWay said:


> I'm on their radar due only to renouncing. They told me years ago I was not a citizen. I have nothing that would pop up as reportable under even the current version of FATCA. I'm not a covered expat, and I've made less than $3,000 US in two of the past number of years, the rest $0.


That's an entirely different set of circumstances. If you've renounced, you are officially off the radar. No further filing obligations. FATCA would not apply to you, period.

Have you formally renounced? If so, you should have met those various tax requirements - five years of filing plus the exit-year declaration - but after that you're free and clear of the IRS, and presumably you can show the CLN with your Canadian passport if US customs ever asks about your place of birth. 

However, "they told me years ago I was not a citizen" doesn't count as having renounced, paperwork must be done to make it official. 

Enough paperwork that in my case I decided it wasn't worth the trouble, and that I was better off to continue not doing what I hadn't been doing all along.


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## BBCWatcher

Bevdeforges said:


> I have noticed that lately they are recommending that any US citizen planning to vote in federal elections should re-register at the beginning of the calendar year in which they wish to vote.


If you want to receive a preprinted ballot automatically then that's prudent practice. If you don't mind using the generic federal write-in ballot, and if you stay aware of federal election schedules and deadlines (including special elections), you can register/re-register at the same time you send in your generic ballot.

I should also mention that, unlike tax forms (oddly enough), you can mail or carry your ballot to any U.S. embassy or consulate and they'll get it back to the U.S. for you. (They put your ballot into the "interoffice" diplomatic mail, then the U.S. State Department hands it to the U.S. Postal Service.) Thus you can save a little money on postage if you want, and sometimes that route is faster and more reliable compared to foreign postal systems. A lot of states support fax or even Internet-based voting, so that's another option in many cases. U.S. citizen-soldiers stationed overseas can send their ballots through the APO/FPO system. (If you happen to have base privileges you can probably do the same thing.)


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## Simey

Nononymous said:


> I imagine the intersection of those two sets - Americans living overseas, and individuals wishing to participate in a Republican primary - is extremely small. Possibly null.


Of course there are. Roughly half the country is Republican. Why would expats be any different? 

However, my state is Virginia. Virginia primaries in recent cycles haven't had much impact on the presidential nominee because it's generally sewn up by the time we get to vote, regardless of from where we cast our votes. 

I agree with the premise of the OP. US worldwide taxation rules is perverse and hurts US global competitiveness by discouraging US citizens from working overseas where we might improve our balance of trade. However, Congress is full of economic Neanderthals who probably think ex patriate means "ex patriot", and so they take the popularist point of view that holds us to be evil fat cats hiding our assets abroad. Cf the recent embarrassing hearings against Apple. I expect this to only get worse as it's much easier to point the finger at us than it is to actually cut Federal spending.


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## Bevdeforges

I'll be honest and admit that I don't understand the "urge" to continue to vote back in the US "just because we can." I live and work in France and I now have French nationality, so I vote here - where I have daily exposure to the issues and candidates. 

The district I can vote from back in the States has been gerrymandered a couple of times, plus I have no friends, family or other contacts back there. If I try to contact "my" Congressional rep, I'm filtered out of her website, because I have an overseas address and IP address - or else I have to try and remember my last address back there (and after 25 years, I have to look it up). 

Frankly, I put the "right" to vote after 5 or more years outside the country in the same category as the ongoing obligation to file and pay US taxes - a royal PITA. I know it was a long and hard fought battle for the expat groups, but as we are finding with the "automatic" nationality for children born overseas with one American parent, it was a big mistake and only causes more problems than it resolves.
Cheers,
Bev


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## BBCWatcher

Simey said:


> Roughly half the country is Republican.


According to Gallup, about 28% of Americans self identify as Republicans without pushing.



> Why would expats be any different?


U.S. citizens living overseas have different demographic characteristics (on average). Their voting patterns and political affiliations probably are different in terms of percentages.



> US worldwide taxation rules is perverse and hurts US global competitiveness by discouraging US citizens from working overseas where we might improve our balance of trade.


OK, try to frame your argument in terms someone in Congress can understand when he/she studies this issue for half a minute. U.S. citizens living abroad face exactly the same tax regime as U.S. citizens living in the United States with one big exception: the first $95K+ of their income earned abroad is free of U.S. tax thanks to the Foreign Earned Income Exclusion.

I hate to repeat myself, but if you're going to make an argument to a politician about how awful it is for U.S. citizens living abroad you have to start with some well-grounded facts. And the fact is that the U.S. tax code already includes the FEIE which is a substantial incentive. There are only two material differences in the U.S. tax code compared to other countries' tax codes: there's an annual filing requirement for many (not all) citizens, and the foreign earned income exclusion is not _unlimited_. The FEIE (and personal exemptions) shield households making at least twice the U.S. median household income and more like triple or quadruple, depending on how you count. (And the U.S. median household income is a lot higher than the world's average median household income.) Most Americans don't earn anywhere near $95,700 per year per individual, and even above that Americans don't owe any U.S. tax on their earned income unless they happen to live in a low tax jurisdiction.

