For several years, I’ve been thinking about giving up my American citizenship.
This is not an act of disloyalty or of protest, I hasten to add. I admit there have been moments – when George W. Bush was reelected, for example – when I was angry enough to repudiate my nationality in protest. But I feel an emotional attachment to the United States that anyone who grew up there would understand.
The reason I’ve considered giving it up is purely practical and has to do with taxes.
I hasten to add, again, that this is not about disloyalty. I love the US and I’m not trying to avoid paying taxes. In fact, my income is taxed in the Netherlands at a far higher rate than it would be if I lived in the US.
As an expatriate American, however, I’m still required to pay taxes to the US as well because the US taxes non-residents on world-wide income, although the first $97,600 (the 2013 figure; it goes up each year) that I earn is exempted. As a teacher, I’ll never earn that much. According to the Wall Street Journal, the only other nation that taxes non-residents on world-wide income is Eritrea (though North Korea may also do so, but no one really knows).
Like everyone, I hate filling out tax forms. As an expat, it’s the long form, plus schedules, plus an extra form to claim the expatriate exemption. And it has always annoyed me that I was required to fill out these forms at all, knowing that I wouldn’t have to pay because of the exemption. I pay an accountant to do it instead, but I resent that expense because of its pointlessness.
Once I gained Dutch citizenship, thoughts of giving up my US citizenship centered on these pointless forms.
The last straw was the new “FBAR” form, the “Report of Foreign Bank and Financial Accounts,” introduced a few years ago. Expatriate Americans are required to fill in yet another form, listing every account that has their name on it, along with the highest balance each account carried in that tax year. I object to this form for three reasons:
- It’s none of their damn business how much money my husband and I have in which accounts.
- It’s a nightmare to fill in! Dutch accounts don’t show a running balance, so I end up having to sit down with a calculator and do a year’s worth of arithmetic to figure at what point each account had its highest balance.
- What’s the point? I assume this is meant to be some sort of information-gathering exercise to catch money launderers or terrorists or to prevent people from hiding their money from the US tax authorities. How does knowing my highest balance on my accounts help that effort when you don’t know what that money was for? (We bought a house last year so our active accounts had very high amounts for about a day.)
So when the FBAR requirement started, that’s when I got serious about giving up citizenship. I knew it would take a few years as I moved my pension money out of the US and generally consolidated my finances. The idea of never having to fill out all these forms again (or pay someone through the nose to do it for me) made it worth it.
But now, the US has put another big stumbling block in my way: they’ve raised the price.
That’s right: Americans have to pay to give up their citizenship. The price was $450, which is ridiculous already. Just this month, the price was quietly raised to $2,350!
According to Yahoo News, the price rise might be an attempt to crack down on US citizens who are “hiding their wealth overseas.”
It is also a response to increased renunciations of citizenship due to – surprise! – the onerous FBAR form.
I don’t have any great wealth to hide. I just don’t want to fill out those forms anymore. There are no real practical advantages to keeping my US citizenship; only inconveniences.
According to the same article, Senator Ted Cruz wants a law passed that would take away the citizenship of anyone who goes to Syria or Iraq to help ISIS terrorists.
This seems woefully unfair. These “bad guys” can give up their citizenship for free, while the rest of us “good guys” – law-abiding, peaceful people – get slapped with a $2,350 fine? Really?
The US isn’t earning any tax payments from expats with moderate incomes, like me. The purpose of making its non-resident citizens report world-wide income is to raise tax revenue from wealthy expats. These wealthy expats are the ones who can afford to pay the $2350 fee, which is probably significantly less than their tax bill would be.
The end result: lower tax revenues from expats, and a whole lot of angry expats who want to give up citizenship. Has Congress really thought this through?
Read my next post on this expatriate tax here.
And my more emotional thoughts on renouncing citizenship.