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The US Election, as seen by Overseas Americans

This entry is part 21 of 23 in the series US citizenship

Watching the American election season from abroad is like slowing down as you pass a car accident on the highway. You don’t really want to see the damage, yet you can’t seem to stop yourself from looking. It has nothing to do with you, yet you’re fascinated.

The US presidential election

I gave up citizenship almost a year ago, so, officially, the US election is none of my concern. (Except to the extent that everybody who meets me and hears my American accent immediately asks me about Trump.)

Many Dutch people would argue that it does concern us because it will affect relations between the Netherlands and the US. It will also affect the global economy, which in turn will affect us.

What matters to overseas Americans

Like the American public, the overseas American community (estimated at 7-9 million people) is polarized about this election, but the issues are different.

Perhaps I should rephrase that: the issue (singular) is different.

For many overseas Americans, there is only one issue: FATCA and how they are treated by the US government, especially in terms of tax reporting.

For any readers who haven’t been following this issue, a number of things are wrong with how the US government treats overseas Americans.

Overseas Americans are required to report their account balances to the Financial Crimes Enforcement Network. This is only required of homeland Americans when they are specifically suspected of a crime.

At the same time, foreign banks are forced under international treaties to report the bank balances of US citizens abroad, presumably so that the two reports can be compared.

FATCA is the Foreign Account Tax Compliance Act, and is designed to help the IRS catch tax cheats: those who hide their money in overseas accounts. It requires that accounts held in foreign banks be reported to the IRS and threatens a 30% withholding on any American money going into any bank that does not comply with the law’s reporting requirements.

The basic problem with this situation is that overseas Americans’ regular, everyday bank accounts are in “foreign” banks, local to them.

Since the banks don’t want the expense of these filings to the US government, many are in the process of closing the accounts of US citizens. At the same time, US citizens with foreign addresses can’t open accounts in homeland banks.

Citizenship-based taxation vs. Residence-based taxation

Besides these reporting requirements, overseas Americans have to file US tax forms each year in addition to paying taxes in their country of residence. The US and Eritrea are the only countries that base their tax system on citizenship rather than residency. A citizen of the Netherlands who lives in the US and keeps his money in US accounts does not have to file Dutch taxes. He only files in the US. A US citizen living here in the Netherlands has to file in both countries.

US citizens living abroad who pay taxes in other countries can qualify for an exemption on the first $100,000 they earn. This means they often don’t owe any taxes at all to the US. However, the extra filing requirements are so complicated and nitpicky that many have to pay accountants to make sense of them. The compliance industry is the only party that benefits.

How overseas Americans will vote

So, getting back to the elections, many overseas Americans, if they vote at all, will vote for Trump.

Why? Not because they like him; most don’t. They’ll vote for him because they are single-issue voters, and the Republican platform includes a clear statement in favor of reversing the FATCA legislation and instituting residence-based taxation.

Donald Trump

photo from Wikipedia

The Democratic platform still supports FATCA. Instead, the Democrats support a “same country exemption,” which would let overseas Americans not report their account balances in the country where they live. This, hopefully, would stop banks closing their accounts.

This half-solution has two problems. First of all, it would actually increase the amount of paperwork by adding another form to the pile. And it doesn’t address the basic unfairness of the fact that overseas Americans have to take so many extra steps and expense to prove their innocence of tax evasion.

Given that overseas Americans number in the millions, their vote could have a significant impact on the outcome of the election. While only 12.7% of eligible military and overseas voters took part in the last presidential election (according to the Council of State Governments), it would not surprise me at all if that number went up considerably this time around.

How expatriates have changed

In the past, overseas Americans generally considered their residence to be temporary. They would, for example, be transferred overseas by their employer. After a few years, they’d return. That meant that they identified with the US and felt represented by their Congressional leaders in their home state. They didn’t see a problem with filing taxes for the years they were away.

Nowadays, a side effect of globalization is far more contact between people of different countries and far more mobility. More and more Americans move overseas to stay, either because they work for a company in another country, or because they fall in love with a citizen of another country. For many, it’s a combination of both.

Their children, too, get US citizenship automatically. Sometimes these children have never been to the US, or only for short visits, and many don’t even speak English. Yet they still have to file the extended returns as adults.

My vote, if I could vote

I think I’m probably in the minority among overseas Americans in that if I could vote, I’d vote for Clinton. The Democrats are wrong about their “same country exemption” as a supposed solution to the problems arising from FATCA. Nevertheless, their platform is right about most other issues.

And, of course, there’s the character issue: I would be ashamed to have Donald Trump representing my country. Yes, he speaks his mind, but his mind is full of hate and divisiveness, sexism and racism.