If you're going to open this line of argument, a fair question to ask is _should_ there be _any_ incentive for Americans to live and work overseas? Why, and why should it be an income tax break greater than the current FEIE simply for living overseas? You mentioned promotion of exports. Some U.S. citizens living overseas do that. (Most probably don't. For example, many Americans working overseas are helping businesses shut down their U.S. operations to transfer work overseas.) Well, OK, but why are exports important? Exports aren't actually important in themselves. The jobs and wealth those exports generate within the U.S. are the important parts. So instead of trying to encourage behavior indirectly (and thus inefficiently), how about if the tax code rewards employment of U.S. citizens (everywhere) and penalizes employment of non-U.S. citizens (everywhere)? For example, how about something like a universal basic income for U.S. citizens regardless of where they live? As another example, right now the U.S. tax code heavily favors non-employment income (particularly capital gains) and still has very low (and leaky) tax rates on upper income earners. How about fixing that? Tax capital gains (indexed) at the same rate as other income, and add another higher bracket or two. Then give every U.S. citizen an annual basic income of about $11,000 (adult, bumped up by $5K starting at age 65) and $4,500 (child under 18), all indexed to inflation. Abolish the minimum wage, Social Security, tax-advantaged retirement accounts, child tax credits, earned income tax credits, FEIE (FTC would still apply), etc., etc. Everybody starts with $16K/$11K/$4.5K, then any earnings (employment/non-employment) are taxed in brackets ranging from 20% to 59%. (The 20% bracket would be lower than the current 10% bracket plus total employer/employee FICA. The 59% bracket would obviously be higher, but it still wouldn't be tax revenue maximizing -- that rate is somewhere north of 70%.) The corporate tax rate would be 30% with only two exclusions: dividends paid to individual U.S. citizens and foreign taxes. But if you want to do business in the U.S. -- if you want access to the world's largest economy -- you pay a minimum of 30% on your worldwide profits in combined foreign and U.S. taxes, period. Moreover, interest, dividends, and capital gains taxes would be collected before payout at, say, a 40% rate, and most taxpayers would get some of that money back when they file. (Those in the 59% bracket probably wouldn't and might owe more.) Oh, and the U.S. would join the rest of the developed world and open a network of universal public medical facilities with $10 per visit/per generic drug co-pays (indexed) -- and then abolish Medicare, Medicaid, and tax-advantages for medical insurance.

That sort of tax system would better promote work and exports, wouldn't it? Employment compensation costs would _dramatically_ fall, especially among lower income earners, encouraging businesses to hire more in the U.S. The current big incentives to sit on/churn capital would also fall dramatically, and corporate profits would be paid more regularly to shareholders. Consumer spending would go up -- everybody who's a U.S. citizen gets $16K/$11K/$4.5K per year minimum (a universal negative tax bracket, a Republican idea actually) -- and just about everybody would be better off. Even the wealthy would do quite well when there's more prosperity. (Their top line grows to compensate for the bigger tax hit.)



> However, Congress is full of economic Neanderthals who probably think ex patriate means "ex patriot", and so they take the popularist point of view that holds us to be evil fat cats hiding our assets abroad.


Some are hiding assets abroad. So what's the plan to help the U.S. government reduce or eliminate that problem? Taxing financial gains _before_ payout would help, for example. Many countries do that.

I'm repeating myself again, but I think there's a decent argument to be made that FBAR and FATCA should be consolidated and simplified. Having two separate systems of foreign financial account reporting with different rules and thresholds is inherently problematic. My preference would be to have a Form 8938EZ that most people with foreign accounts would file and a Form 8938 for the rare big account holders. Form 8938EZ would replace the FBAR form. There are many other steps that could be taken to make filing simpler -- and to make the tax code less prone to abuse, particularly among the wealthy.

But is the U.S. government going to allow U.S. citizens living overseas to avoid all U.S. taxes (if they happen to live in low tax jurisdictions)? No way. Not going to happen. And if you make that argument you'll be lucky to find even a small handful of Congresspersons who'd agree with you. You might as well be lobbying for the U.S. government to fully fund a French TGV high-speed rail line from Macon, Georgia, to Lubbock, Texas. It's just so politically absurd you'll be tuned out.


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## Nononymous

Simey said:


> Roughly half the country is Republican. Why would expats be any different?


At the risk of sounding snide, the mind-broadening benefits of living overseas are perhaps not entirely consistent with the current Republican worldview. Plus the small matter of Europeans with their state-run health insurance and not running around armed. (I did however fail to account for all the oil industry expats.)

We were in Berlin when Obama made his campaign speech in 2008. Democrats Abroad were impressive in their zeal for signing up anyone with a US passport. It's a market Republicans left untapped, probably for good reason.

American friends persuaded me to vote in 2004, I think, but after that I've refused on the grounds that I should be consistent in severing my ties.


