# ACAGF survey on FATCA effects on US overseas



## Bevdeforges

Thought this study might be of interest to those of you dealing with FATCA. It's a study done by ACA Global Foundation and the University of Nevada about the effects of FATCA on US taxpayers living overseas.

http://www.unr.edu/Documents/business/accounting/FATCASurveyReportFinalDraftDecember2015.pdf

Enjoy!
Cheers,
bev


----------



## iota2014

Thanks for posting the link, Bev. I remember doing that survey. 

Also of interest: the Taxpayer Advocate's Report (Taxpayer Advocate Service - Full Report), particularly the backing for the ACA Same-Country-Exception option, and the (disingenuous) IRS response:



> The IRS could have significantly alleviated reporting burdens for U.S. persons who are bona fide residents in foreign countries by revising regulations under IRC §§ 6038D and 1471 to eliminate the requirement to report specified foreign financial assets on the Form 8938 if such persons have reported the assets on the FBAR. The IRS could also facilitate these taxpayers’ legitimate need for local banking services in their countries of residence by excluding financial accounts maintained by a financial institution organized under the laws of the country of which the U.S. persons are bona fide residents from FATCA report- ing.47 To this point, the IRS has not been willing to pursue these recommendations proposed by the National Taxpayer Advocate and supported by other stakeholders.48 In response to the National Taxpayer Advocate’s request that this proposal be included in the U.S. Department of the Treasury Office of Tax Policy and the IRS Priority Guidance Plan, the IRS Office of Chief Counsel maintained:
> Under longstanding U.S. tax policy, U.S. citizens are taxed on their worldwide income irrespective of where they reside. Section 6038D was enacted to provide the IRS with an effective means to ensure compliance by all U.S. taxpayers owning foreign financial assets, including those residing outside of the United States. Thus, it was decided that the regulations under section 1471 and 6038D should not provide a broad carve out (from either the FFI reporting rules or the taxpayer self-reporting requirements, respectively) for U.S. citizens residing abroad as proposed in [TAS Recommendations for Published Guidance under Sections 6038D and 1471]. However, please note that the section 6038D regulations provide very substantial reporting relief for most U.S. citizens who are bona fide residents of another country. The regulations do so by providing aggregate foreign financial asset reporting thresholds for U.S. citizens residing abroad that are very generous and substantially higher than those applicable to other U.S. taxpayers. As a result, only those U.S. taxpayers residing abroad who have very substantial foreign financial asset holdings are required to file a Form 8938.49


http://taxpayeradvocate.irs.gov/Med...RC15_Volume1_LR_05_Foreign-Acct-Reporting.pdf

The TA Report also comments on the closure of the overseas IRS offices:

INTERNATIONAL TAXPAYER SERVICE: The IRS’s Strategy for Service on Demand Fails to Compensate for the Closure of International Tax Attaché Offices and Does Not Sufficiently Address the Unique Needs of International Taxpayers (http://taxpayeradvocate.irs.gov/Med...5_Volume1_MSP_07_International-TP-Service.pdf)


----------



## Bevdeforges

And thank you for the references to the Taxpayer Advocate reports. I'm been very impressed with the work that the Taxpayer Advocate office appears to be doing. Nice to know that someone over there is thinking of us "overseas taxpayers" now and then.
Cheers,
Bev


----------



## BBCWatcher

What's "disingenuous" about the IRS's response? It's entirely factual from what I can tell.


----------



## iota2014

The IRS response as quoted in the TA Report doesn't address the main FATCA problem, which is not Form 8938 but the pointless labelling of US citizens - however low their income and however honest their finances - as troublesome and costly customers for financial institutions to have on their books.


----------



## BBCWatcher

We don't know if that is the IRS's complete response, and the Taxpayer Advocate doesn't claim it is complete. But how is that (perhaps partial) response "disingenuous"? It's your chosen word, not a word the Taxpayer Advocate used. Everything on page 361 that the IRS's Office of Chief Counsel wrote is factual, isn't it?(*)

What exactly is the _IRS_ supposed to do about _that_ alleged problem? Does the IRS decide with whom a bank in Istanbul (for example) decides or does not decide to do business? The Taxpayer Advocate recommended that _Congress_ change the law. Congress (and the President) might have some such influence, although it's rapidly becoming a moot point as the OECD's bank reporting requirements are now coming into effect.

