Why I’m Giving Up My Passport(nytimes.com)
nytimes.com
Why I’m Giving Up My Passport
http://www.nytimes.com/2014/12/08/opinion/why-im-giving-up-my-american-citizenship-passport.html?&hp&action=click&pgtype=Homepage&module=c-column-top-span-region®ion=c-column-top-span-region&WT.nav=c-column-top-span-region&_r=0
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I think the claim is more that there is no Overseas Constituency (basically a congressional district for non-resident citizens) like several other countries have.
See: http://en.wikipedia.org/wiki/Overseas_constituency
See: http://en.wikipedia.org/wiki/Overseas_constituency
My wife is British, I'm American. I am currently working on several US based companies but I'm confident my Entrepreneurial streak and her desire to go back to the UK will bring about me forming a business overseas.
I knew this was a concern, but I didn't realize so much so that people were giving up their passports?
Reading through the comments, I see a lot of talk about "What are the common people to do?" and that the well off seem to be dancing around this problem?
Am I off base? I just don't see why I couldn't do the same, even as an 'Average' businessman.
I don't see any moral dilemma in moving my money around to the Caymans, or wherever need be to avoid this problem, either. Why is it presented as so difficult, when so many others seem to be doing this so successfully?
As much as I love the United States, having lived here my entire life, I am not going to let them fuck me over.
I knew this was a concern, but I didn't realize so much so that people were giving up their passports?
Reading through the comments, I see a lot of talk about "What are the common people to do?" and that the well off seem to be dancing around this problem?
Am I off base? I just don't see why I couldn't do the same, even as an 'Average' businessman.
I don't see any moral dilemma in moving my money around to the Caymans, or wherever need be to avoid this problem, either. Why is it presented as so difficult, when so many others seem to be doing this so successfully?
As much as I love the United States, having lived here my entire life, I am not going to let them fuck me over.
The comments here seem universally in favor of the author, so I'm going to stick my neck way out, but...
I'm actually kind of worried about tax evasion. Especially here, because jurisdiction shopping seems uniquely available to the wealthy.
I take the author's point that not everyone caught up in this is actively trying to evade taxes, but I'm also not especially saddened by paperwork hardship stories, nor am I moved by taxes on income after the first ~ $100,000 a year.
I'd find the arguments for change far more persuasive if they were accompanied by compelling suggestions on how to prevent tax fraud from people who can afford to buy a house abroad and spend X days a year in it.
I'm serious, I'm in your corner 100% if you just meet me half way, acknowledge these laws have some purpose. There's a problem they're trying to solve, take that seriously. Present a better solution for that problem, rather than just saying we should shrug our shoulders and tear the whole thing down.
I'm actually kind of worried about tax evasion. Especially here, because jurisdiction shopping seems uniquely available to the wealthy.
I take the author's point that not everyone caught up in this is actively trying to evade taxes, but I'm also not especially saddened by paperwork hardship stories, nor am I moved by taxes on income after the first ~ $100,000 a year.
I'd find the arguments for change far more persuasive if they were accompanied by compelling suggestions on how to prevent tax fraud from people who can afford to buy a house abroad and spend X days a year in it.
I'm serious, I'm in your corner 100% if you just meet me half way, acknowledge these laws have some purpose. There's a problem they're trying to solve, take that seriously. Present a better solution for that problem, rather than just saying we should shrug our shoulders and tear the whole thing down.
This was a good thread. I was planning to file for US citizenship before moving back to Sweden but many of the comments here made me reconsider, especially with regard to the reporting requirements. I am willing to gamble with my permanent residency since I am married to a US citizen, and as many have pointed out, citizenship doesn't offer any discernable advantages except the ability to work in the US.
I don't know how accurate this statement is, but I find this pretty ironic.
"The extraterritorial reach of the income tax dates from the Civil War, when the government wanted to prevent Americans from fleeing to Britain to avoid taxes."
"The extraterritorial reach of the income tax dates from the Civil War, when the government wanted to prevent Americans from fleeing to Britain to avoid taxes."
Expatriation and taxes are complex issues with many facets, and I feel the author of the article is naively or deceitfully ignoring them to only focus on the unrealistic solution that would benefit him. First, let's get the taxation-without-representation trope out of the way: you can always vote by absentee ballot in federal elections in your place of last residence in the US [1]. I think it reflects rather poorly on someone if they don't even make that effort--and then complain about it.
As for actually paying taxes, that's fairly well covered in the comments: you don't unless you're making big bucks. The issue seems to be paying an accountant to do the paperwork. Yes, it is slightly more paperwork for an expatriate, but plenty of people in the US pay an accountant to do their taxes too (itemizations, deductions, capital gains, and lots of fancy accounting to reduce taxes). Accountants seem to be about $500, so the $5K figure is for the full service expat (the upper tier whose company pays for everything--or used to), or for those who have 2 businesses like the author. Heck, taxes for business owners in the US are probably $5K as well. For regular employees, it is also possible to download the forms online and file your taxes yourself. That's what I did when I lived abroad as a student and employee.
The new reporting by foreign banks for US citizens seems to be an actual issue. Making foreign banks deal with US bureaucracy sounds like a nightmare, and if they do refuse expat American customers, that might be a problem in day-to-day living. That probably does need some real-world solution, such as raising the limit to 20K for a basic checking account.
The complexity of the US tax forms comes from the innumerable deductions and allowances that are meant to encourage some form of economic behavior (e.g. buy solar panels or invest in local businesses). It's not an ideal system, but it does provide a lot of flexibility and it's one way for the gov't to set economic policy in a county that frowns on more direct gov't involvement.
Finally, on the moral side of the issue, I don't see any problem with a country keeping tabs on the wealth of its citizens who are free to come and go. It's the tyranny of the IRS: rich and poor alike must file. Nobody argues they shouldn't pay taxes when they are in the US, but in order to do that properly, you can't turn a blind eye to what happens to their money when they happen to be out of the country. As other commenters have said, having US citizenship is an insurance of some sorts, and if/when you move back, the irs wants to know where you stashed all your foreign earnings.
I think the US is unique in this regard: lots of wealth, lots of freedoms including travel, lots of tax deductions, and a ruthless IRS that is known to go after the rich and the poor alike. Other countries would probably like to have the power to enforce their tax regimes abroad, but can't.
[1] http://www.howtogermany.com/pages/voting.html
As for actually paying taxes, that's fairly well covered in the comments: you don't unless you're making big bucks. The issue seems to be paying an accountant to do the paperwork. Yes, it is slightly more paperwork for an expatriate, but plenty of people in the US pay an accountant to do their taxes too (itemizations, deductions, capital gains, and lots of fancy accounting to reduce taxes). Accountants seem to be about $500, so the $5K figure is for the full service expat (the upper tier whose company pays for everything--or used to), or for those who have 2 businesses like the author. Heck, taxes for business owners in the US are probably $5K as well. For regular employees, it is also possible to download the forms online and file your taxes yourself. That's what I did when I lived abroad as a student and employee.
The new reporting by foreign banks for US citizens seems to be an actual issue. Making foreign banks deal with US bureaucracy sounds like a nightmare, and if they do refuse expat American customers, that might be a problem in day-to-day living. That probably does need some real-world solution, such as raising the limit to 20K for a basic checking account.
The complexity of the US tax forms comes from the innumerable deductions and allowances that are meant to encourage some form of economic behavior (e.g. buy solar panels or invest in local businesses). It's not an ideal system, but it does provide a lot of flexibility and it's one way for the gov't to set economic policy in a county that frowns on more direct gov't involvement.
Finally, on the moral side of the issue, I don't see any problem with a country keeping tabs on the wealth of its citizens who are free to come and go. It's the tyranny of the IRS: rich and poor alike must file. Nobody argues they shouldn't pay taxes when they are in the US, but in order to do that properly, you can't turn a blind eye to what happens to their money when they happen to be out of the country. As other commenters have said, having US citizenship is an insurance of some sorts, and if/when you move back, the irs wants to know where you stashed all your foreign earnings.
I think the US is unique in this regard: lots of wealth, lots of freedoms including travel, lots of tax deductions, and a ruthless IRS that is known to go after the rich and the poor alike. Other countries would probably like to have the power to enforce their tax regimes abroad, but can't.
[1] http://www.howtogermany.com/pages/voting.html
Is it just me, or does "being a citizen," feel increasingly archaic as time goes on? The idea is still deeply embedded in society and government, and passports still speak volumes (insofar that they're valued differently), but citizenship seems more of a formality. Some are very tied to their countries of origin, but there seems to be a growing trend to simply follow the wealth--whether it be money, standard of living, etc.
If holding additional citizenship becomes a burden, people simply drop it.
If holding additional citizenship becomes a burden, people simply drop it.
I just became a US citizen after living in the country for 23 years. For me, the notion isn't archaic at all. I was a permanent resident for some time. The US could revoke my residency if I spent more than six months consecutively outside the USA.
I do think many people think the term is becoming archaic. For people who live and call a country which they are not citizen in their home, it's definitely not archaic. Becoming a US citizen was one of the most important days of my life.
I do think many people think the term is becoming archaic. For people who live and call a country which they are not citizen in their home, it's definitely not archaic. Becoming a US citizen was one of the most important days of my life.
Doesn't your experience prove the parent's point? For 23 years you've been a productive law-abiding member of society but were stripped of rights just because you are an "alien". Now that you have joined the club you can support similar treatment of others.
I still think it's archaic to discriminate that way against citizens of other countries. (the best part being Americans calling them "non-citizen", exposing either some prejudice or some ignorance or both)
You haven't been around much I take it? Calling people without citizenship "non-citizens" is not a purely American thing.
I have not been to many english speaking countries. I travel a bit, but mostly around Europe, and I have mostly seen signs about the nationality of the passport you're using more than the citizenship of the people (because there can be more than one).
Nationality versus citizenship are not really understood by Anglophones, in my experience. Ethnicity versus citizenship would be closer to the way we speak.
Well said. Very similar situation to my own.
> I just became a US citizen after living in the country for 23 years.
Why? For what benefit? I haven't seen a reason yet to even consider doing that.
Why? For what benefit? I haven't seen a reason yet to even consider doing that.
Read the fine print. You don't have any real rights to your permanent residency. The USA can decide not to renew it for any reason they deem fit.
Also, laws may change in the future that further restrict the entitlements permanent residents have. Permanent residents can be deported. I've been subject to extra screening in customs.
There's a lot of reasons to be a US citizen if you're planning on staying in this country for life.
Also, laws may change in the future that further restrict the entitlements permanent residents have. Permanent residents can be deported. I've been subject to extra screening in customs.
There's a lot of reasons to be a US citizen if you're planning on staying in this country for life.
So it boils down to they treat a foreigner like a foreigner which was clearly spelled out from the beginning.
I've changed countries once, at this point it wouldn't really be assumed I'm planning on staying anywhere for life.
I've changed countries once, at this point it wouldn't really be assumed I'm planning on staying anywhere for life.