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## BBCWatcher

I've done a little bit more searching. There's not much data about U.S. citizens living overseas and their voting patterns. A group called the Overseas Vote Foundation released a study a couple years ago with some estimates, but they also have struggled finding good data.

They think only about 6 or 7 percent of non-military/non-government U.S. citizens living overseas voted in the 2008 federal election. If they're correct, that's a very low turnout rate. There's nearly zero information about political party affiliations among U.S. citizens living overseas, but there's some anecdotal evidence to suggest the Democratic Party is substantially more popular within that group.

The OVF points out there are roughly half a million American citizens born overseas each year. Some of them move to the U.S., but not all of them do. According to the report 18 states permit children born and living abroad (when they turn 18) to vote in the same place their U.S. citizen-parent do/did. There may be more than 18 by now, and the bigger population states seem to be over-represented in that list. So at quick glance it looks like "most" Americans born and remaining abroad would be eligible to vote in U.S. federal elections. Whether it's 18 or 20 or some other number, though, it's not enough -- it should be all states.

Anyway, to net it out, overseas Americans do have "taxation with representation." Many articles talk about how the U.S. goes to great lengths to help (most) Americans living overseas to vote, and I think that's a fair characterization. It's not perfect, but it's pretty good. I think a better phrase here is "taxation without participation." Meaning that 90 percent or more of Americans living overseas don't bother to participate in U.S. federal elections. That's really not the government's fault, though: that's the taxpayer's/voter's fault. Congress and the President respond to constituencies that engage in the political process, and right now overseas Americans aren't participating at high or even moderate rates.


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## Simey

BBCWatcher said:


> I've done a little bit more searching. There's not much data about U.S. citizens living overseas and their voting patterns. A group called the Overseas Vote Foundation released a study a couple years ago with some estimates, but they also have struggled finding good data.
> 
> They think only about 6 or 7 percent of non-military/non-government U.S. citizens living overseas voted in the 2008 federal election. If they're correct, that's a very low turnout rate. There's nearly zero information about political party affiliations among U.S. citizens living overseas, but there's some anecdotal evidence to suggest the Democratic Party is substantially more popular within that group.
> 
> The OVF points out there are roughly half a million American citizens born overseas each year. Some of them move to the U.S., but not all of them do. According to the report 18 states permit children born and living abroad (when they turn 18) to vote in the same place their U.S. citizen-parent do/did. There may be more than 18 by now, and the bigger population states seem to be over-represented in that list. So at quick glance it looks like "most" Americans born and remaining abroad would be eligible to vote in U.S. federal elections. Whether it's 18 or 20 or some other number, though, it's not enough -- it should be all states.
> 
> Anyway, to net it out, overseas Americans do have "taxation with representation." Many articles talk about how the U.S. goes to great lengths to help (most) Americans living overseas to vote, and I think that's a fair characterization. It's not perfect, but it's pretty good. I think a better phrase here is "taxation without participation." Meaning that 90 percent or more of Americans living overseas don't bother to participate in U.S. federal elections. That's really not the government's fault, though: that's the taxpayer's/voter's fault. Congress and the President respond to constituencies that engage in the political process, and right now overseas Americans aren't participating at high or even moderate rates.


Seriously? You had to do research on a statement that was obviously ridiculous in the first place? Of course there are Republicans overseas. And Socialists, Communists, Libertarians, Anarchists, and so on. No big group of Americans is going to be monolithic. 

Also, I am curious why anyone would subtract overseas military from the statistics? It seems an obvious point, but they are every bit as much Americans overseas as anyone else. 

On all the questions why anyone in the US would want to encourage American companies to have American employees overseas, I'm not quite sure where to start. Perhaps it's simplest to answer it with another question. If it's so obvious that a world wide taxation system is the way to go, how come none of our international competitors do likewise? Hey, I am all for American exceptionalism, but I think on this one the rest of the world has it right. 

But yes, I agree that our politicians don't think that way. They also seem to think massive budget deficits are a great idea. So much for their economic wisdom. 

bev: to give a personal answer to your question why anyone would bother to vote, I vote while I am overseas for the same reason I vote while in the US. It's my country, and I have a stake in it. I could point to practical issues - I pay taxes and own property etc - but it's broader than that of course, and not dramatically different based on where I happen to be at the time.


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## BBCWatcher

Simey said:


> Of course there are Republicans overseas.


There are, and nobody wrote otherwise. The more interesting question is how many, and there aren't good data to answer that question. There are probably around 4 to 5 million Americans living overseas, and the percentage of those who self-identify as Republicans is very likely lower than the 28% of U.S. residents. How much lower? Hard to say.



> Also, I am curious why anyone would subtract overseas military from the statistics? It seems an obvious point, but they are every bit as much Americans overseas as anyone else.


Nobody is subtracting them, but they also aren't the same. For one thing many/most of them live and/or work on U.S. sovereign property, shop in U.S. dollars at U.S. stores (on bases), have access to the U.S. Postal Service (via APO/FPO) -- there are a lot of differences. It's important to understand military personnel, diplomatic and government workers (and their families), and civilians -- they're all important, but they're all different in various ways. If you don't consider those differences then you don't reach the best understanding of each subpopulation of Americans living overseas.