(*) The IRS's Chief Counsel correctly pointed out that U.S. citizens living overseas _already_ receive unique, special relief from IRS Form 8938 reporting: they're the only ones who enjoy a minimum $200,000 filing threshold. What's "disingenuous" about that? It's absolutely true.


----------



## iota2014

> We don't know if that is the IRS's complete response...


Correct, that's why I said "as quoted."



> What exactly is the IRS supposed to do about that alleged problem?





> The IRS could also facilitate these taxpayers’ legitimate need for local banking services in their countries of residence by excluding financial accounts maintained by a financial institution organized under the laws of the country of which the U.S. persons are bona fide residents from FATCA report- ing.47





> ...the OECD's bank reporting requirements are now coming into effect.


The OECD reporting requirements don't single out one particular nationality to be scapegoated.

Interesting observation here:


> Information reporting can be very useful and influence compliant behavior, provided it is narrowly tailored to accomplish a reasonable result. The National Taxpayer Advocate previously has observed that *taxpayers’ willingness to meet their reporting and filing obligations is driven more by considerations of personal integrity and perceptions of systemic fairness than by economic deterrence and enforcement measures.*16 To this point, the entire population of FATCA filers have not, to TAS’s knowledge, shown themselves to be a group in need of special enforcement procedures. *Nevertheless, FATCA starts with the unsubstantiated assumption most taxpayers are bad actors and implements a draconian enforcement regime applied to everyone, even to the vast majority of taxpayers who have been, and likely will continue to be, fully compliant .*


----------



## Bevdeforges

BBCWatcher said:


> (*) The IRS's Chief Counsel correctly pointed out that U.S. citizens living overseas _already_ receive unique, special relief from IRS Form 8938 reporting: they're the only ones who enjoy a minimum $200,000 filing threshold. What's "disingenuous" about that? It's absolutely true.


I suspect what is meant here is that while it's true that the $200,000 filing threshold is higher than the threshold for US residents, it does overlook the idea that for those of us resident overseas, simple retirement investments (heartily encouraged in the US, as well as elsewhere these days) quickly run up balances in the mid-six figures. Or should do if you really intend to retire in the country where you are living like any of the others living there.

And whereas an IRA or 401K is assumed to be primarily taxable in the US and under US terms (certainly in most of the tax treaties I've looked at), a reciprocal "courtesy" is not extended to foreign retirement accounts, even if their terms of taxation are virtually identical to the US "deferred retirement account" terms. (Even worse, I guess, if the foreign retirement account is tax free - a common incentive to get people to save for their retirements - because an American holding such an account loses out on the advantages.) It seems a bit unreasonable to "force" US citizens to only put retirement investments in US funds if they hope to gain the tax advantages.

I'm all for rendering unto Caesar whatever old Caesar is due. I started up my IRA long before I moved outside the US. The deal then was that I was "deferring" tax on those funds until I withdraw the money. My country of residence (and nationality, too) respects that status and considers withdrawals from my IRA to be transfers of capital (like I was just moving funds from my US savings account to my French bank). I pay my tax to the US and that's just fine. It's what I signed up for.

But if I were to have a French assurance vie with tax deferred status and preferred taxation if I withdraw after my retirement, the US does not respect the special status of these funds and it's highly likely that French income taxes paid on the funds will not be sufficient to cover the US tax obligation under the current rules. So, in effect there is a sort of double taxation going on here. Plus all the additional reporting obligation for what is in France, a stock standard retirement account.
Cheers,
Bev


----------



## BBCWatcher

Bevdeforges said:


> I suspect what is meant here is that while it's true that the $200,000 filing threshold is higher than the threshold for US residents, it does overlook the idea that for those of us resident overseas, simple retirement investments (heartily encouraged in the US, as well as elsewhere these days) quickly run up balances in the mid-six figures.


If you're at least relatively wealthy, by definition. The _average_ U.S. IRA and 401(k) balances were well under $100,000 at year end 2014, and that's after a big run up in financial markets. The mean is lower, and foreign experiences are, on average, lower. (The U.S. places a greater emphasis on these types of accounts.) Note that government accounts (e.g. Singapore's) are exempt. Most people don't have $200,000 or more in financial accounts. Maybe they should, but they don't.