It can be as simple as freedom to travel without visas (depending on the country of origin).
When I was young and experimentally idealistic I felt the same way. Thinking of myself as a world citizne, I phoned up the local branch of the UN and asked how I get a UN passport. The very aptient lady on the other end explained that governments hate people without citizenship because they think they might get stuck owing them something, and that UN passports were only issued to refugees who had lost everything, and even then the main function was not to admit them to places, but to have a document that could be associated with an exit date to ensure some transited out of a country.
I still think citizenship ought to be something you choose but in reality it is usually something that happens to you, based on where you emerged into the world and what citizenship your parents hold. This is not going to change for the foreseeable future.
I still think citizenship ought to be something you choose but in reality it is usually something that happens to you, based on where you emerged into the world and what citizenship your parents hold. This is not going to change for the foreseeable future.
I'm afraid we are drifting backwards: a new cold war is looming and, if we are unlucky, it can turn into a hot one, and it's suddenly going to become quite important what citizenship you have (and where you live).
Is it just me, or does "being a citizen," feel increasingly archaic as time goes on
When times are good it might, but just ask Americans who were in Liberia or Sierra Lione recently, or who were in Georgia in 2007, or who were in Ukraine until this year. Citizenship doesn't matter until it really, really matters. In Israel there are increasingly stories about families wondering about whether getting or attempting to get a second citizenship is a form of cowardice or a pragmatic acknowledgement of events on the ground.
We may be living in a peace bubble: http://www.cato.org/publications/cato-online-forum/primacy-f... . I hope that isn't the case. If however it is, citizenship really, really matters.
Let me reiterate that moving towards a safer and more developed world in which citizenship doesn't matter much is great and I hope we do it. But that progress is not guaranteed and is not universal.
When times are good it might, but just ask Americans who were in Liberia or Sierra Lione recently, or who were in Georgia in 2007, or who were in Ukraine until this year. Citizenship doesn't matter until it really, really matters. In Israel there are increasingly stories about families wondering about whether getting or attempting to get a second citizenship is a form of cowardice or a pragmatic acknowledgement of events on the ground.
We may be living in a peace bubble: http://www.cato.org/publications/cato-online-forum/primacy-f... . I hope that isn't the case. If however it is, citizenship really, really matters.
Let me reiterate that moving towards a safer and more developed world in which citizenship doesn't matter much is great and I hope we do it. But that progress is not guaranteed and is not universal.
When times are good it might, but just ask Americans who were in Liberia or Sierra Lione recently
They would probably tell you that the US State Department charges people for being rescued rather than doing it for free like other governments, and that the bill has a habit of being absurdly large and in some cases (like evacuation via aircraft carrier) can result in bankruptcy and people wishing they had not been rescued.
http://travel.state.gov/content/passports/english/emergencie...
Departure assistance is expensive. U.S. law 22 U.S.C. 2671(b) (2) (A) requires that any departure assistance be provided "on a reimbursable basis to the maximum extent practicable.” This means that evacuation costs are ultimately your responsibility; you will be asked to sign a form promising to repay the U.S. government. We charge you the equivalent of a full coach commercial fare on a comparable mode of transportation at the time that commercial travel ceases to be a viable option. You will be taken to a nearby safe location, where you will need to make your own onward travel arrangements. Typically, you will not have an opportunity to select the destination to which we will take you; it will be to the nearest safe location (only in rare circumstances will that be to the United States). If you are destitute, and private resources are not available to cover the cost of onward travel, you may be eligible for emergency financial assistance.
https://goatpath.wordpress.com/2011/02/11/how-much-can-an-ev...
As far as I can tell once you leave US borders, unless you intend to return permanently one day there are no benefits to being a US citizen and lots of downsides.
By the way one thing I keep reading about re: FATCA is that the State Dept seems to be underreporting the numbers of people who are giving up citizenship.
They would probably tell you that the US State Department charges people for being rescued rather than doing it for free like other governments, and that the bill has a habit of being absurdly large and in some cases (like evacuation via aircraft carrier) can result in bankruptcy and people wishing they had not been rescued.
http://travel.state.gov/content/passports/english/emergencie...
Departure assistance is expensive. U.S. law 22 U.S.C. 2671(b) (2) (A) requires that any departure assistance be provided "on a reimbursable basis to the maximum extent practicable.” This means that evacuation costs are ultimately your responsibility; you will be asked to sign a form promising to repay the U.S. government. We charge you the equivalent of a full coach commercial fare on a comparable mode of transportation at the time that commercial travel ceases to be a viable option. You will be taken to a nearby safe location, where you will need to make your own onward travel arrangements. Typically, you will not have an opportunity to select the destination to which we will take you; it will be to the nearest safe location (only in rare circumstances will that be to the United States). If you are destitute, and private resources are not available to cover the cost of onward travel, you may be eligible for emergency financial assistance.
https://goatpath.wordpress.com/2011/02/11/how-much-can-an-ev...
As far as I can tell once you leave US borders, unless you intend to return permanently one day there are no benefits to being a US citizen and lots of downsides.
By the way one thing I keep reading about re: FATCA is that the State Dept seems to be underreporting the numbers of people who are giving up citizenship.
> feel increasingly archaic as time goes on?
It really depends on where you are born.As an american,you can move almost freely across the world.That's not the case if you're born in some god forsaken place in Africa for instance.Being born in the "right place" is definitely a privilege.Trust me.
> but there seems to be a growing trend to simply follow the wealth--whether it be money, standard of living, etc.
It has always been that way.There's nothing new about that.People have been moving where there are better opportunities for centuries.
It really depends on where you are born.As an american,you can move almost freely across the world.That's not the case if you're born in some god forsaken place in Africa for instance.Being born in the "right place" is definitely a privilege.Trust me.
> but there seems to be a growing trend to simply follow the wealth--whether it be money, standard of living, etc.
It has always been that way.There's nothing new about that.People have been moving where there are better opportunities for centuries.
citizenship seems more of a formality
Hardly a formality for citizens of countries that aren't any fun to live in and aren't easy to leave. Ask a Syrian or a North Korean if citizenship is a formality.
Hardly a formality for citizens of countries that aren't any fun to live in and aren't easy to leave. Ask a Syrian or a North Korean if citizenship is a formality.
Only citizens of privileged countries would hold this view, I think.
We hold it in the hopes that eventually all may hold it.
Is following wealth internationally a particularly new trend? Nearly all of America's population is descended from immigrants who came chasing money and/or standard of living.
It matters if you want to participate in democracy by voting. Many (most?) places you can't even vote for your town's major or school board without a national citizenship.
I think you live in a fairly unique situation if you consider citizenship becoming old fashioned. With all the speak about globalization, shifting ones recidence from country to country is not something people generally engage in often. Family, work and living permits, cultural background, language - these are still quite real limitations to most. It's probably a bit different with top experts but by definition most are not...
Isn't it also a fairly modern concept? At least in Europe, until WW1, citizenship and passport checks weren't nearly the thing they are today.
I'm kind of conflicted about this article. As an American living abroad, it's very, very pertinent. On the other hand, it's basically political in nature so I'm going to flag it in any case, as I don't think it's fair to complain about political articles except for ones I really happen to like.
Edit: for those actually interested in doing something, this group looks to be legit: http://americansabroad.org/
Edit: for those actually interested in doing something, this group looks to be legit: http://americansabroad.org/
I think this kind of flagging is misplaced. Politics is usually unwanted on HN because political posts usually reduces to "OMG, [Obama/Tea party] SUXXORZ!!!!".
When it's sufficiently interesting, politics is ok, the problem is propaganda and discussing values that are a matter of taste.
When it's sufficiently interesting, politics is ok, the problem is propaganda and discussing values that are a matter of taste.
> When it's sufficiently interesting, politics is ok, the problem is propaganda and discussing values that are a matter of taste.
https://news.ycombinator.com/item?id=6120530 is a pretty good summary of why I don't want to see politics here. I'll also add the "bullshit asymmetry principle": http://ordrespontane.blogspot.it/2014/07/brandolinis-law.htm... - which tends to become important as these discussions grow. It's super easy to say some inane thing, but to properly refute it requires research, links, statistics, reason... it's difficult. I don't think "good political discussions" are a stable state, either - it's something that might happen for a period of time, but then decay sets in.
https://news.ycombinator.com/item?id=6120530 is a pretty good summary of why I don't want to see politics here. I'll also add the "bullshit asymmetry principle": http://ordrespontane.blogspot.it/2014/07/brandolinis-law.htm... - which tends to become important as these discussions grow. It's super easy to say some inane thing, but to properly refute it requires research, links, statistics, reason... it's difficult. I don't think "good political discussions" are a stable state, either - it's something that might happen for a period of time, but then decay sets in.
Do you also have to pay "thousands" of dollars to accountants? This particular bit seems to be an exaggeration, as I would imagine any tax software should be able to deal with foreign income. And with only federal income to report, this should be cheap too.
Here's an example that explains the tax rules for Canadian Green Card holders who have Canadian tax free retirement savings accounts. It all seems equitable and simple until you start reading deeper and it becomes clear that as a US Green Card holder from Canada working in the US that you probably need regular services from a tax attorney or a very sharp CPA with experience advising Canadians working in the US to keep you out of trouble. You probably only need that for this issue when the rules change but they do change and it's not the only issue that you're going to need professional advice for. The cost of that specialty advice adds up fast. http://www.serbinski.com/working-in-usa/rrsp.shtml
> Do you also have to pay "thousands" of dollars to accountants?
No, I found a good guy who really knows what he's doing up in Vicenza. But between his fee, and a day off work to go see him and get all my US stuff in order... it does start to add up.
> I would imagine any tax software should be able
Maybe, but I doubt it does it nearly as well as a competent accountant, who, for instance, knows how to read an Italian tax filing, and knows the details of the US-Italy tax treaty.
No, I found a good guy who really knows what he's doing up in Vicenza. But between his fee, and a day off work to go see him and get all my US stuff in order... it does start to add up.
> I would imagine any tax software should be able
Maybe, but I doubt it does it nearly as well as a competent accountant, who, for instance, knows how to read an Italian tax filing, and knows the details of the US-Italy tax treaty.
Articles about immigration into/out of the United States seem to hold a special place on HN.
Disregarding the broader debate, I think most would agree that the filing process for Americans who willingly comply is itself egregious.
You can be making less than the exempted amount, and still be obligated to pay thousands simply to file a return.
You can be making less than the exempted amount, and still be obligated to pay thousands simply to file a return.
There has been a good amount of discussion here about the merits of having an automated return generated by the government and have people simply either agree to it or update with additional deductions as appropriate. Unfortunately, because of heavy lobbying, such a thing won't materialize any time soon. [1]
Personally, I'm in favor of a simpler, flatter tax with fewer deductions. Right now the system rewards those who game it more aggressively, rather than rewarding those who behave in financial responsible ways. For example, having a house that one can barely afford with a huge mortgage is better tax-wise than having a modest home and saving/investing more. That seems entirely backwards to me.