> If it's so obvious that a world wide taxation system is the way to go, how come none of our international competitors do likewise? Hey, I am all for American exceptionalism, but I think on this one the rest of the world has it right.


OK, so why does no other country have the world's largest economy, the world's most powerful military, and the world's biggest cultural influence?

....No, that's a cop out, with all due respect. Any/every political leader is not going to be receptive to that sort of argument. You have to explain why U.S. taxation of (wealthy) U.S. citizens living overseas (who happen to live in low tax jurisdictions) is not the correct U.S. tax policy. What are the merits of that argument when... see below.



> They also seem to think massive budget deficits are a great idea.


No, they don't. Budget deficits have been coming down more sharply than any time since the end of World War II -- that's just fact. And incidentally that's not good policy because the U.S. economy has not recovered, the U.S. federal government can borrow at zero or negative real interest rates, and the U.S. has a lot of infrastructure to repair.

But one way to reduce budget deficits further is to collect more taxes. In fact, it's one of only two ways. Considering that government spending as a share of GDP is pretty low, especially by developed economy standards, increasing tax collections/compliance is probably the preferred way to reduce budget deficits. So how does reducing or eliminating U.S. taxes on (wealthy) U.S. citizens living overseas (who happen to live in low tax jurisdictions) consistent with reducing budget deficits? (Answer: it isn't.)

OK, so one might try to argue that these special highly compensated extraterritorials would generate so much more economic activity that (net) tax revenues would flood in, if only you eliminated their U.S. taxes. Got any evidence for that assertion? It utterly strains credulity, frankly.

I've never met anyone who likes to pay taxes. But what's the cogent, logical argument for why (wealthy) U.S. citizens shouldn't pay U.S. taxes (if they happen to live in low tax jurisdictions)? "Most other countries don't collect these taxes" is not a compelling argument. Is there any other, reasonable argument? I haven't got one.


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## Simey

BBCWatcher said:


> There are, and nobody wrote otherwise. The more interesting question is how many, and there aren't good data to answer that question. There are probably around 4 to 5 million Americans living overseas, and the percentage of those who self-identify as Republicans is very likely lower than the 28% of U.S. residents. How much lower? Hard to say.
> 
> 
> Nobody is subtracting them, but they also aren't the same. For one thing many/most of them live and/or work on U.S. sovereign property, shop in U.S. dollars at U.S. stores (on bases), have access to the U.S. Postal Service (via APO/FPO) -- there are a lot of differences. It's important to understand military personnel, diplomatic and government workers (and their families), and civilians -- they're all important, but they're all different in various ways. If you don't consider those differences then you don't reach the best understanding of each subpopulation of Americans living overseas.
> 
> 
> OK, so why does no other country have the world's largest economy, the world's most powerful military, and the world's biggest cultural influence?
> 
> ....No, that's a cop out, with all due respect. Any/every political leader is not going to be receptive to that sort of argument. You have to explain why U.S. taxation of (wealthy) U.S. citizens living overseas (who happen to live in low tax jurisdictions) is not the correct U.S. tax policy. What are the merits of that argument when... see below.
> 
> 
> No, they don't. Budget deficits have been coming down more sharply than any time since the end of World War II -- that's just fact. And incidentally that's not good policy because the U.S. economy has not recovered, the U.S. federal government can borrow at zero or negative real interest rates, and the U.S. has a lot of infrastructure to repair.
> 
> But one way to reduce budget deficits further is to collect more taxes. In fact, it's one of only two ways. Considering that government spending as a share of GDP is pretty low, especially by developed economy standards, increasing tax collections/compliance is probably the preferred way to reduce budget deficits. So how does reducing or eliminating U.S. taxes on (wealthy) U.S. citizens living overseas (who happen to live in low tax jurisdictions) consistent with reducing budget deficits? (Answer: it isn't.)
> 
> OK, so one might try to argue that these special highly compensated extraterritorials would generate so much more economic activity that (net) tax revenues would flood in, if only you eliminated their U.S. taxes. Got any evidence for that assertion? It utterly strains credulity, frankly.
> 
> I've never met anyone who likes to pay taxes. But what's the cogent, logical argument for why (wealthy) U.S. citizens shouldn't pay U.S. taxes (if they happen to live in low tax jurisdictions)? "Most other countries don't collect these taxes" is not a compelling argument. Is there any other, reasonable argument? I haven't got one.


I don't have the kind of time for a long reply as you seem to have, so you will have to make do with a few observations. 

Military are expats. I see no reason to exclude them other than the fact it gerrymanders the numbers by excluding a large group generally reckoned to lean right of groups such as State Department, Peace Corps, et al. Every expat is going to have a slightly different experience of being overseas, and a differing connection to the US. I think you have a bit of a stereotype of the military, but actually many do not live on large US bases. E.g. my American father did not and I went to UK schools despite being the son of a GI and an English mother. 