But that's not my question. I had a specific question: how is the IRS "disingenuous"? That's basically accusing the IRS of lying. Where is the IRS lying here?

Congress has rarely been shy about setting or changing tax policy -- their job together with the President, not the IRS's -- but Congress also doesn't always agree with the Taxpayer Advocate.


----------



## Bevdeforges

Definition of disingenuous:



> not candid or sincere, typically by pretending that one knows less about something than one really does.


Tax rules are generally set based on US residents and their requirements (i.e. what the IRS or Congress believe are necessary to get the " proper" taxes out of them). The IRS is disregarding the actual situation of overseas residents with regard to local tax rules and financial instruments. And, as the study reports, it's much easier to claim you don't know the situation overseas if you cut off all attempts at two way communication.
Cheers,
Bev


----------



## BBCWatcher

Bevdeforges said:


> The IRS is disregarding the actual situation of overseas residents with regard to local tax rules and financial instruments.


Quite the opposite. The IRS's Chief Counsel exhibited an awareness that U.S. persons residing overseas have a special, unique privilege compared to their U.S. resident peers: higher Form 8968 thresholds.

You might argue that _Congress_ is disregarding something, but the IRS certainly isn't.



> And, as the study reports, it's much easier to claim you don't know the situation overseas if you cut off all attempts at two way communication.


Congress cut the IRS's budget. (Are the groups supposedly representing U.S. persons living overseas lobbying Congress aggressively to increase the IRS's budget, including funding for IRS services and personnel at U.S. embassies and consulates? "Curiously" such groups don't seem to be doing that, as far as I can tell. I wonder why?)

If you're going to criticize, at least blame the correct party here.


----------



## Bevdeforges

> The IRS's Chief Counsel exhibited an awareness that U.S. persons residing overseas have a special, unique privilege compared to their U.S. resident peers: higher Form 8968 thresholds.


That's the IRS Chief Counsel's take on the situation. It is not the way many of us overseas residents see things. Personally, I don't have a dog in this fight - too poor. But I understand the concerns and the points of view of those who are being "inconvenienced" or worse by the current situation.

I'm well aware that IRS budgets have been cut to the bone. But that doesn't mean that I necessarily concur with the manner in which they have chosen to cut back their expenses.

How many angels can dance on the head of a pin, anyhow? :noidea:
Cheers,
Bev


----------



## iota2014

BBCWatcher said:


> Quite the opposite. The IRS's Chief Counsel exhibited an awareness that U.S. persons residing overseas have a special, unique privilege compared to their U.S. resident peers: higher Form 8968 thresholds.


The higher threshold may be presented as a privilege, but looked at in practical terms it seems to be more a question of self-protection. The Sept 2015 TIGTA audit found the IRS struggling to cope with the processing of the incoming deluge of 8938 forms.



> * Transcribed data are not validated to ensure accuracy.
> 
> * Data on Form 8938 continuation statements (used to report additional foreign accounts or other foreign assets) are not transcribed.
> 
> * Losses reported by taxpayers cannot be input as negative amounts.
> [..]
> TIGTA recommended that the IRS: 1) update the compliance activities in the FATCA Compliance Roadmap for identifying noncompliance by foreign financial institutions; 2) initiate a periodic quality review process for the processing of paper Forms 8938 to ensure the accuracy of the data being transcribed; and 3) ensure that the transcription issues identified in this report are addressed.
> 
> The IRS agreed with the first two recommendations but disagreed with some programming changes related to the third recommendation due to *budgetary constraints, limited resources, and competing priorities.*


https://www.treasury.gov/tigta/auditreports/2015reports/201530085fr.html

It does make one wonder - again - why FATCA was launched without the necessary funding to implement it effectively.


----------



## BBCWatcher

iota2014 said:


> It does make one wonder - again - why FATCA was launched without the necessary funding to implement it effectively.


Ask Congress, especially the parts that control Congress.


----------



## Bevdeforges

iota2014 said:


> It does make one wonder - again - why FATCA was launched without the necessary funding to implement it effectively.