[1] http://www.businessinsider.com/intuit-opposes-free-tax-filin...
Personally, I'm in favor of a simpler, flatter tax with fewer deductions. Right now the system rewards those who game it more aggressively, rather than rewarding those who behave in financial responsible ways. For example, having a house that one can barely afford with a huge mortgage is better tax-wise than having a modest home and saving/investing more. That seems entirely backwards to me.
[1] http://www.businessinsider.com/intuit-opposes-free-tax-filin...
Being "financially responsible" is the last thing a government wants to promote. From a moral standpoint we like it when people save, but for the prosperity and growth of the economy at large, everyone should be spending every cent they make.
The purpose of many tax cut/rebate programs is to encourage you to spend money and bolster the economy. If you disagree, want to maybe argue the point instead of just downvoting?
Not sure who down voted, as directionally you are correct.
That said, there is such a thing as a health propensity to save in economics. You want the growth, etc., but you also want demand to be somewhat resistant to short-term ups/downs. That can only be achieved if the consumers save enough in order to keep spending, even if the income is fluctuating.
In practice, this is very very difficulty and has to do with social norms/attitudes as much as with actual economics.
Personally though, the amount of pull back we had in spending in the 2008 crash was not fun. I'd rather forego a bit of growth in exchange for a more consistent demand and a financially more sound neighbors who will not drag me down with them if/when economy sputters.
That said, there is such a thing as a health propensity to save in economics. You want the growth, etc., but you also want demand to be somewhat resistant to short-term ups/downs. That can only be achieved if the consumers save enough in order to keep spending, even if the income is fluctuating.
In practice, this is very very difficulty and has to do with social norms/attitudes as much as with actual economics.
Personally though, the amount of pull back we had in spending in the 2008 crash was not fun. I'd rather forego a bit of growth in exchange for a more consistent demand and a financially more sound neighbors who will not drag me down with them if/when economy sputters.
That's not actually true. If everyone spends at once, the economy can overheat, creating bubbles and uncontrolled inflation. If everyone saves, the economy can contract and we fall into a depression. The federal reserve uses interest rates and other tricks to try to find the (moving) sweet spot where the economy grows without a significant risk of a recession. The performance of the fed and economic policies are debatable, but the principle is sound.
Automated returns would work in simple cases, but not for expats. Expats have to navigate a complicated maze of tax exemptions, tax credits, and foreign currencies, systems and deadlines which are hard to reconcile with their US counterparts.
Except in most cases the "complicated maze" is on the USA side.
This makes an interesting startup idea.
I'm sure those tens of millions would be thrilled to only pay hundreds to a specialty USA startup instead of thousands to local tax accountants.
A theoretical annual market revenue of a billion bucks is not bad. A bit over three million customers is not totally unreasonable, and a third of a thousand dollars is disruptively cheaper but still multiplies out to a lot of revenue.
I'm sure those tens of millions would be thrilled to only pay hundreds to a specialty USA startup instead of thousands to local tax accountants.
A theoretical annual market revenue of a billion bucks is not bad. A bit over three million customers is not totally unreasonable, and a third of a thousand dollars is disruptively cheaper but still multiplies out to a lot of revenue.
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I expect that the American taxation of expats is unlikely to change because there's simply very little economic pressure to do so.
The value of an American citizenship is incredibly high. The vast majority of people in the world would go to great lengths and expense to be able to have one. The taxation requirements, as onerous as they are, are still worth it to the vast majority of citizens.
Similarly, the value of a British citizenship (or of any other powerful western country) is very high, and most people would put up with great costs to have it. The author mentions that he pays quite high taxes there as well.
The marginal value of having an additional citizenship from the set of powerful western countries is quite low, though, which is why this author no longer feels that the costs are worth it. But only an incredibly small fraction of people are in a position to be citizens of more than one powerful western country, which means that the costs of being a citizen will likely continue to be judged (by most people) against the value of citizenship on its own, not as a marginal addition to some other citizenship.
The value of an American citizenship is incredibly high. The vast majority of people in the world would go to great lengths and expense to be able to have one. The taxation requirements, as onerous as they are, are still worth it to the vast majority of citizens.
Similarly, the value of a British citizenship (or of any other powerful western country) is very high, and most people would put up with great costs to have it. The author mentions that he pays quite high taxes there as well.
The marginal value of having an additional citizenship from the set of powerful western countries is quite low, though, which is why this author no longer feels that the costs are worth it. But only an incredibly small fraction of people are in a position to be citizens of more than one powerful western country, which means that the costs of being a citizen will likely continue to be judged (by most people) against the value of citizenship on its own, not as a marginal addition to some other citizenship.
>> I expect that the American taxation of expats is unlikely to change because there's simply very little economic pressure to do so.
On the other hand, it is possible to change it with very little loss of revenue to the US because this taxation raises very little money in practice. Because of the 97.6k income exemption, as well as double taxation tax credits, the only real thing it does is create mountains of expensive paperwork for expats (as well as the IRS). Think along the lines of paying $5k to a specialty accountant to prove that your US tax bill is zero, every year.
The other part of your comment about this affecting only a small fraction of people is inaccurate. It affects all US expats - currently several million (6.32m is the last number I've seen). The only criterion for being affected is US citizenship. Foreign citizenship is irrelevant. You will be taxed in most foreign countries if you are resident there, regardless of your citizenship - and then taxed again by the US on the basis of your US citizenship.
On the other hand, it is possible to change it with very little loss of revenue to the US because this taxation raises very little money in practice. Because of the 97.6k income exemption, as well as double taxation tax credits, the only real thing it does is create mountains of expensive paperwork for expats (as well as the IRS). Think along the lines of paying $5k to a specialty accountant to prove that your US tax bill is zero, every year.
The other part of your comment about this affecting only a small fraction of people is inaccurate. It affects all US expats - currently several million (6.32m is the last number I've seen). The only criterion for being affected is US citizenship. Foreign citizenship is irrelevant. You will be taxed in most foreign countries if you are resident there, regardless of your citizenship - and then taxed again by the US on the basis of your US citizenship.
I don't think it's quite that bad. I've been an expat for some years, and I pay about $200/year to a CPA to make sure everything's filled out. At least for regular employment income it's pretty straightforward, if slightly tedious: report your income and foreign tax paid, run things both with and without the AMT, and declare any foreign bank accounts (declaring again, another way, if any had over $10k in a year). I could probably do it myself, but I figured I'd pay a CPA just to make sure it's done right. Things do get more complex if you run a business or own property, I suspect, but just as an employee I haven't found it difficult to do the annual "$0 tax owed" paperwork.
Do you have a pension fund? Some kind of health insurance that behaves like a bank account? Anything that looks like a mutual fund investment? If so, either your CPA is undercharging you or he is not doing his job properly. I you live a "standard" European life, following the us tax code to the letter is going to put you at a 50-100 page filing.
And if you don't follow the letter - well, depends how much the IRS thinks they can extract from you.
And if you don't follow the letter - well, depends how much the IRS thinks they can extract from you.
There's a lot of boilerplate in the filing, so yeah, it's pretty long. It's pretty mechanical though: you go down a checklist and make sure you've filed everything. I do have a pension fund whose existence I report as an asset. It's exempt from taxation, because the state-administered Danish pension system is specifically exempted in the Denmark–U.S. tax treaty, but I report it on form 8938 and through the FBAR as an account I have an interest in. Healthcare is a single-payer state system, so no accounts or insurances are involved. I do agree things could be simpler, but it's really not the most complex thing about living in another country.
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when I enquired about having mine done (after I learned about the FBAR) I was quoted in the realm of £2k and I'd have to make the trip to London with all my data.
Considering my taxes would be easy peasy, I wouldn't think $5k is out of the range of normal.
Considering my taxes would be easy peasy, I wouldn't think $5k is out of the range of normal.
My friend works at one of the big 4 accounting firms doing international tax, and $5k is the going rate for the services he provides. He said most of the time their services are paid by the employers, though they have a few high net worth individuals who pay for the service.
Ah yeah if it's a big service like that, esp. selling via employers, I could see $5k being the going rate. My employer paid for Deloitte to provide relocation assistance (mostly helping me find an apartment), and I think they charged about the same. You don't really get in the door at those kinds of places for less than a few $k.
If you're an individual with a fairly "normal" expat job (just a salary), I'd recommend finding an independent tax preparer who's done expat taxes before. There are a lot of CPAs who have 1-person offices doing tax prep, and some are knowledgeable about how to file for an expat. I asked around and found a friend-of-a-friend in that line of business.
If you're an individual with a fairly "normal" expat job (just a salary), I'd recommend finding an independent tax preparer who's done expat taxes before. There are a lot of CPAs who have 1-person offices doing tax prep, and some are knowledgeable about how to file for an expat. I asked around and found a friend-of-a-friend in that line of business.
I personally use www.taxesforexpats.com - they charge $350 for the Federal return and $75 for FBAR.
I've been very happy with their service and am happy to recommend them.
I've been very happy with their service and am happy to recommend them.
Neat! I really should check that out.
$200 is an awful lot of money for effectively nothing at all. You sound like someone who doesn't expect to be abroad very long, if you expected to be abroad for the remainder of your life (as many expats are) you'd likely find that $200*40 years to be less pleasant of a proposition.
Eh, it's not nothing, but $200/yr is hardly even among the most important monetary considerations when it comes to being an expat. It'd be better if it were $0, but it's not really a factor in my decision-making, considering all the other costs and complications involved. I certainly wouldn't choose where to live or what citizenships to have over an amount of money that adds up to $2k per decade.
I would hope that that cost covers tax preparation in general, not just the US-specific paperwork.
At least in the UK, paying any money at all for tax preparation is unusual.
Having to do tax preparation is unusual period.
I've filed a total of zero tax forms with the UK government in my lifetime. I've filed several hundred with the US government in a couple of years (and paid third parties money to file "for me" because filing directly is insanely difficult).
I've filed a total of zero tax forms with the UK government in my lifetime. I've filed several hundred with the US government in a couple of years (and paid third parties money to file "for me" because filing directly is insanely difficult).
Having to do significant tax prep is unusual in the US, too: most US employees have taxes withheld (which is required by law), and usually end up with the Treasury owing them at the end of the year.
Guess it depends on what you mean by significant. Mine is a significant burden, but I'm probably unusual, so I checked the national averages.
The IRS says the average time to complete a tax return is 13 hours: - 12% complete 1040EZ at 4 hours each, - 19% complete 1040A at 7 hours each, - 69% complete 1040 at 16 hours each [1].
Since some 150 million returns will be filed this year [2], that's an aggregate of almost 2 billion hours spent. That's just federal, of course. States are probably less time each, since they piggyback on federal, but there's certainly some time spent there.