Of course, GIs don't benefit from the income exclusion (or at least I did not when I was stationed overseas). On the other hand, many military families have multiple incomes, including local incomes. 

In any case, I think this is irrelevant. Americans overseas span the political spectrum. Arguing otherwise is silly. 

Many, many companies find it beneficial to find export markets and so do our competitor countries. You may think that is trivial given the size of the US economy, but I think that's very complacent. Many companies also think it is beneficial to have feet on the ground in their potential markets. However, employers (including American employers) have reported to me that they prefer not to hire Americans because Americans have to be paid more to offset the higher taxes we pay. 

Because it's more expensive for an American company to send employees abroad than it is for our competitors, that disadvantages American companies but it also disadvantages American individuals. Every non-American citizen hired overseas in preference to an American is a job not enjoyed by an American. I don't think you can reduce the benefit of being employed to simply whether you pay taxes to the US. Surely being employed productively is a good thing in itself. 

Another benefit to not taxing expats that is understood outside the US is the concept of being a tax exile. I think it is a good thing if governments feel pain if they tax people into exile. We have this mechanism at the state level and it helps put a check on the ability of a state to tax its way out of trouble. If State X (call it, say, California) taxes excessively, individuals are free to move to a lower taxing state (call it, say, Texas). The revenue effect is noticed and you will (and do) see articles in the paper. It brings the issue of tax competition to the public fore. 

Similarly, the same happens in many other countries. I recall many articles about the subject growing up in the UK in the 70s for example. It was an argument for more fiscal discipline that was raised in the 80s. Interestingly, when rates were lowered you started seeing articles about former tax exiles returning and bringing their talents and incomes back. A more recent example of the same issue are French entrepreneurs who have recently left France after Hollande's election and who have moved to the UK. This has been noticed in France. 

Unfortunately, the US does not feel that pain because we continue to tax productive citizens even if they leave the country. The only way we can protest are to give up citizenship (which is hard and irreversible) or by breaking or ignoring the law (neither of which are advisable, or right). The country loses in these scenarios both because it loses a valuable early warning signal that it is becoming international uncompetitive, but also because it loses potentially talented individuals. And unlike countries that have suffered periodic brain drains such as the UK and France, anyone giving up citizenship is probably gone for good.


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## Bevdeforges

Simey said:


> bev: to give a personal answer to your question why anyone would bother to vote, I vote while I am overseas for the same reason I vote while in the US. It's my country, and I have a stake in it. I could point to practical issues - I pay taxes and own property etc - but it's broader than that of course, and not dramatically different based on where I happen to be at the time.


I think the issue of both taxes and voting from overseas has lots to do with the specific circumstances of those who are living overseas - why, for how long and a few other things.

There is discussion of the US military personnel overseas. The military does everything possible to allow these people to maintain their US residences, documents (say, driving licenses), benefits (US social security) and as someone has already noted, many overseas military types live in a virtual US "cocoon" with shopping, entertainment and living accommodation all on base and noticeably American. Used to be the FVAP (voting assistance program) was primarily for those in the military and had little or no assistance for non-military folks.

But some of us are permanent residents, or even citizens of the countries where we live. We get little or no benefit from our US citizenship these days, other than a "free pass" to enter and leave the US as we care to, plus the right to vote and to file our taxes each year. (OK, we also have the right NOT to have 30% of our US based income withheld automatically, as would be the case for Social Security or other retirement benefits and savings.) But frankly, that's about it for those of us who are permanently installed outside the US.

I'm perfectly willing to pay US income taxes on my IRA when I start dipping into it in a few years. That was the deal I signed up for when I started an IRA, and it was always advertised as a "deferred" tax savings plan. But I am nowhere near the 30% bracket. I also don't think I should be penalized twice when I start drawing my US SS pension - first by the WEP rule, and then by having my benefits taxed simply because I'm married to an NRA who is not subject to US taxation.

It kind of comes down to the old "think globally, act locally" thing. I vote here in France, and I pay my taxes here (many of which are not deductible in any form on US income tax returns). Very little of what goes on back in the US directly affects me anymore. For those who will or might someday return, it's different.
Cheers,
Bev


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## CdnAllTheWay

I'm sorry but, when you contact the proper government department (DOS), and after 30 minutes of questioning, they tell you that you are not a US citizen, and 20+ years later the same government wants to tax you, that most certainly IS taxation without representation. 

If not, could someone please advise me as to my representative, as I would like to complain about the length of time it takes to receive a CLN, for which I paid $450 US, and spent almost $800 on airfare to acquire?


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## Nononymous

CdnAllTheWay said:


> I'm sorry but, when you contact the proper government department (DOS), and after 30 minutes of questioning, they tell you that you are not a US citizen, and 20+ years later the same government wants to tax you, that most certainly IS taxation without representation.
> 
> If not, could someone please advise me as to my representative, as I would like to complain about the length of time it takes to receive a CLN, for which I paid $450 US, and spent almost $800 on airfare to acquire?