Unfortunately, this appears to be SOP for Congress. But hey, at least one of the candidates is "promising" to do away with the IRS altogether. That could solve everyone's problem! 
Cheers,
Bev


----------



## iota2014

Bevdeforges said:


> Unfortunately, this appears to be SOP for Congress. But hey, at least one of the candidates is "promising" to do away with the IRS altogether. That could solve everyone's problem!
> Cheers,
> Bev




Indeedy.


----------



## ersterhernd

Although I was not involved in the survey, as a Canadian I concur with the responses that were tallied. Thanks for posting this.


Ersterhernd


----------



## maz57

BBCWatcher said:


> Quite the opposite. The IRS's Chief Counsel exhibited an awareness that U.S. persons residing overseas have a special, unique privilege compared to their U.S. resident peers: higher Form 8968 thresholds.


Talk about a disingenuous statement, that's not the only "privilege" US persons living overseas enjoy compared the their US resident peers. The IRS' default assumption is that expats are somehow involved in tax evasion. IRS' chief counsel neglected to mention that every legal, ordinary, mundane local account that an expat could possibly have is treated with total suspicion by the IRS. This results in being required to annually submit endless, useless, invasive forms that a homelander holding similar accounts in the US has never even heard of, let alone ever had to fill out. 

They are required to annually register with the Financial Crimes Enforcement unit of the Treasury Department, even having to report (if they happen to have signature authority) accounts that are not possibly any of the IRS' business.

Expats are also subjected to punitive taxation such as the PFIC regime if they hold anything other than a simple savings account for the purpose of retirement savings.

This is more of the same old lame argument that US taxation of expats is more than totally fair because they are subject to the exact same tax code as US resident taxpayers plus a few perks such as the higher 8938 threshold and later filing deadline. In actual fact, US expats are systematically punished simply because they don't live in the US.

If Congress' objective was a "US citizen abroad extermination program" they would be hard pressed to come with anything better than the system which exists presently.


----------



## BBCWatcher

maz57 said:


> This results in being required to annually submit endless, useless, invasive forms that a homelander holding similar accounts in the US has never even heard of, let alone ever had to fill out.


And _less often so_ than their identically situated U.S. resident peers.

Equal treatment under the law is _reasonable_. In this case, Congress -- it's Congress (with the consent of the President, or a supermajority in Congress) -- treats U.S. persons living overseas unequally, in their favor. The law and regulations provide special, unique relief from IRS Form 8938 reporting requirements because the reporting threshold is higher.

There are those -- including you, including perhaps me -- who argue that Congress should be treating U.S. persons living overseas _even more unequally_ than their identically situated peers residing in the United States. But let's be clear about what you're asking of Congress.



> Expats are also subjected to punitive taxation such as the PFIC regime if they hold anything other than a simple savings account for the purpose of retirement savings.


No, every U.S. person is subject to those identical rules, identically. If you're a farmer living in Nebraska and buy a German mutual fund then you (most likely) trigger PFIC rules.

As it happens, I am in favor of clarifying and narrowing the PFIC rules somewhat. But I'm in favor of doing that for every U.S. person.



> This is more of the same old lame argument that US taxation of expats is more than totally fair because they are subject to the exact same tax code as US resident taxpayers plus a few perks such as the higher 8938 threshold and later filing deadline. In actual fact, US expats are systematically punished simply because they don't live in the US.


It's not "lame." It's a fact. How you choose to interpret that fact (or set of facts) is up to you and your politics. But it's still a fact, that U.S. persons residing overseas are treated _at least as well_ as their identically situated U.S. peers. (They even get a two month tax filing deadline extension, as another example.)

By your logic you should be railing against the Congress for having child tax credits. Well, just like living outside the United States, having children is a choice. The tax code provides special tax breaks to those who have children. Likewise, the U.S. tax code provides special, unique tax breaks to those U.S. persons who live outside the United States. You want _more_ tax breaks -- and I might even agree with you -- but (like everything else) that's a political argument, and Congress is the only actor (or set of actors) that can respond to such arguments.



> If Congress' objective was a "US citizen abroad extermination program" they would be hard pressed to come with anything better than the system which exists presently.


Oh, please. Don't be silly. People rightly tune out such hyperbole. As if the 35+ countries with compulsory military service -- more onerous than tax and financial reporting by any reasonable measure -- are in the citizenship "extermination" business. Come on.


----------



## maz57

At least with military service a citizen can serve their time and the obligation is done and over with (provided one isn't exterminated in the process). The tax obligation of a US citizen never goes away. 