[1] http://www.irs.gov/instructions/i1040/ar03.html [2] http://www.irs.gov/pub/irs-soi/P6187.pdf
The IRS says the average time to complete a tax return is 13 hours: - 12% complete 1040EZ at 4 hours each, - 19% complete 1040A at 7 hours each, - 69% complete 1040 at 16 hours each [1].
Since some 150 million returns will be filed this year [2], that's an aggregate of almost 2 billion hours spent. That's just federal, of course. States are probably less time each, since they piggyback on federal, but there's certainly some time spent there.
[1] http://www.irs.gov/instructions/i1040/ar03.html [2] http://www.irs.gov/pub/irs-soi/P6187.pdf
Many people fill out the 1040-EZ themselves (a one-page form you can use if you just take the standard deductions and have no unusual tax situations). However, if you can deduct more than the standard deduction, you have non-trivial investments, or any of numerous other situations apply, you have to fill out the full 1040 form, and that requires sufficient effort that there's a substantial tax preparation industry in the US.
That said, there shouldn't be; there's quite a bit of lobbying by the aforementioned tax prep industry to prevent simplification of taxes to the point where everyone could simply file them on their own, as well as to prevent the establishment of an online government-hosted tax prep system. And that's completely ridiculous. The IRS already has more than enough information to simply send everyone a pre-calculated bill.
That said, there shouldn't be; there's quite a bit of lobbying by the aforementioned tax prep industry to prevent simplification of taxes to the point where everyone could simply file them on their own, as well as to prevent the establishment of an online government-hosted tax prep system. And that's completely ridiculous. The IRS already has more than enough information to simply send everyone a pre-calculated bill.
In my case, I pay more than that for just the US-specific paperwork. Naturally, I also have to deal with the Italian side of things, which is not exactly a low-bureaucracy system either.
Yes, but $200 is alot smaller than $5000 stated in the parent comment.
>>> On the other hand, it is possible to change it with very little loss of revenue to the US because this taxation raises very little money in practice.
Are you sure? These tax laws also collect money from US Citezens working as contractors for the US military over seas not just someone who has decided they would rather live in Europe for the rest of their lives. They are often paid 6 figures salaries and there are 10's if not 100's of thousands of them around the world esp. supporting the wars in Iraq and Afghanistan. I don't think you would find a lot of support for reducing their taxes to zero.
Are you sure? These tax laws also collect money from US Citezens working as contractors for the US military over seas not just someone who has decided they would rather live in Europe for the rest of their lives. They are often paid 6 figures salaries and there are 10's if not 100's of thousands of them around the world esp. supporting the wars in Iraq and Afghanistan. I don't think you would find a lot of support for reducing their taxes to zero.
They're being paid by a US employer in that case, and I suspect that they're not being taxed by the host country, since they're temporary residents. Wouldn't that pretty pretty easily distinguished from "employed by private UK company, pays UK taxes"?
No, the fact that the salary is paid by a US employer has nothing to do with it. The tests for the Forgein Earned Income Exclusion are where your "tax home" is which is determined by your place of physical employment and the number of days per year you spend outside of the US. So long as your tax home is in a foreign country and you spend at least 330 days outside the US you don't pay federal income taxes on your first
This site explains the basics. It most definitely does apply to US contractors.
http://www.hrblock.com/tax-answers/services/jsp/article.jsp?...
This site explains the basics. It most definitely does apply to US contractors.
http://www.hrblock.com/tax-answers/services/jsp/article.jsp?...
In Canada, if your working for the canadian government in an embassy or similar in a foreign country, you are taxed according to canadian tax law. Same with temporary assignment abroad. I think the USA can continue taxing it's government soldiers in a similar fashion.
I didn't say that the taxes only affect a small fraction of people. I said that only a small fraction of people have (or can easily attain) dual citizenship, and can reasonably do something about it.
Someone who doesn't have dual citizenship is certainly going to complain about the tax paperwork, but they're not in a position to do much about it. They're not a big enough voting bloc to effect change and they're certainly not going to renounce their citizenship over it without having citizenship in another powerful western country to fall back on.
Someone who doesn't have dual citizenship is certainly going to complain about the tax paperwork, but they're not in a position to do much about it. They're not a big enough voting bloc to effect change and they're certainly not going to renounce their citizenship over it without having citizenship in another powerful western country to fall back on.
It seems like the 97.6k income exemption and double taxation tax credits help explain why this taxation isn't a huge burden on normal expats.
However, we've seen plenty of examples of American corporations setting up offices in foreign countries to avoid paying U.S. taxes -- what's to prevent the highest paid individuals from doing something similar to avoid their tax burden if this taxation policy was changed?
However, we've seen plenty of examples of American corporations setting up offices in foreign countries to avoid paying U.S. taxes -- what's to prevent the highest paid individuals from doing something similar to avoid their tax burden if this taxation policy was changed?
$5k for an accountant to do your taxes is pretty high. I'm self-employed, and I'm paying EUR 500 per year to my accountant. More expensive ones cost EUR 1000. If the US tax system is so complex that it'd require $5000 in accountant work, that's certainly pretty extreme.
"The vast majority of people in the world would go to great lengths and expense to be able to have one."
What is that based on?
What is that based on?
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As someone with an indefinite (10 year renew, for $500/pop) "green card" I've decided going for citizenship after 3-5 years is too risky. I operate a foreign bank account in order to repay my student loans (since it costs me roughly 1% to send money that way Vs. 3% or more via a credit card (even with 0% foreign transaction fees)).
My concern is that if I was a US citizen, the bank might close my account for the reasons cited in the article. So now I won't be able to get citizenship (and e.g. vote, get a US passport) until my loans are completely paid off and I can close the account.
I will say that my "plan" is if I ever leave indefinitely, that I will renounce my citizenship. Having to file US taxes is extremely painful even for someone with "simple" taxes like me (one job, no additional sources of income, few deductions). Before I moved to the US I never had to fill out a single tax form (ever). Americans just love pointless bureaucracy like no other...
I'll be damned if I am filing US taxes from abroad. I just refuse to on principle alone.
My concern is that if I was a US citizen, the bank might close my account for the reasons cited in the article. So now I won't be able to get citizenship (and e.g. vote, get a US passport) until my loans are completely paid off and I can close the account.
I will say that my "plan" is if I ever leave indefinitely, that I will renounce my citizenship. Having to file US taxes is extremely painful even for someone with "simple" taxes like me (one job, no additional sources of income, few deductions). Before I moved to the US I never had to fill out a single tax form (ever). Americans just love pointless bureaucracy like no other...
I'll be damned if I am filing US taxes from abroad. I just refuse to on principle alone.
Just so you know, Green card holders and citizens have the exact same requirements when it comes to taxes and foreign account disclosures. If you are a Permanent resident/Green card holder, you still have to file taxes with IRS regardless of where you live or where your accounts are. The foreign bank account law (FATCA) also applies to permanent residents.
Yes, but permanent residency is easily abandoned, and can later be reobtained if desired (through any available means of immigration).
not so.
there is the tale of a french game developer who did what you said, and the IRS still managed to froze his foreign bank account.
basically, he gave up his US residency. Moved back to his native france, joined a game company that turned huge. on the IPO(?) the IRS got france to hold his assets because he was evading taxes, by renouncing the residency.
..i'm trying to find the history or the names. but failing, i'm sure someone here can help...
there is the tale of a french game developer who did what you said, and the IRS still managed to froze his foreign bank account.
basically, he gave up his US residency. Moved back to his native france, joined a game company that turned huge. on the IPO(?) the IRS got france to hold his assets because he was evading taxes, by renouncing the residency.
..i'm trying to find the history or the names. but failing, i'm sure someone here can help...
But if you're going to abandon your green card, you need to do it before the eight year because doing it after that makes you subject to the exit tax where abandoning your green card requires giving up a nice chuck of your net worth.
As a green card holder, you are already taxed as a US permanent resident (ie: in the exact same way as a US citizen, regardless of where you live). If your bank knows and hasn't forced you to close your account, they're probably OK with having you. If they don't know, well, use your best judgment.
> My concern is that if I was a US citizen, the bank might close my account for the reasons cited in the article. So now I won't be able to get citizenship (and e.g. vote, get a US passport) until my loans are completely paid off and I can close the account.
So when you're a US citizen, they will close your bank account, and you will not be able to become a US citizen anymore? I don't quite follow.
So when you're a US citizen, they will close your bank account, and you will not be able to become a US citizen anymore? I don't quite follow.
I'm not sure what you aren't following.
- I am currently a green card holder
- I can remain in the US indefinitely, I only have to pay $500 to renew my green card every 10 years, inform them if I am abroad for over 6 months, and not commit any serious crimes.
- I can apply for US citizenship in 2-4 years. US citizenship grants me some rights and takes away from restrictions.
- If I apply/gain for US Citizenship my bank abroad might close my account due to the US government rules (see the article).
- So instead I won't apply, will remain on a green card, and will wait until the account can be closed in 7-10 years time.
- Once the account is closed I can apply for US Citizenship if I wish.
- I am currently a green card holder
- I can remain in the US indefinitely, I only have to pay $500 to renew my green card every 10 years, inform them if I am abroad for over 6 months, and not commit any serious crimes.
- I can apply for US citizenship in 2-4 years. US citizenship grants me some rights and takes away from restrictions.
- If I apply/gain for US Citizenship my bank abroad might close my account due to the US government rules (see the article).
- So instead I won't apply, will remain on a green card, and will wait until the account can be closed in 7-10 years time.
- Once the account is closed I can apply for US Citizenship if I wish.
OK, I get that you have the risk of your bank account being closed due to citizenship (which I imagine, is something that can only happen after the fact?) but I just don't see what the possibility of closing of your foreign bank account has to do with obtaining your citizenship.
Not trying to be pedantic, just genuinely curious (I'm a GC holder myself): Why should the USCIS care about your foreign bank account?
Not trying to be pedantic, just genuinely curious (I'm a GC holder myself): Why should the USCIS care about your foreign bank account?
He's saying he can't get citizenship in the sense that he can't risk having his foreign bank account closed--not that he is prevented from doing so by the US government.
It has nothing to do with it. But up until now the majority of accounts negatively impacted by these rules have been owned by US Citizens, US Permanent Residence have slipped under the radar so far partly because our accounts are owned by a local national (in our respective home countries) from the perspective of the bank and partly because they just haven't done it yet.
If you change status from a permanent resident to a citizen it won't magically cause your bank account to close, but you might now be on their "list" and the US government can move easily bully a bank into closing the account of one of "their" nationals. It has nothing to do with the USCIS, and everything to do with the IRS.
If you change status from a permanent resident to a citizen it won't magically cause your bank account to close, but you might now be on their "list" and the US government can move easily bully a bank into closing the account of one of "their" nationals. It has nothing to do with the USCIS, and everything to do with the IRS.
if parent becomes a US citizen, parent's bank account might be closed. therefore, parent 'cannot' become a citizen.
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Have you run the numbers on refinancing the loan?