When you went to the consulate for renunciation and all that, presumably they gave you a timeline for receiving your CLN, and possibly some sort of contact information if you have not received it once that time interval has elapsed.

I was confused by your original posts about FBAR and FATCA, getting an ITIN, and all that. If you have renounced, this no longer applies to you. You are off the hook, off the radar, etc. Assuming of course you followed the directions for five years' tax compliance, filed your exit-year return and all that. If you did not do that, I have no idea what happens, but that might explain the non-appearance of the CLN.

(It was precisely all this tax-compliance paperwork that made me think renouncing was - currently - not worth the trouble.)

Another point - if you were told 20+ years ago that you were not a citizen, presumably by taking Canadian citizenship at some point in the past, you were a candidate for "relinquishment" (as opposed to renouncing) and could receive your CLN without spending $450 or dealing with the tax paperwork. However, it sounds like you have renounced already.

Finally, in reality the US government doesn't want to tax you, strictly speaking. They just want you to file tax returns. By the sounds of it you would never have owed them a dime. Filing is still stupid and onerous for a Canadian citizen and resident, but let's be clear, there's no actual money involved unless your circumstances are fairly exceptional.


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## Nononymous

Per all these rather long discussions about voting rights and taxing expats etc. I think it's probably useful to divide US persons into three categories.

1. US citizens who moved overseas, possibly working, have no other citizenship, and possibly maintain ties or intend to return to the US. These are the folks who are likely to vote. The merits of taxing or not taxing them are a long argument that I personally have no stake in, but argue away, those who do care.

2. US citizens who moved overseas as adults, have taken another citizenship, and have no intention of returning. Likely not too concerned with voting. Not as likely to be tax-compliant, and it's probably going to be in their interests to renounce if things continue the way they are.

3. US citizens by birth or parentage, with no connection to the US. Almost certainly they have dual citizenship. Requiring these folks to file tax returns is idiocy. The vast majority are probably unaware of their filing obligations. These are the ones who are - justifiably - getting angry when they do become aware, and in Canada at least, will likely lose their minds when FATCA becomes more widely known. 

I'm about a 2.8, on account of spending a few years in the US back in the 90s.


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## CdnAllTheWay

3. US citizens by birth or parentage, with no connection to the US. Almost certainly they have dual citizenship. Requiring these folks to file tax returns is idiocy. The vast majority are probably unaware of their filing obligations. These are the ones who are - justifiably - getting angry when they do become aware, and in Canada at least, will likely lose their minds when FATCA becomes more widely known. 

This would be me. Born there, to Canadian parents, left US for Canada in infancy. Never worked there, no SSN, never in receipt of any benefit of any kind from the US. How could I ever even expect these things, since the US told me I was not a citizen? All the US has ever done is lie to me, try to tax me, and demand financial information they have no business having.

Nononymous, I filed nothing prior to renouncing. As DOS has no requirements to be tax compliant to renounce, lack of filing on my part should have no affect on the length of time to obtain a CLN.

And yes, I am angry. I was not anti-American before, but I certainly am now. I no longer see the US as the brash young kid, with a heart in the right place. I now see the US as the meth-head in the neighbourhood, that forces you to get a home security system. Rotting from the inside out.


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## CdnAllTheWay

I forgot to add, as I was born dual, I was denied the ability to relinquish at the consulate.


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## Nononymous

CdnAllTheWay said:


> Nononymous, I filed nothing prior to renouncing. As DOS has no requirements to be tax compliant to renounce, lack of filing on my part should have no affect on the length of time to obtain a CLN.


Good luck with that. 

If you do receive a CLN, please let us know. However, as the renunciation process includes a commitment to have filed tax returns for five years and so forth, I rather expect you might not.

In your situation (virtually identical to mine) I would have kept my head down and done nothing. As mentioned earlier, the only potential issue you'd have is travelling to the US on a Canadian passport with a US birthplace. Otherwise this is something you could ignore for the rest of your life, FATCA notwithstanding.

I'm not sure the citizenship advice you received was accurate - if you were born in the US, and born dual, it's a difficult thing to lose. But the rules have changed over the decades.


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## BBCWatcher

Nononymous said:


> I'm not sure the citizenship advice you received was accurate - if you were born in the US, and born dual, it's a difficult thing to lose. But the rules have changed over the decades.


To provide some more details, the 14th Amendment was adopted in 1868. The U.S. Supreme Court ruled in 1898 that children of non-U.S. citizens/non-diplomats (Chinese in that particular case) born in the U.S. are born U.S. citizens owing to the 14th Amendment's Citizenship Clause.

"Difficult to lose" is a bit of an understatement when referring to 14th Amendment (birthright) citizenship. Voluntary renunciation is the only way to lose it.


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## Nononymous

I'm not completely certain of this, but I believe it wasn't impossible to lose US citizenship, at least in the past. You could lose it by acquiring another citizenship, serving in a foreign military, etc. I remember taking a little oath at the consulate to deny having committed these various sins when I applied for a US passport in my twenties. 