There would be many more renunciations than there are already if the US government didn't make it both expensive and severely limit the number of available consular appointments. Some simply go underground and never admit that they are US citizens.

You and I will never agree about any of this but who cares? What does make a difference is what Congress thinks and Congress clearly doesn't think there's a problem. ("We don't forbid you to live outside the United States, but if you do, and you try to have a financial life, expect to be punished for making that choice".)

You call it hyperbole; I call it a systematic attack on US persons living abroad resulting in ever increasing numbers of renunciations. I'm not sure if that is really what Congress' intended, but it is certainly the practical effect of the US tax code and FATCA.


----------



## BBCWatcher

maz57 said:


> At least with military service a citizen can serve their time and the obligation is done and over with (provided one isn't exterminated in the process).


Now why would you think that? It's certainly not a one-time bout of involuntary, unpaid or poorly paid servitude. Let's consider Singapore as an example among these 35+ countries, and it's a reasonable one. The minimum compulsory national service consists of:

(a) Twenty two months of active duty, typically starting from age 18 (assuming you pass a special exam to get a two month reduction);

(b) Reservist callups every year until you're age 40 (i.e. typically for twenty more years). Callups can be up to 40 days per year, although they can be longer in an emergency or some other urgent national need. Callup notices are sent via SMS (text messages), and you must respond to the messages within a certain time period (48 hours, as I understand it) or face penalties if you don't have a good excuse. The reservist activities themselves (recurrent training, medical checkup, etc.) have some greater advance warning if non-urgent.

These requirements apply to both citizens and second generation permanent residents (sons of PRs). Well before age 18 those subject to national service must get explicit permission before leaving the country and must keep the government informed of their whereabouts.

If it weren't obvious, compensation for this obligatory service is extremely far below market rates. Otherwise Singapore could have an all volunteer force if it were paying market rates. But it doesn't, and it doesn't.

The fact is that Singapore has a nontrivial number of males every year who illegally evade, and legally (or quasi legally) avoid, their military service responsibilities. They do things like...take another citizenship or terminate PR status. (Singapore does not tolerate other citizenships, so the acquisition of a foreign citizenship is an expatriating act once known. Countries vary.) As is their right. However, the government has a very long memory, and such individuals sometimes cannot even transit at Changi Airport thereafter, for example. It depends on how amicable the "divorce" was, as it were.

Now where are the people howling about this tyranny or "tyranny," as you prefer? Would you like to take a guess? 



> You and I will never agree about any of this but who cares?


Don't be so sure. But I try to keep my political views separate from the facts.


----------



## Bevdeforges

> You call it hyperbole; I call it a systematic attack on US persons living abroad resulting in ever increasing numbers of renunciations. I'm not sure if that is really what Congress' intended, but it is certainly the practical effect of the US tax code and FATCA.


And others of us find it the simple stupidity of Congressional members who haven't a clue about the extent of the laws they pass, nor their practical impact on Americans living overseas. They appear to be more interested in making the headlines for their constituents - with no consideration (or in many cases, awareness) that they may have overseas residents among the folks they are supposed to represent.
Cheers,
Bev


----------



## BBCWatcher

Bevdeforges said:


> And others of us find it the simple stupidity of Congressional members who haven't a clue about the extent of the laws they pass, nor their practical impact on Americans living overseas.


Or (some people argue) on soybean farmers, antique gun owners, religiously affiliated university administrators, residents of Trenton, school bus drivers, oil rig workers with less than 5 years of experience, public librarians, dermatologists....

Practically everyone has a gripe about Congress. U.S. persons living outside the United States are not unique in that respect. And practically every cohort or interest group frequently expresses sentiments of victimhood, including this one to pick a live example.

Somewhere in the halls of Congress there is a tiny violin orchestra playing for each/every group of alleged victims.


----------



## iota2014

America doesn't collectively care about the collateral damage it inflicts. I was 12 when I got my head round that. It's not personal, it's just one of the attributes of a superpower. America has been a relatively benign superpower, fortunately. Once you find that a superpower is doing something to you that you don't want it to do, the only sensible alternatives are to try to get out of its way (i.e. by renouncing) or accept the damage and adjust to it. Either way, America won't notice or care.