(I realize it may not be an option, but if you already have a fairly clear plan to stay in the US, it would seem worth pursuing, maybe even just to avoid all the money transfer fees)
(I realize it may not be an option, but if you already have a fairly clear plan to stay in the US, it would seem worth pursuing, maybe even just to avoid all the money transfer fees)
Don't know about GP, but as a Swede the interest on my government student loan is lower than the interest on my savings account. I imagine the situation is similar in other parts of Europe.
Pretty hard to compete with that.
Pretty hard to compete with that.
Yeah, I don't necessarily expect it would make sense. I don't even know what sort of US loan you could get to do such a thing.
But if the loans aren't all that large, maybe it's still worth spending an extra $1000. A specific analysis of a real situation is what I was interested in.
But if the loans aren't all that large, maybe it's still worth spending an extra $1000. A specific analysis of a real situation is what I was interested in.
If you live in the US and your other bank becomes aware of that, they'll probably decide it's easier to close your account than deal with FATCA anyway.
I'm hearing the same thing on the ground - US citizenship is highly prized but people are still dropping it like a hot potato because of this.
The article is wrong in that:
>We are the only country (except, arguably, Eritrea) that taxes all of its citizens on worldwide income
Nope. South Africa does this too...the rules are very forgiving though so it tends to be OK anyway despite it being technically "world-wide income".
The article is wrong in that:
>We are the only country (except, arguably, Eritrea) that taxes all of its citizens on worldwide income
Nope. South Africa does this too...the rules are very forgiving though so it tends to be OK anyway despite it being technically "world-wide income".
I think what the guy was referring to was taxing citizens who don't live in the country on income arising outside the country. SA doesn't seem to do that:
http://www.sars.gov.za/ClientSegments/Individuals/Tax-Stages...
http://www.sars.gov.za/ClientSegments/Individuals/Tax-Stages...
ah - thats going into specific legislation. We're probably both right in our own ways....
It boils down to the definition of "resident" under SA law. I studied this at varsity and we can debate it...but lets rather not. My point was simply that SA tax laws have "taxed on global income" rules...contrary to what the article suggests.
It boils down to the definition of "resident" under SA law. I studied this at varsity and we can debate it...but lets rather not. My point was simply that SA tax laws have "taxed on global income" rules...contrary to what the article suggests.
China taxes worldwide income also for their citizens, it's just that this rule is mostly ignored.
Being a US citizen certainly benefited him when he was abroad yet he was selected to be a Rhodes scholar.
I support a reduced tax bill when you are living abroad but to say Americans should pay no taxes is ridiculous. They most likely had some direct/indirect benefits from being American and also can always return to a vibrant and economical strong society. It is like insurance, they should still have to pay some premium.
I support a reduced tax bill when you are living abroad but to say Americans should pay no taxes is ridiculous. They most likely had some direct/indirect benefits from being American and also can always return to a vibrant and economical strong society. It is like insurance, they should still have to pay some premium.
You're missing the point.
This isn't about tax avoidance-- as the article points out the first $97k earned abroad isn't taxed and above that it isn't double taxed.
The problem is that the regulations are absurd, not well documented, and the fines and penalties for innocent errors (such as not filing the right form at the right time for bank accounts on which you owe no tax) are extraordinary.
As an american who has spent an extended time abroad, we also suffer from the fact that the rules for banks are so bad that many countries simply won't open bank accounts for americans, because they aren't prepared for the hassle.
It's often quite difficult to live and work in a country and not have a local bank account. It makes getting and making payments to people in that country much more difficult.
This isn't about tax avoidance-- as the article points out the first $97k earned abroad isn't taxed and above that it isn't double taxed.
The problem is that the regulations are absurd, not well documented, and the fines and penalties for innocent errors (such as not filing the right form at the right time for bank accounts on which you owe no tax) are extraordinary.
As an american who has spent an extended time abroad, we also suffer from the fact that the rules for banks are so bad that many countries simply won't open bank accounts for americans, because they aren't prepared for the hassle.
It's often quite difficult to live and work in a country and not have a local bank account. It makes getting and making payments to people in that country much more difficult.
Exactly, the US regulations are absurd. And not just for US citizens living abroad. I'm Canadian living in the US as a resident and have a couple of real estate investment interests in Canada, but also can't create an investment account with my Canadian bank because of the regs. The regulations around overseas investments can be punitive to the max, with penalties to boot. You can run into PFIC rules, etc. It costs me over $1500/year to get an accountant to do my US taxes, and I've had specialty crossborder accountants refuse to do my return because it's too complex even for them and they are afraid of the liabilities. Not to mention that you actually can get double taxed when the US doesn't recognize a particular type of income from across the border.
You should tell the author of the article that because he states:
"The challenges facing expat Americans abroad would disappear if the United States taxed and regulated only those who lived in America."
He is advocating taxing avoidance clear as day.
I agree the rules and regulations should be better. But he is going one huge step further.
He is advocating taxing avoidance clear as day.
I agree the rules and regulations should be better. But he is going one huge step further.
He does NOT pay US tax under the current system. So, he is not trying to avoid US tax. He is trying to avoid paying $5K to an accountant to do his US tax forms for which he does not owe any tax.
It doesn't matter what he personally pays or doesn't.
He clearly states US citizens abroad should not pay US taxes. (edit to add "US" which I thought was obvious)
He clearly states US citizens abroad should not pay US taxes. (edit to add "US" which I thought was obvious)
> He clearly states US citizens abroad should not pay taxes.
That's not exactly true: he states that US citizens abroad should not pay US taxes. We already have to pay taxes in the places we live, just as non-US citizens living in the US still have to pay taxes in the US.
That's not exactly true: he states that US citizens abroad should not pay US taxes. We already have to pay taxes in the places we live, just as non-US citizens living in the US still have to pay taxes in the US.
Imagine someone born in the US. They leave the US at three months old. They live their entire lives in their parents - in their - country. They are educated there. They work there. They don't have a US passport and haven't ever visited the US.
In your opinion: should that person pay US tax?
In your opinion: should that person pay US tax?
That person should be able to give up their citizenship for free.
Many people even if they don't live in the US get the benefit of people the US citizen. The author didn't live in the US yet still got a Rhodes scholarship.
Why are you so incensed by this? Does it make any difference at all if you know that the only other country in the entire world that taxes based on citizenship rather than residency is Eritrea? Even assuming you grant that the state is a reasonable entity to begin with and it is due tribute from everybody whom it claims ownership over, why should somebody pay tax in a country they no longer reside in for goods and services they no longer make use of?
I live and work in Italy, for an Italian company, and have to pay taxes to Italy. I use Italian health care. My children go to Italian schools. I don't see why I should pay taxes to the United States. If my Italian wife were to live in the US, she would not owe any taxes to Italy. This is true for citizens of all countries besides the US and Eritrea, and the latter probably does not have the means to enforce it.
http://en.wikipedia.org/wiki/International_taxation#Individu...
http://en.wikipedia.org/wiki/International_taxation#Individu...
Then you might consider giving up your US citizenship. Of course this means your children (that you have not had yet) should not be able to claim US citizenship.
So I should give up my citizenship? No thanks. I think my country should stop being so overbearing and invasive, thank you very much, like all the others (in this particular matter, at least). "Land of the free" and all that.
> He is advocating taxing avoidance clear as day.
What's so extraordinary about "avoiding" to pay taxes for services you will not use?
What's so extraordinary about "avoiding" to pay taxes for services you will not use?
Because being an American citizen is like having insurance as I clearly stated before. Also before he got the benefit of being American even though he was living abroad when he took the Rhodes scholarship.
If he doesn't want to have "being American insurance" then yes maybe he should give up his citizenship.
Had he argued just for less complex rules and regulations then I agree but that is not all he is advocating.
He is telling US taxpayers hey keep the country going, I am not going to contribute anything but I want to be able to easily comeback if I need to.
If he doesn't want to have "being American insurance" then yes maybe he should give up his citizenship.
Had he argued just for less complex rules and regulations then I agree but that is not all he is advocating.
He is telling US taxpayers hey keep the country going, I am not going to contribute anything but I want to be able to easily comeback if I need to.
> He is telling US taxpayers hey keep the country going, I am not going to contribute anything but I want to be able to easily comeback if I need to.
And once he comes back he will be liable to paying taxes.
Besides, is this Rhodes scholarship publicly financed? Because according to wikipedia it's funded by a private trust in England.
And once he comes back he will be liable to paying taxes.
Besides, is this Rhodes scholarship publicly financed? Because according to wikipedia it's funded by a private trust in England.
> He is telling US taxpayers hey keep the country going, I am not going to contribute anything but I want to be able to easily comeback if I need to.
FTA: "My “in-person final loss of citizenship appointment” is scheduled for Jan. 14 at the United States Consulate here."
FTA: "My “in-person final loss of citizenship appointment” is scheduled for Jan. 14 at the United States Consulate here."
>I support a reduced tax bill when you are living abroad but to say Americans should pay no taxes is ridiculous.
I'm fairly sure America is the only country that taxes non-resident citizens. Why do you think America is right and every other country is wrong?
I'm fairly sure America is the only country that taxes non-resident citizens. Why do you think America is right and every other country is wrong?
Ugh, there are a lot of countries, including big ones like china.
> Ugh, there are a lot of countries, including big ones like china.
The table in http://en.wikipedia.org/wiki/International_taxation#Individu... states "no" for "taxes foreign income of nonresident citizens" for China. Is that incorrect?
The table in http://en.wikipedia.org/wiki/International_taxation#Individu... states "no" for "taxes foreign income of nonresident citizens" for China. Is that incorrect?
Yep, it is a commonly misunderstood and ignored aspect of the Chinese tax system. I have to stay out for one month every five years to avoid it.
I'm confused. Are you a Chinese tax resident? Are you a legally non-tax-resident Chinese citizen? My question was about taxation of non-Chinese income of non-resident Chinese citizens. (Forming an analogy to taxation of British income of British-resident American in the opinion.)
I am a Chinese tax resident but an American citizen. China taxes worldwide income for citizens as well as long term residents (they don't really do green cards), I have to do the one month thing every five years to avoid it. The gov is also not aggressive in enforcement.
Even austrailia taxes worldwide income, America is not that unique here.
Even austrailia taxes worldwide income, America is not that unique here.
I think you are confused about foreign residence and foreign taxation. Most countries will tax all foreign income if you are a tax resident of their country. But not many tax foreign income of citizens who are resident in a foreign country, and Australia definitely does not do this. If you are a resident of another country then Australia doesn't make any demands on you at all. The only catch is that a temporary residence overseas might mean they still consider you to be an Australian resident for a time.
Yes but the issue is about taxing worldwide income of non-resident citizens. Do Chinese laws provide for taxing U.S. income of Chinese citizens who permanently live and work in the U.S.? (Leaving aside enforceability.)
Taxing foreign income of tax-residents is, as you said, common, most first-world countries do it.
Taxing foreign income of tax-residents is, as you said, common, most first-world countries do it.