There are a few folks on the forum who moved to Canada and became citizens in the 1970s, thus losing US citizenship, and who've recently been able to relinquish (as opposed to renounce) because they argued that the US retroactively made them citizens again in the 1980s, without their necessarily wanting to be. Or at least I think that's how it went.

How this relates to dual citizenship from birth, I'm not sure.


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## Simey

Since the issue came up about voting and the imposition of taxes and burdensome requirements, I'll point out that the sponsor of the FATCA legislation was Rep. Charles Rangel D-NY and the sponsor of the amendment to the FBAR legislation that requires forms to be filed with tax forms was Sen. Max Baucus D-MO (who is retiring). At the time both houses of Congress had Democratic majorities. I don't have the voting rolls, but I doubt this legislation would have passed otherwise. 

Idiocy has adherents in both parties of course. Sen. McCain R-Az joined Sen. Schumer D-NY in lambasting Apple for having smart tax lawyers and being completely law abiding. Nevertheless any expats voting for these guys have only themselves to blame.

Yes, I am being partisan. But I am a little tired of people voting left and then complaining about legislation the people they voted for introduce. Equally, if you have the vote and this issue is important to you, I'd encourage you to exercise your mandate and help elect representatives who understand that economic popularism isn't smart governance and usually ends up hurting people.


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## BBCWatcher

Nononymous said:


> I'm not completely certain of this, but I believe it wasn't impossible to lose US citizenship, at least in the past. You could lose it by acquiring another citizenship, serving in a foreign military, etc.


You are correct, but all that changed (legally speaking) with a U.S. Supreme Court ruling in 1967 (Afroyim v. Rusk) which firmly entrenched the 14th Amendment's birthright citizenship and denied Congress the ability to interfere with it.

This is actually a good thing, though it may not seem like it. That is, only you (the U.S. born individual) have the power to terminate your U.S. citizenship. That's as it should be, in my view, and it's an important individual right. I'd much rather see the individual have sole control in such matters. I also tend to prefer simple, universal rules (rights) for establishment of citizenship. Birth in a particular place is pretty simple.

I would point out that the U.S. is hardly alone in bestowing citizenship automatically on children born within its territory (land, sea, and airspace) who are subject to U.S. government jurisdiction, i.e. not children of foreign diplomats posted to the U.S. Canada is much the same, for example. And while taxes represent one obligation of citizenship they aren't the only obligation. Compulsory military service is a possible obligation that every sovereign government maintains as an option, to pick another example.


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## Bevdeforges

US passports used to carry a "warning" that the commission of certain acts (serving in a foreign military, taking a second nationality, serving in a foreign government, etc.) could cause the loss of your US nationality - and as I understand it, those laws are still very much on the books, though the Supreme Court decision BBCWatcher cited more or less put those laws on indefinite "hold."

Back in the early 1950's there was a woman working at the US Consulate in Paris who took those laws quite literally, and she took it upon herself to confiscate the passports of any American woman who had married a French man without specifically renouncing the automatic French citizenship ship granted at the time to foreign spouses of French nationals. Last I knew, the Paris Consulate was still looking for some of those women to attempt to give them back their US citizenship, but I kind of wonder how many of them were interested after 50 years.
Cheers,
Bev


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## Pacifica

@ CdnAllTheWay, Nononymous,

CdnAllTheWay is correct. Tax compliance is not a requirement to receive a CLN. In fact, if one fails to file the previous 5 years and 8854 by June 15 of the year after renouncing, the loss of citizenship itself remains valid. The only tax-related duties Dept of State has are: (1) to ensure that the person has read and understands the “Statement of Understanding of Consequences” (form 4081), which makes reference to tax in Item 10 (“I understand that” … renunciation/relinquishment may not exempt me from US income taxation …”); and (2) to forward a copy of each approved CLN to IRS (7FAM1240 Interagency Coordination and Reporting Requirements).

Length of time for receipt of CLNs in Canada is currently from about 2 to 6 months. It’s really the consulate official who ascertains that everything’s in order with your file. So, if the consulate has you sign the documents, you can be confident that you will get your CLN. Although HQ in Washington does the official approval, that’s basically paperwork – and it’s basically an administrative processing backlog slowing things down.


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## cescolar

(Boy, quite an interesting thread I started here!  )

How about using the argument: "since all the other countries in the world (Except, of course, Eritrea) think it is not fair to tax their citizens residing abroad, why should the US do it? Because we are "special"?

You ask why do citizens want to live abroad? In my case, because of the economy - at my age nobody would hire me. So I moved to a lower cost country, Brazil (but with the way prices are going up...) and tried to start a business. Now I have horrific paperwork for the IRS and the Treasury because of it! So I have decided to retire and sell the business at a loss...you see what the current tax laws have done?