Hillary screwed up big time on the email issue, but she’s smart and articulate and practical. The fact that she is inside the halls of power and knows how to make political deals is a good thing. Whoever is president has to work with Congress to get anything done. After all, they make the laws, not the President. I can’t see Trump doing the kind of negotiating, placating, and bargaining that would be necessary to push a bill through a severely divided Congress. Clinton would have trouble too, but would be better at it than a man who speaks before he thinks.

The election outcome

If Trump wins, America will suffer, at least on any international issue. Foreign governments do not respect him and will be unlikely to seek out opportunities for cooperation. Overseas Americans, however, will be filled with hope that FATCA will be repealed.

I doubt, however, that a repeal will happen. It may be in the Republican platform, but I suspect it will be the first thing traded away in negotiations over a new tax bill. It will be too easy for Democrats to accuse Republicans of being soft on tax cheats, and the Republicans won’t see overseas Americans as being an important enough constituency to resist that pressure.

If Clinton wins, foreign government leaders will be willing to work with her. As far as taxes go, it’ll be business as usual for overseas Americans. They’ll have to continue the expense and injustice of filing all those forms, whether a same country exemption goes through or not. They’ll find it increasingly difficult to do everyday banking, get a mortgage, or make investments. More of them will renounce citizenship, as I did.

As for me, I’ll keep watching the car crash, trying vainly to explain it to my students and pretty much anyone who hears my American accent.

Series Navigation<< Indignation Fatigue and FATCAOn Receiving my California Voter Ballot >>

18 Comments

  • Anne

    October 27, 2016 at 3:45 pm

    Really good blog! and I know it was important for you to give up your USA citizenship, but we could use your vote this November…. Here’s hoping lots of us are “with her” 🙂

    Reply
  • Neill

    October 27, 2016 at 4:20 pm

    Having been on some conference calls with republicans abroad I can say that most overseas Americans don’t seem to be that bothered with FATCA etc. They wanted to talk to the candidates about there VP choice etc. We see the same from democrats abroad as well. Most are likely oblivious.
    I was stunned by this as an immigrant in the US having my foreign pensions attacked.
    If the democrats get in we will have Chuck Schummer with a lot of power. He has said he wants to get people who have renounced. After all the only reason for running away is that you haven’t paid your fair share. the 877A exit tax is his baby.
    I will be voting for Trump. I don’t think he has much chance though.

    Reply
      • Neill

        October 27, 2016 at 7:39 pm

        I think there is a very real chance of it getting worse not better under the democrats.
        They have basically denied the entire situation.

        Reply
          • Neill

            October 27, 2016 at 9:46 pm

            By all measures the complexity of the US tax code is in a worldwide league of its own. Simplification is a must now. Your a victim of this.
            Look carefully at Clinton’s tax proposal (I have). You will find many new levels of complexity.
            Capping itemized deductions in a new way to go with the ways just added by Obama. Capping retirement plans in a way that generates massive complexity in the basis of plans.
            6 new levels of capital gains tax to go with the two extra levels added by Obama.
            An exit tax for corporations to stop them running away but nothing about changing the stuff they are running away from. This can go with the exit tax that Schumer wants to beef up to stop people like you running away. No mention of getting rid of the reasons you might want to run away.
            Extra parallel tax called the Buffet rule to go with the parallel NIIT (net investment income tax) tax Obama added that’s crushing expats who file MFS. This goes with the 3 parallel taxes we had pre-Obama. Extra tax brackets/surtaxes on the wealthy.
            Taking the estate tax into higher rates and more levels.
            New tax on stock trades to go with the SEC tax we already have.
            Thank god I don’t work anymore and can avoid much of this. I should thank Obama for showing me the error of my ways working for so long.

  • Karen Tilley

    October 27, 2016 at 5:28 pm

    A great description of our situation as Americans abroad. I too, have renounced, as much because of the reporting to Financial Crimes Enforcement Network as to citizenship-based taxation requirements. I pay taxes in my country of residence, and am not a FATCAt tax cheat! I can’t wait for this election to end, so embarrassing.

    Reply
  • Shobha

    October 27, 2016 at 11:21 pm

    I don’t think I know anyone voting for Trump. And I know a lot of Americans living in London thanks to where we live. There are larger issues at stake than FATCA’s effect on overseas Americans. Frankly, if you are over with a company, the expat packages take care of most of the double taxation issues.

    Reply
  • JC Double Taxed

    October 27, 2016 at 11:48 pm

    Nice. Nice series of blogs.