Not sure, even then usa and Chinese taxes are about the same and would cancel out. But this is an issue when a PRC resident goes to work in in a low tax country like Hong Kong or Singapore (just like for us, actually). The government was talking about cracking down on PRC citizens working in Hong Kong.
This should apply the same to any country, so, Singapore.
Do Chinese laws provide for taxing Singapore income of Chinese citizens who permanently live and work in Singapore?
If so, is it a matter of not recognizing the citizen is non-resident in China (e.g. claiming it is a "temporary" non-residency)?
Do Chinese laws provide for taxing Singapore income of Chinese citizens who permanently live and work in Singapore?
If so, is it a matter of not recognizing the citizen is non-resident in China (e.g. claiming it is a "temporary" non-residency)?
I understand what you are saying now. No, China just taxes residents on worldwide income, citizens who aren't residents are not.
If you can avoid it by spending a certain amount of time out of the country then surely it is not what is meant by non-resident taxation in the context of this article?
Yes, you are right. I was misunderstanding the context.
America isn't every other country. In most cases America offers more opportunity than anywhere else.
In this case, more opportunity to do paperwork and apply for special interest tax breaks :)
From my perspective it offers less. For instance, holding a passport from nearly any other country is effectively like holding a form of health insurance - if you get diagnosed with a long-term disease like cancer, you can repatriate and get free treatment. Not so with US citizenship.
Yet other countries don't charge for this much more tangible privilege.
The US passport also isn't even in the top 10 most valuable ones to hold for travel https://www.henleyglobal.com/international-visa-restrictions...
Yet other countries don't charge for this much more tangible privilege.
The US passport also isn't even in the top 10 most valuable ones to hold for travel https://www.henleyglobal.com/international-visa-restrictions...
That's why it shouldn't need to tax its citizen abroad...
Please cite sources. While we're trading unsubstantiated opinions; I disagree. I moved to a country everyone said had a crap economy and it has offered far more opportunity.
Of course, you're probably right. The real lesson here is to including supporting evidence and not just your feelings.
Of course, you're probably right. The real lesson here is to including supporting evidence and not just your feelings.
"So most expatriates owe no money to the I.R.S. each year — and yet many of us have to pay thousands of dollars to accountants because the rules are so hard to follow."
This is where the problem is. The rules are just so damn hard and complex. I lived in HongKong for a couple of years outside US and expat tax is nothing short of nightmare even when you know you won't owe a penny to the IRS. The tax in HongKong is as simple as it gets and Yes US is a much bigger country and all that but I fail to understand why things are so complex. I love my accountant but sometimes I wonder would she exist if I can do my own taxes in a matter of a few clicks ?
Coming back to giving up US passports point, well good for the author but like someone else mentioned, the value of US citizen or even a Permanent Residency (green card) is really high even though you have to go through so much trouble just to file the damn taxes. Unless you are tremendously successful already with tons of money and not to worry about your financial future AND can choose to live anywhere, sure giving up the US passport will be much easier. Otherwise, it will take serious guts.
This is where the problem is. The rules are just so damn hard and complex. I lived in HongKong for a couple of years outside US and expat tax is nothing short of nightmare even when you know you won't owe a penny to the IRS. The tax in HongKong is as simple as it gets and Yes US is a much bigger country and all that but I fail to understand why things are so complex. I love my accountant but sometimes I wonder would she exist if I can do my own taxes in a matter of a few clicks ?
Coming back to giving up US passports point, well good for the author but like someone else mentioned, the value of US citizen or even a Permanent Residency (green card) is really high even though you have to go through so much trouble just to file the damn taxes. Unless you are tremendously successful already with tons of money and not to worry about your financial future AND can choose to live anywhere, sure giving up the US passport will be much easier. Otherwise, it will take serious guts.
What does that fellow want from me now? He says in the article that the first 100 kUSD of foreign earnings aren't taxed, and to fix this he wants to end taxation of expatriates altogether.
It's reminiscent of Prop 13 in California. It was sold as a means to keep the elderly on fixed incomes in their homes, but it also applies to commercial real estate, and that was the purpose of the execrable thing.
Pass the bucket, I'm going to throw up.
It's reminiscent of Prop 13 in California. It was sold as a means to keep the elderly on fixed incomes in their homes, but it also applies to commercial real estate, and that was the purpose of the execrable thing.
Pass the bucket, I'm going to throw up.
The argument here is mostly NOT about paying tax. There are exemptions that cover that. He wants to not pay $5K a year to an accountant and have his bank accounts closed by banks afraid that the US government will confiscate 20% of all money transfers if don't report US expats' accounts correctly.
Because it is a marginal tax rate on everything if you have to pay an accountant to prove to the IRS you don't owe anything. Plus in most instances that income will be being taxed in another country - the author is in Britain and we definitely have tax here!
So not only is it double taxation but it is taxation without representation, something that's generally considered bad...
So not only is it double taxation but it is taxation without representation, something that's generally considered bad...
He can vote. He just doesn't know how. The only Americans that can't vote are in the non-state regions within the territory of the United States. I live overseas and have no problem voting in every election held in Massachusetts. Your district where you vote is the place you last held residency.
> Your district where you vote is the place you last held residency.
As an American abroad, this makes little sense to me.
Rather than spread our votes out across the country by forcing us to vote where we last held residency, why not allow Americans abroad to elect their own representatives?
I have more in common with other Americans abroad than I do with the average voter in the state where I last lived nearly 20 years ago. We wouldn't expect a former New Yorker, now Texan to continue voting in New York's elections. But if someone moves from New York to, say, Mexico City, that's exactly what happens.
As an American abroad, this makes little sense to me.
Rather than spread our votes out across the country by forcing us to vote where we last held residency, why not allow Americans abroad to elect their own representatives?
I have more in common with other Americans abroad than I do with the average voter in the state where I last lived nearly 20 years ago. We wouldn't expect a former New Yorker, now Texan to continue voting in New York's elections. But if someone moves from New York to, say, Mexico City, that's exactly what happens.
While representation is certainly an issue, many expats with two nationalities get to vote twice; in both their countries. Double representation isn't exactly fair either.
It would be nice if people simply voted and paid taxes where they live, and moving to another country was easy, removing the need to hold on to previous nationalities.
It would be nice if people simply voted and paid taxes where they live, and moving to another country was easy, removing the need to hold on to previous nationalities.
> end taxation of expatriates altogether
Taxation of expatriates which is something that literally no other developed nation does, and they seem to be doing fine.
This is reflected in the fact that now many banks abroad will simply not let Americans open account with them. Any other nationality is fine.
Taxation of expatriates which is something that literally no other developed nation does, and they seem to be doing fine.
This is reflected in the fact that now many banks abroad will simply not let Americans open account with them. Any other nationality is fine.
I am an American who has lived in Norway for several years. I have to deal with this crap every year and, when the time comes to choose between passports, I am honestly not sure which choice I will make. I love US, as I spent my formative years there and those were some pretty good years, but am less a fan of US tax law.
Yep. I find the Norwegian taxation system to be considerably more manageable and equitable. You pay taxes that are not much higher than in the US and actually get things in return, like excellent health care, free tuition a social safety net, better infrastructure, and a much much higher standard of living across the board. Wellstone was right: We all do better when we all do better. It's genuinely great, but I digress...
The other awesome thing about Norwegian taxes is that the government does it for you. At the end of the year, they send you form with all of your taxes done and ask, "Is this right?" If it is, you click a button and are done. If not, then you might have to do a little work, but it is still so so so much less than managing the US taxes.
Yep. I find the Norwegian taxation system to be considerably more manageable and equitable. You pay taxes that are not much higher than in the US and actually get things in return, like excellent health care, free tuition a social safety net, better infrastructure, and a much much higher standard of living across the board. Wellstone was right: We all do better when we all do better. It's genuinely great, but I digress...
The other awesome thing about Norwegian taxes is that the government does it for you. At the end of the year, they send you form with all of your taxes done and ask, "Is this right?" If it is, you click a button and are done. If not, then you might have to do a little work, but it is still so so so much less than managing the US taxes.
> You pay taxes that are not much higher than in the US and actually get things in return
This is what bothers me the most about the U.S. Federal Government. Most of the things I enjoy in the U.S. are provided by my city, county and state. Things like courts and fire protection and cops and roads and schools and water and sewage systems and electricity and parks.
And what's amazing about all that is I don't pay very much for it. States and cities seem to be able to really stretch our tax dollars.
I pay a lot more into the federal government and in return I get interstates (which are awesome) and the TSA at airports and borders. Other than that, I don't really have many tangible interactions with the federal government at all. This was made very obvious during the shutdown, which I wouldn't have noticed if I hadn't been reading the news. It seems to be largely a money pit.
This is what bothers me the most about the U.S. Federal Government. Most of the things I enjoy in the U.S. are provided by my city, county and state. Things like courts and fire protection and cops and roads and schools and water and sewage systems and electricity and parks.
And what's amazing about all that is I don't pay very much for it. States and cities seem to be able to really stretch our tax dollars.
I pay a lot more into the federal government and in return I get interstates (which are awesome) and the TSA at airports and borders. Other than that, I don't really have many tangible interactions with the federal government at all. This was made very obvious during the shutdown, which I wouldn't have noticed if I hadn't been reading the news. It seems to be largely a money pit.
The top programs the Federal Government pays for are Social Security, Medicare and Medicaid, and the military. Everything else is in the small single digit percentages.
If you're not fighting a war or retired, it's not a surprise that you don't see much direct benefit from federal spending.
State operations like schools, streets and roads, airports, transit, and police are much more visible in daily life. Still, state budgets are supplemented with grants from the federal government, too.
But the big point here is that retirement and health care and war are the biggest federal operations. And, to reference op, you don't get much benefit of that living overseas.
--- Incidentally, the TSA is paid for by air ticket taxes and the interstates were paid for mostly by federal gas taxes and maintained by state taxes. Only new highway construction is paid for out of federal income taxes since the gas tax became unpopular in Congress in the 1990s and was allowed to drop too low to pay for highway grants so it was replaced with income tax money. So even your visible federal tax benefit examples aren't really paid out of federal income tax.
If you're not fighting a war or retired, it's not a surprise that you don't see much direct benefit from federal spending.
State operations like schools, streets and roads, airports, transit, and police are much more visible in daily life. Still, state budgets are supplemented with grants from the federal government, too.
But the big point here is that retirement and health care and war are the biggest federal operations. And, to reference op, you don't get much benefit of that living overseas.
--- Incidentally, the TSA is paid for by air ticket taxes and the interstates were paid for mostly by federal gas taxes and maintained by state taxes. Only new highway construction is paid for out of federal income taxes since the gas tax became unpopular in Congress in the 1990s and was allowed to drop too low to pay for highway grants so it was replaced with income tax money. So even your visible federal tax benefit examples aren't really paid out of federal income tax.