----------



## maz57

iota2014 said:


> America doesn't collectively care about the collateral damage it inflicts. I was 12 when I got my head round that. It's not personal, it's just one of the attributes of a superpower. America has been a relatively benign superpower, fortunately. Once you find that a superpower is doing something to you that you don't want it to do, the only sensible alternatives are to try to get out of its way (i.e. by renouncing) or accept the damage and adjust to it. Either way, America won't notice or care.


How true, but they manage to make enemies out of folks who were previously enthusiastic supporters or at least neutral. And then they wonder why people despise them.


----------



## BBCWatcher

iota2014 said:


> America doesn't collectively care about the collateral damage it inflicts.


For what it's worth, I think that's far too pessimistic. It's also ahistorical. Would _you_ really like to trade today's overall, combined rights, privileges, and obligations of U.S. personhood with those of, say, the 1970s? I certainly wouldn't!


----------



## iota2014

BBCWatcher said:


> For what it's worth, I think that's far too pessimistic. It's also ahistorical.


I don't think it's ahistorical or pessimistic. As superpowers go, America has been relatively benign. It could have been a lot worse.



> Would _you_ really like to trade today's overall, combined rights, privileges, and obligations of U.S. personhood with those of, say, the 1970s? I certainly wouldn't!


If I had my time-travelling druthers, I'd go back and take UK citizenship in 1966, when I married a UK citizen and thereby became eligible under the laws of the time. That would have freed me of US citizenship without a $2350 bill to pay.

US citizenship is valuable to many. It wasn't to me. I've been happy in England, and have often thanked my lucky stars I got out of America when I did.


----------



## BBCWatcher

iota2014 said:


> ....and have often thanked my lucky stars I got out of America when I did.


Vietnam (Draft) Era?


----------



## iota2014

BBCWatcher said:


> Vietnam (Draft) Era?


No. When I say I thank my lucky stars, I mean it (almost) literally. 

Sputnik scared America into passing the Defense Education Act, which decreed national exams of high school seniors in a very typical mission to find some smart American kids to get American satellites up there too. I didn't launch any satellites but I did get a scholarship to a college with an international study-abroad programme, which would never have been possible had Sputnik not inspired that shock of fear in Washington.


----------



## Bevdeforges

BBCWatcher said:


> Practically everyone has a gripe about Congress. U.S. persons living outside the United States are not unique in that respect. And practically every cohort or interest group frequently expresses sentiments of victimhood, including this one to pick a live example.
> 
> Somewhere in the halls of Congress there is a tiny violin orchestra playing for each/every group of alleged victims.


No one here is arguing any differently. But no one has that mythical choice between "today's overall, combined rights, privileges, and obligations of U.S. personhood with those of, say, the 1970s?" It really doesn't matter what you or I or anyone prefers. Personally, I think Congress made a HUGE mistake in listening to the US expats of the 1970's with their demands to allow automatic transmission of US citizenship to children born overseas with a single US parent. (Would have, among other things, saved us at least one of the looney tunes running for President.... but I digress.  ) At the time it seemed like a good idea, but nobody gave any thought to the consequences of what are now called "accidental Americans" who often have no ties back to the Mother Country but suddenly find they are supposed to be filing US taxes.

Maybe the real issue is the too-short planning horizon in the States, or the limited attention span or just the typical US lack of interest of how things work outside the US. But some of those "freedoms" you are so keen to choose may actually be serious inconveniences or problems for people in other circumstances. 
Cheers,
Bev


----------



## BBCWatcher

iota2014 said:


> Sputnik scared America into passing the Defense Education Act, which decreed national exams of high school seniors in a very typical mission to find some smart American kids to get American satellites up there too.


Yes indeed. And it took some public funds to do all that, didn't it?

By the way, Sputnik was launched in 1957. In 1957 the top marginal U.S. personal income tax rate was 91%. That rate kicked in for adjusted income above $400,000 in 1957 dollars, Married Filing Jointly. That's equal to about $3.38 million in current dollars (as I write this).

I don't have perfect data available for 1957, but in 1960 the top income cohort (meaning top 1%, from what I can tell) hit a net effective income tax rate of about 31 percent after credits, deductions, exemptions, etc. That's a few percentage points above today. (Memo to U.S. persons living overseas: if you're upset now, you would have much more upset then.) On a marginal basis the top rate really was that high.