    As the FATCA IGA’s were not submitted to the US Senate for approval (as international treaties), their legality is based on Executive Order. Trump said that he would get rid of the unconstitutional executive orders covering a range of areas. So with Trump elected FATCA IGAs can be recinded even without any agreements with the Senate and House. One commentator said that the FATCA Executive Order may be ended with one year notice.

    I am not sure I agree with the view that if Clinton is elected it would be business as usual. She wants to raise taxes, including lowing the death tax exemption. So it appears that there will be more burden on overseas US persons.

    A fine point of the FATCA SCE: yes this may mean more paperwork for US persons overseas (& no help to accidentals). Yet not considered is the extra paperwork for the banks, extra “If then” paperwork, new account procedures, and changes in computer databases, which may mean more of the consequences you mention.

    The Republicans Overseas do support a lawsuit that FATCA and FBAR are unconstitutional on 8 claims fatcalegalaction. The Democrats will not even mention the FBAR part of the injustices. Also, I look forward to the ADCS Canadian FATCA IGA lawsuit proceeding and ADCT constitutional case against US Citizenship Based Taxation (Alliance for the Defeat of Citizenship based Taxation). And here in Australia : http://www.FixTheTaxTreaty.org.

    Reply
  • David Lohrmann

    October 28, 2016 at 11:00 am

    I only voted in 2 presidential elections (for Obama) and I don’t have to tell you what he and the Democratic Party did to thank me for those votes.
    So, basically, I would have initially become a single-user voter if I (as a renunciant) still had the right to vote in American elections.
    However, while giving some attention to HRC over the past months, I’ve noticed many issues which bother me. Unlike old-school politicians like Truman and Eisenhower, Hillary and Bill have both misused public office to become incredibly wealthy. Although they are backed by Wall Street, the world’s financial elite and large corporations, she wants us to believe that she would raise her own taxes and those of her backers to save the middle class. If that were true she wouldn’t so unfeelingly destroy the US middle class living abroad. The Clintons also have 90% of the international media totally under control as political tools to further their own agenda. As a result, much of what they do and say has been played down, glossed over and ignored completely. She has made Trump’s disgusting attitudes and statments toward women her major campaign issue and whitewashed her husband’s appalling track record in that regard. She says that Trump can’t be trusted with the codes, but is constantly threatening Russia with war for alledged and unproven hacking of the DNC headquarters and blurted out America’s nuclear response time to the world during the last debate. Her diplomatic experience is touted as her major advantage over Trump although, aside from George W. Bush, no American has done more to contribute to the mess we have in Libya and Syria today, which also created the refugee crisis we in Europe apparently cannot deal with properly.
    And Hillary clearly has committed perjury and destroyed evidence in connection with Congressional and FBI investigations. Many Americans are now serving very long sentences for less serious and less numerous offenses.
    All of this is just the tip of the iceberg regarding Hillary (and many other members of the Democratic party). But the Dems are not the sole root of the problem. The roots are bi-partisan. I voted for Obama to reverse what Bush had done and he did do a few things better. But he couldn’t stop the expansion of the military-industrial complex, American political and financial overreach and many other issues that were on the big agenda. He even extended American overreach regarding taxation and misused executive orders more than any other US President in history. A vote for either the Dems or the Republicans probably will continue to make things only worse, as was the case under Bush and Obama. If there is any hope of a turnaround, then it rests with the Libertarians or the Greens. But I seriously doubt that they’ll be able to work miracles either.

    Reply
    • Rachel

      October 28, 2016 at 12:25 pm

      I disagree with you on many of your points, as you know. As for the Libertarians or the Greens, because of the electoral college system the US will always move to two strong parties rather than multiple little ones. The little parties can’t win.

      Reply
  • Betsy

    October 28, 2016 at 6:16 pm

    Thoughtful comments here are a breath of fresh air compared to what we see and hear on a daily basis on the mainland. While we’ve enjoyed our time with friends and family after four years absent, our apprehensions about the manipulative tactics in the U.S. media have come to pass. Appalling doesn’t begin to describe the situation. All we can think is, “these two are the best we can do?” Avid supporters on both sides have lost their minds. The next two weeks can’t pass quickly enough. Count your blessings that you only see the tip of the iceberg.

    Reply
  • Victoria@ The British Berliner

    November 4, 2016 at 3:21 pm

    As a British person, I don’t claim to have any say over American affairs especially with Brexit hanging over our heads. Sigh!

    However, I live in Berlin, and many of my expat friends are American. Most of them were surprisingly, supporters of Bernie, but the majority will pretty much be voting for Hilary.

    Fingers crossed!

    Reply

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