Social Security and Medicare are not entitlement programs. They are insurance programs that are largely acutuarily sound. They should not be considered government expenditures as they are funded by the users of the insurance programs.
They are entitlement programs. Current taxpayers pay for current beneficiaries, and it has been that way since the programs were founded. Who do you think paid for the first recipients of social security?
The distinction is meaningless. It is always the case that the currently economically active part of the population pays for those who aren't active. [1]
If you prefer thinking in monetary terms (as most people do), think about somebody who has a retirement savings account. Their money comes out of payments that firms make (in the form of interest on bonds, or in the form of dividends etc.). This is money that could otherwise have gone to the employees of those firms.
To get an even clearer picture, think about it in real terms. Retirees use up real resources and services that are generated by the currently working population. So the current workers provide for the current beneficiaries, plain and simple. The movements of money that are used to reflect the movements of real resources is really just a thin layer on top, and it would be wise not to focus too much on the cosmetics of that thin layer.
[1] Mostly children and retirees and, if you allow yourself to be honest about the reality of capitalism, the rich and powerful.
If you prefer thinking in monetary terms (as most people do), think about somebody who has a retirement savings account. Their money comes out of payments that firms make (in the form of interest on bonds, or in the form of dividends etc.). This is money that could otherwise have gone to the employees of those firms.
To get an even clearer picture, think about it in real terms. Retirees use up real resources and services that are generated by the currently working population. So the current workers provide for the current beneficiaries, plain and simple. The movements of money that are used to reflect the movements of real resources is really just a thin layer on top, and it would be wise not to focus too much on the cosmetics of that thin layer.
[1] Mostly children and retirees and, if you allow yourself to be honest about the reality of capitalism, the rich and powerful.
I don't think that is correct for social security.
I just started taking social security (yes, I am an old programmer :-) and unless I live a very long time I will never get back all that I have paid into social security, if you take I to account what I put in and earn a small amount of interest on the money (which is not so small with compounding).
Medicare is more of a government handout - I agree with you there.
I just started taking social security (yes, I am an old programmer :-) and unless I live a very long time I will never get back all that I have paid into social security, if you take I to account what I put in and earn a small amount of interest on the money (which is not so small with compounding).
Medicare is more of a government handout - I agree with you there.
> Who do you think paid for the first recipients of social security?
I didn't know this was the case. Why would they start paying out as soon as they started collecting? It makes no sense to me.
I didn't know this was the case. Why would they start paying out as soon as they started collecting? It makes no sense to me.
When you strip away the financial facade, what remains is current workers providing surplus output for retirees to consume.
They actually didn't intend to; it was supposed to have around a decade of money paid in before any started going out. Also, though, remember that it didn't cover the same people it covers now.
Can we go back to a scheme where we have a decade of money paid in? I'd happily pay a little more if it helps end the endless name calling and what not.
It's heading that way right now, although the baby boomers will presumably reverse that fairly soon. Here's a table from 1937 to 2013:
http://www.ssa.gov/oact/STATS/table4a1.html
I found it interesting that the system looks to be in far better shape today than it has been for many decades. In the early ears, assets outweighed expenditures by a huge amount, sometimes by more than a factor of 10. As you move down the table, this stops, and in the 1970s it hits a 1:1 ratio of yearly expenditures to assets, then shoots way past. In 1983, the trust fund had under $20 billion in assets but the program spent $153 billion! That's clearly a program where current taxpayers are paying for current retirees, rather than the savings program it's painted as.
By the late 80s, things start looking much better, as income substantially outweighs expenditures. In 2001, the trust fund exceeded $1 trillion while expenditures were at a considerably more modest $378 billion. The 2013 figure has about $2.7 trillion in the trust fund, with expenditures of about $679 billion. Not a factor of 10, but certainly far better than the 60s, 70s, or 80s.
I knew that SS was in better shape than many people say, but I had no idea that it used to be so much worse. The picture painted by the naysayers is one of a long slide towards disaster, whereas it looks like the program is currently doing great. Future demographic shifts will certainly hurt a lot, but compared to the years when the trust fund was essentially nonexistent there's almost nothing to worry about.
http://www.ssa.gov/oact/STATS/table4a1.html
I found it interesting that the system looks to be in far better shape today than it has been for many decades. In the early ears, assets outweighed expenditures by a huge amount, sometimes by more than a factor of 10. As you move down the table, this stops, and in the 1970s it hits a 1:1 ratio of yearly expenditures to assets, then shoots way past. In 1983, the trust fund had under $20 billion in assets but the program spent $153 billion! That's clearly a program where current taxpayers are paying for current retirees, rather than the savings program it's painted as.
By the late 80s, things start looking much better, as income substantially outweighs expenditures. In 2001, the trust fund exceeded $1 trillion while expenditures were at a considerably more modest $378 billion. The 2013 figure has about $2.7 trillion in the trust fund, with expenditures of about $679 billion. Not a factor of 10, but certainly far better than the 60s, 70s, or 80s.
I knew that SS was in better shape than many people say, but I had no idea that it used to be so much worse. The picture painted by the naysayers is one of a long slide towards disaster, whereas it looks like the program is currently doing great. Future demographic shifts will certainly hurt a lot, but compared to the years when the trust fund was essentially nonexistent there's almost nothing to worry about.
I imagine the first recipients of Social Security paid for themselves.
This page has the story of the first SS beneficiary:
http://www.ssa.gov/history/imf.html
This wasn't until 1940, even though the program began three years before.
As far as I know, SS benefits are and always have been determined by what you pay in, from the beginning. Do you have information to the contrary?
This page has the story of the first SS beneficiary:
http://www.ssa.gov/history/imf.html
This wasn't until 1940, even though the program began three years before.
As far as I know, SS benefits are and always have been determined by what you pay in, from the beginning. Do you have information to the contrary?
In effect they hit the budget, as they only "invest" in US government securities. Now that SOcial Security doesn't have a surplus, it is drawing off of debt service payments paid by the treasury.
It's an entitlement program masquerading as an investment program, largely by design, as the high payroll taxes that accompany the program are meant to provide it political legitimacy.
>Everything else is in the small single digit percentages.
What is aggravating is that this is where they want to make the most cuts. Not to defense or large social programs. 2 or 3 billion to NASA will make huge progress for our country and technology, and it is a drop in the pond for the government. Yet, that is where they want to make cuts.
What is aggravating is that this is where they want to make the most cuts. Not to defense or large social programs. 2 or 3 billion to NASA will make huge progress for our country and technology, and it is a drop in the pond for the government. Yet, that is where they want to make cuts.
To pick a nit, people in the armed services don't get benefits, they get compensation. The beneficiaries of the armed forces are the ones not fighting.
You also leave off debt service, which is approaching the military budget in size.
That aside, I agree with what you wrote.
You also leave off debt service, which is approaching the military budget in size.
That aside, I agree with what you wrote.
>You also leave off debt service, which is approaching the military budget in size.
There's a lot of FUD and wrong opinions approaching the national debt, and people don't think about it correctly.
Very briefly, I'll make one point to bring some of this to light: 40% of the national debt is owned by the government.
* 16% by social security (so this portion isn't debt service, it's SS funding) * 13% by other government entities (likewise funding these agencies) * 12% by the Federal Reserve (whose profits are remitted to the Treasury, this money is free)
Another 25% of the debt is owned by Americans in some form or another.
For comparison, the two largest foreign debt holders are China and Japan each with about 7%.
There's a lot of FUD and wrong opinions approaching the national debt, and people don't think about it correctly.
Very briefly, I'll make one point to bring some of this to light: 40% of the national debt is owned by the government.
* 16% by social security (so this portion isn't debt service, it's SS funding) * 13% by other government entities (likewise funding these agencies) * 12% by the Federal Reserve (whose profits are remitted to the Treasury, this money is free)
Another 25% of the debt is owned by Americans in some form or another.
For comparison, the two largest foreign debt holders are China and Japan each with about 7%.
I fail to see why that's better.
If default is the worst case scenario, defaulting on foreign banks seems preferable to defaulting on your retirees. The same is true for money printing, as retirees are harmed greatly by inflation.
If default is the worst case scenario, defaulting on foreign banks seems preferable to defaulting on your retirees. The same is true for money printing, as retirees are harmed greatly by inflation.
If you owe debts to other countries you have to pay that money outside the system. So it takes a certain percentage of production (GDP) and pays the benefit of that production to people in other countries. Japan has a much bigger debt problem than the USA in percentage terms. Nearly all their debt is owed to those in Japan so when it is paid it merely redistributes wealth (rather than losing it to those overseas).
While inflation can allow you to payoff debt with less valuable $ and thus reduce the value of what is given to other countries (also to retirees and other holders of government debt but for the matter of losing wealth to other countries that isn't a factor). But markets adjust and unless you have now paid off all your debt and owe nothing you have to borrow again, and lenders will demand larger interest payments to make up for the risk of your debasing the currency to pay them back worthless dollars. So while this can maybe work in the short term if you fool the markets it most likely doesn't work in the long term for the USA.
I would say it is probably true defaulting on foreign banks would be preferable but it isn't that neat. The USA would default to everybody and it would be chaos (because of the central role of the USA - different than if some minor economic power defaults). The USA owes lots to foreigners and those in the USA and while spreading the costs of default overseas sounds better really it would be so catastrophic I doubt it matters. Debasing the currency through inflation is what would happen instead in the case of the USA. Which would have bad costs to the USA and to those holding USA government debt.
While inflation can allow you to payoff debt with less valuable $ and thus reduce the value of what is given to other countries (also to retirees and other holders of government debt but for the matter of losing wealth to other countries that isn't a factor). But markets adjust and unless you have now paid off all your debt and owe nothing you have to borrow again, and lenders will demand larger interest payments to make up for the risk of your debasing the currency to pay them back worthless dollars. So while this can maybe work in the short term if you fool the markets it most likely doesn't work in the long term for the USA.
I would say it is probably true defaulting on foreign banks would be preferable but it isn't that neat. The USA would default to everybody and it would be chaos (because of the central role of the USA - different than if some minor economic power defaults). The USA owes lots to foreigners and those in the USA and while spreading the costs of default overseas sounds better really it would be so catastrophic I doubt it matters. Debasing the currency through inflation is what would happen instead in the case of the USA. Which would have bad costs to the USA and to those holding USA government debt.
But it isn't that simple. State budgets are partly funded by federal taxes. Just skimming this abstract from the CBO report[0], in 2011, 25% of state and local government expenses were covered by federal grants amounting to over half a trillion dollars.
[0] https://www.cbo.gov/publication/43967
[0] https://www.cbo.gov/publication/43967
Sure, I'm simplifying, but I think my point stands.
Federal tax as percent of GDP: 19% [1]
State and local tax as percent of GDP: 9% [2]
So, even if we bump up state and local expenditures to 11.25%, it still seems like we're getting a better deal from local governance.
1) http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Doc...
2) http://www.ncsl.org/documents/fiscal/TaxesandtheEconomy.pdf (a little out of date...)