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## Nononymous

Pacifica said:


> CdnAllTheWay is correct. Tax compliance is not a requirement to receive a CLN. In fact, if one fails to file the previous 5 years and 8854 by June 15 of the year after renouncing, the loss of citizenship itself remains valid.


I don't doubt your reading of the statute, but if this is true, then why are folks so busy dotting Is and crossing Ts to do the IRS paperwork? I'm not talking about Eduardo Saverin here, more the regular Canadians who would owe nothing anyway. Assuming you have no US assets, what if any are the consequences of renouncing and ignoring the tax filing?

I ask because it sounds too good to be true, frankly. But if it is true, I might just trot back down to the consulate...


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## BBCWatcher

cescolar said:


> How about using the argument: "since all the other countries in the world (Except, of course, Eritrea) think it is not fair to tax their citizens residing abroad, why should the US do it? Because we are "special"?


To which every U.S. political leader would reply (with some merit), "Yes, we are special."

That sort of argument didn't fly with my parents when I was 8 years old.


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## Pacifica

Nononymous said:


> I don't doubt your reading of the statute, but if this is true, then why are folks so busy dotting Is and crossing Ts to do the IRS paperwork? I'm not talking about Eduardo Saverin here, more the regular Canadians who would owe nothing anyway. Assuming you have no US assets, what if any are the consequences of renouncing and ignoring the tax filing?
> 
> I ask because it sounds too good to be true, frankly. But if it is true, I might just trot back down to the consulate...


It’s because although the person is incontrovertibly not a US citizen anymore, they’re still on the hook to IRS unless they log out. No matter what, you can’t incur any new citizenship-based debt to IRS once you’ve renounced. But if you don’t file 8854 you fall into the “covered” expatriate category even though you’re below $2 million in net worth (although I think one’s first $600,000 is exempt, anyway – don’t trust me on that, I’m not very knowledgeable on the tax side of expatriation). I also think people, even with much much smaller net worth, log out because people have a tendency to want to tie up loose ends neatly and close the books completely.



Nononymous said:


> Assuming you have no US assets, what if any are the consequences of renouncing and ignoring the tax filing?"


Any consequences at this time would be related to IRS itself. International collections are a problem for them. In Canada, due to the Tax Treaty (s. 26A(8)(a)) CRA will not assist them. As far as I know, most people are filing, but I’m aware of some who are not. As you know, there’s a lot of people who suddenly realised they’re “US persons” who have minimal or no connections to the US, and some figure IRS can’t do anything as they have no assets in the US and they’re comfortable with that. It’s a very individual decision. 


The point I wanted to get across, though, isn’t that one should or should not file tax forms – but that loss of citizenship is not contingent on filing tax forms.


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## Nononymous

Hmm... Hmm... Interesting...

This is tempting. Saves me some paperwork, but more importantly satisfies my stubborn urge to not cooperate with the US government by supplying financial information.

The cynical approach is still to renew my US passport from a temporary European residence later this year, and save myself any hassles with work travel for the next decade. But maybe I renounce from there instead?


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## boating2go

Nononymous said:


> Hmm... Hmm... Interesting... This is tempting. Saves me some paperwork, but more importantly satisfies my stubborn urge to not cooperate with the US government by supplying financial information. The cynical approach is still to renew my US passport from a temporary European residence later this year, and save myself any hassles with work travel for the next decade. But maybe I renounce from there instead?


You definitely want to research denouncing your citizenship. They tax you at the time of denouncing on all taxes on perspective future earnings plus a lot more, you would get an enormous tax bill. Also if you choose not to pay the IRS may take any US income, investments, property, or pensions you have to pay your bill.


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## Nononymous

boating2go said:


> You definitely want to research denouncing your citizenship. They tax you at the time of denouncing on all taxes on perspective future earnings plus a lot more, you would get an enormous tax bill. Also if you choose not to pay the IRS may take any US income, investments, property, or pensions you have to pay your bill.


I don't think that statement is entirely accurate...

Also, it's "renouncing" not "denouncing" (nice Freudian slip though) and "prospective" not "perspective" - on that note I'm not sure how they can tax prospective future earnings.


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## jbr439

Nononymous said:


> ... on that note I'm not sure how they can tax prospective future earnings.


Possibly thinking about defined benefit pensions. The present value of such pensions (i.e. future earning) is used in net worth/exit tax calculations.


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## BBCWatcher

Future U.S. source income is still U.S. taxable, often less favorably (e.g. mandatory 30% withholding), albeit with a reset cost basis if the "exit tax" applies. There can also be future estate and gift tax implications.


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## CdnAllTheWay

I see this thread has resurfaced, so I shall update. I did receive a CLN without filing anything with the IRS. I received it about four months after renouncing. I did file an exit tax form with Treasury the following year, giving limited information. I have heard nothing from the IRS. Not a peep. Anything from the IRS will be met with, "Thanks for the invitation, but I won't be playing."

As I have never had assets or income in or from the US, there's not a damned thing they can do to me. I have no desire to ever set foot in the US again, so they they can huff and puff all they want, their choice.


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