> I didn't launch any satellites but I did get a scholarship to a college with an international study-abroad programme, which would never have been possible had Sputnik not inspired that shock of fear in Washington.


So what you seem to be saying is that government invested in your education -- and in millions of other educations. Sometimes that investment paid off, sometimes not, much as with venture capitalists. Also like long-term investors, the U.S. takes a percentage from the "winners" over their lifetimes.

It's all very...capitalist, if nothing else.


----------



## iota2014

BBCWatcher said:


> Yes indeed. And it took some public funds to do all that, didn't it?
> 
> So what you seem to be saying is that government invested in your education...


Nope. Universities picked up names from the exam lists and sent them offers, part of the struggle to get some brains mixed in with the sports-and-money recruits. One of them wrote to me. 



> -- and in millions of other educations.
> 
> Sometimes that investment paid off, sometimes not, much as with venture capitalists.


Yes, that's one way to look at it. Or from the point of view of the investees, you could call it collateral benefit - the flip side of collateral damage.



> Also like long-term investors, the U.S. takes a percentage from the "winners" over their lifetimes.


Nah...that's just spin, trying to justify the extra-territorial taxation efforts. Citizenship-based taxation doesn't just inflict its demands on US citizens the US has "invested" in, it hits those it _can_ hit. It's about the exercise of naked power. FATCA is its baby.


----------



## Nononymous

BBCWatcher said:


> So what you seem to be saying is that government invested in your education -- and in millions of other educations. Sometimes that investment paid off, sometimes not, much as with venture capitalists. Also like long-term investors, the U.S. takes a percentage from the "winners" over their lifetimes.


My favourite non-hypothetical example of "injustice" - however one defines that - with respect to US taxes and education as follows:

Person with US citizenship grows up in another country, presumably has citizenship as well. Said person goes to university in that country, receives a fellowship to cover living expenses. If said person chose to be compliant with US taxes, the amount of that fellowship in excess of tuition fees would be taxable by the US, even if it's tax-free in their country of residence. (Assuming the amount exceeds the minimum personal exemption, which is certainly possible for graduate work, and it's truly a fellowship for study not paid labour for working as a teaching or research assistant so can't be considered earned income, then yes the US would tax this money.) This amounts to a transfer of funds from said person's country of residence to the US treasury. Pretty good return for an investment of zero by the US.


----------



## BBCWatcher

Nononymous said:


> If said person chose to be compliant with US taxes, the amount of that fellowship in excess of tuition fees would be taxable by the US....


It's not only tuition, and the (less remaining) excess has to be at least above the individual's personal exemption and standard deduction, and it has to be not foreign taxed, and you haven't factored in the American Opportunity Tax Credit which may apply. (You've stumbled into another area of the U.S. tax code where there's a negative income tax rate for some, i.e. a refundable tax credit, i.e. free money from the IRS just because you're a U.S. person.)

You've drawn this illustration too narrowly, to net it out.

That said, it's not actually possible to design a tax system that eliminates _all_ potential "injustices" (as reasonable people would judge such matters), but there really are a whole set of lifecycle effects that annually cycled residence tests simply don't take into account. It's _reasonable_ to take them into account. To do that, some countries have adopted "sticky" residence concepts, and they've been getting more popular and more rigorous, not less.

By the way, I hope everyone realizes that most U.S. universities are heavily government subsidized, starting with the fact that most are tax exempt.


----------



## Nononymous

BBCWatcher said:


> You've drawn this illustration too narrowly, to net it out.


I didn't claim that this was a common problem, but it's certainly possible for a US citizen who spends his or her entire life outside of the US to sluice off funds to the US treasury (in return for nothing, basically) if they choose to be tax-compliant. I find that particularly annoying when it's public funding for scholarships. 

Yes, it's also possible that such a person could also take public funds out of the US under certain conditions (in return for nothing, basically). This is also strange. 



> By the way, I hope everyone realizes that most U.S. universities are heavily government subsidized, starting with the fact that most are tax exempt.


So are everyone else's universities, and probably to a much higher degree. With friends of mine spending close to $60k to send their kid to a "public" university in the US, I'm not sure I'd consider that too heavily subsidized.


----------