Federal tax as percent of GDP: 19% [1]
State and local tax as percent of GDP: 9% [2]
So, even if we bump up state and local expenditures to 11.25%, it still seems like we're getting a better deal from local governance.
1) http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Doc...
2) http://www.ncsl.org/documents/fiscal/TaxesandtheEconomy.pdf (a little out of date...)
As explained in other comments, Federal Govt is basically a giant insurance company with an army.
This is an over simplification as some States pay more in taxes then they get in return via various federal pay outs.
Some states get less in payouts than their _residents_ pay in taxes. But the state budgets are still larger with the federal payouts than they would be with only the state taxes.
The federal government spends mostly on SS, Medicare/Medicaid, and military.
https://en.wikipedia.org/wiki/File:U.S._Federal_Spending_-_F...
Presumably if the fed wasn't paying for social security and medicare/medicaid, your state would have to, or you'd have bands of sick and elderly wandering the streets like so many zombies. If the fed wasn't paying for the military, I guess your state could also do this, lest the Brits march in and put us all under the rule of the king again.
https://en.wikipedia.org/wiki/File:U.S._Federal_Spending_-_F...
Presumably if the fed wasn't paying for social security and medicare/medicaid, your state would have to, or you'd have bands of sick and elderly wandering the streets like so many zombies. If the fed wasn't paying for the military, I guess your state could also do this, lest the Brits march in and put us all under the rule of the king again.
Bear with me as I don't live in the US but doesn't some money taxed by the federal entity trickle down to the states somehow ?
edit: What's the state/federal taxes ratio ?
edit: What's the state/federal taxes ratio ?
See a sibling comment. It does work like that. There an interesting power division between fed, state and local.
Fed usually use the "carrot" approach to distributing some taxes. So instead of "forcing" states to comply say to set a speed limit. They'll just withhold the funds for road repair and maintenance if speed limit is not set according to some standards. Perhaps the same goes for other things welfare money, drinking age, etc.
Some people are fiercely in favour of more state control (almost down to a religious type conviction). I never really got that. I came from Europe and when I think of "government" I think of one government entity. It operates at multiple levels but it is more or the same entity. And basic things like traffic laws, gun laws, sales taxes, etc are uniform.
Fed usually use the "carrot" approach to distributing some taxes. So instead of "forcing" states to comply say to set a speed limit. They'll just withhold the funds for road repair and maintenance if speed limit is not set according to some standards. Perhaps the same goes for other things welfare money, drinking age, etc.
Some people are fiercely in favour of more state control (almost down to a religious type conviction). I never really got that. I came from Europe and when I think of "government" I think of one government entity. It operates at multiple levels but it is more or the same entity. And basic things like traffic laws, gun laws, sales taxes, etc are uniform.
Because in theory you have more control over your state and (even more) your local authorities. This is a consequence of simple voting power theory - and extending the notion of 'control' beyond single votes to activism, letter-writing, pamphleteering, etc. (In practice it doesn't work that way because no one seems to care that much about the local authorities, probably because it's more exciting to keep people excited about people in power at higher levels).
Europe will come to understand that philosophy as it merges to become the EU. Already the EU is an overcomplicated mess where the dynamics of agency are unclear. It will get worse as the EU claims more power over the member states.
Europe will come to understand that philosophy as it merges to become the EU. Already the EU is an overcomplicated mess where the dynamics of agency are unclear. It will get worse as the EU claims more power over the member states.
> Europe will come to understand that philosophy as it merges to become the EU
I'm not sure that is very likely. France for example is 65 million people, so around 1/5th of the US. That is not a very large difference, and that's twice the size of the largest US state.
With anywhere between 1 and 11 million inhabitants, French régions are actually close to US states, yet since 1789, there have been little will to delegate more power to the régions (or the smaller départements).
Some people like having a central government that ensures equality between all parts of the territory. On the other hand we might have more little overseas régions that might have a hard time fending for themselves if the central state didn't allocate more money to them without asking the other régions' opinion.
I'm not sure that is very likely. France for example is 65 million people, so around 1/5th of the US. That is not a very large difference, and that's twice the size of the largest US state.
With anywhere between 1 and 11 million inhabitants, French régions are actually close to US states, yet since 1789, there have been little will to delegate more power to the régions (or the smaller départements).
Some people like having a central government that ensures equality between all parts of the territory. On the other hand we might have more little overseas régions that might have a hard time fending for themselves if the central state didn't allocate more money to them without asking the other régions' opinion.
I'm not sure about your comparison. 315M is a lot closer to 500M than it is to 65M. And as far as land mass and GDP go, the US is bigger than the whole of Europe. The EU is newer and so it's hard to say if it will ever get the teeth the US federal government has, but it should be noted that State's Rights are enshrined in the US Constitution, so philosophically it's closer to the EU than to French régions. There no is question of delegating power to states, it's a question of states ceding power to the federal government.
Well, have you thought about Kant's theory that larger Republics are actually more stable? In practice that has seemed to work out.
What do you think of the EU? Is it a reasonable level of state control? Would you expand it's reach?
US States are European Countries. The demographics are similar. State/Municipal governments are far more integrated than state/Federal, much like the EU/Country divide.
US States are European Countries. The demographics are similar. State/Municipal governments are far more integrated than state/Federal, much like the EU/Country divide.
I agree, as a foreigner living in the US, it's baffling how different each state is in regards to law/budgets/etc.
The ratio is different for every state and every tax bracket, but in California, on a married developers salary with a house, we pay something like 17.5% Fed, 9.3% state, and local (property tax) is 1.4376% of the value of your home, which on my salary is something like 5%.
So for us, income and property tax add up to almost 32% of our income.
Home ownership is the big wildcard in that calculation. You could pay nothing to your locality (other than sales taxes) if you don't own a home and instead pay a higher percentage to the feds.*
* - of course, someone owns the home and is paying property taxes, but your personal tax bill doesn't reflect that.
So for us, income and property tax add up to almost 32% of our income.
Home ownership is the big wildcard in that calculation. You could pay nothing to your locality (other than sales taxes) if you don't own a home and instead pay a higher percentage to the feds.*
* - of course, someone owns the home and is paying property taxes, but your personal tax bill doesn't reflect that.
To answer your first question: yes. However, the amount varies greatly by state and changes year to year. Many of the programs for which states receive federal money are temporary in nature. Others, like federal subsidies for state Medicaid programs, are more permanent in nature. The actual ratio is going to be very uneven throughout the country.
Yes, but only if you live in a poorer state. Every state I've lived in has been one of the rich states that gives more money to the federal government than it receives in services.
But that does not mean that federal taxes do not enhance the state budget. That just means your federal taxes amount to more than the assistance your state gets. So your state budget is still enhanced by federal grants, over what it would have been.
Don't forget a massive amount of military spending, which trickles down to the local communities in the form of reckless and unnecessary police militarization.
Also: FDA, EPA, FCC, FBI, CIA, and tons of other TLD agencies that keep the country running in the long run.
Also: FDA, EPA, FCC, FBI, CIA, and tons of other TLD agencies that keep the country running in the long run.
Norway population is 5 million so it makes sense not to have federal/state divided governance like in US.
[deleted]
Some would argue (not myself, just pointing it out), that every one of your interactions is made in freedom, which is made possible by a very large military spend.
Except that many other countries have freedom but don't spend anywhere near as much (absolute or per capita) on defence.
Foreign countries might or might not have freedom if the US were not subsidizing their security with expensive US military operations around the world.
Some say the US screwed up so much under Bush it would have been better to loose the world without American protection, and Bush did do a terrible job. But we don't know either way.
In any case, many other countries would pay more for military operations if the US paid less.
Some say the US screwed up so much under Bush it would have been better to loose the world without American protection, and Bush did do a terrible job. But we don't know either way.
In any case, many other countries would pay more for military operations if the US paid less.
The flip side of that is that the USA has heavily subsidized the defenses of Europe and the rest of the world.
Not that they've asked for it - but it's difficult to conceive that Europe would have escaped Hitler or the USSR's aggressions without a lot of military spending on their behalf by the USA.
Not that they've asked for it - but it's difficult to conceive that Europe would have escaped Hitler or the USSR's aggressions without a lot of military spending on their behalf by the USA.
Conversely, it's difficult to conceive that the United States would have gained independence over the UK without a lot of military spending on their behalf and direct military actions by the French.
What does that have to do with current US defense spending?
Or was it just some kind of one-upmanship?
Or was it just some kind of one-upmanship?
What does WW2 have to do with current defence spending?
A lot, actually. Most of the European countries were so badly in debt at the end of it that it laid the foundations for the US's expanded sphere of influence, particularly as regards the Middle East and East Asia. It was also the first time that the United States had united completely with one global objective and accomplished it. It created a Global Bipolar system which ended up with unipolarity after the fall of the Soviet Union.
Plus, it created the military industrial complex.
So...a lot.
Plus, it created the military industrial complex.
So...a lot.
Well, by the Bourbon monarchy in France.
US subsidizes the defense budgets of Norway and Saudi Arabia alike.
Sure, some of these countries have great freedom, but I'm not convinced whether US military subsidy protects freedom or just the status quo.
Sure, some of these countries have great freedom, but I'm not convinced whether US military subsidy protects freedom or just the status quo.
I don't see how the US military expenditure helps American freedom. Not only is it used to restrict freedoms of some other countries (admittedly sometimes it's restricting the freedom of governments that seek to restrict the freedom of their people, which could arguably be a good thing, but this isn't always the case), but hand-me-downs to the police are used to restrict the freedom of Americans themselves.
Don't forget: Eternal war is expensive.
you get war and war and more war!
You also get an awesome army that kicks asses around the world, isn't that cool? ;)
>>The other awesome thing about Norwegian taxes is that the government does it for you.
The US has also attempted to do this. However, every attempt has been killed by corporate interests (like Intuit) and politicians (mostly Republicans) and special-interest-groups (conservative anti-tax organizations)
The latter claim that the government shouldn't automatically create a form with all taxes done because the government will not try to minimize citizen tax payments (and most people will check the 'OK' button without reviewing their taxes to see if they can get additional deductions). In reality, I think that most anti-tax organizations realize that they'll lose a significant portion of their support if filing taxes becomes easy. In the case of companies like Intuit, the motives are obviously transparent.
The US has also attempted to do this. However, every attempt has been killed by corporate interests (like Intuit) and politicians (mostly Republicans) and special-interest-groups (conservative anti-tax organizations)
The latter claim that the government shouldn't automatically create a form with all taxes done because the government will not try to minimize citizen tax payments (and most people will check the 'OK' button without reviewing their taxes to see if they can get additional deductions). In reality, I think that most anti-tax organizations realize that they'll lose a significant portion of their support if filing taxes becomes easy. In the case of companies like Intuit, the motives are obviously transparent.
This isn't such a far fetched claim.
In Israel for example - you get taxes deducted from your pay check every month, directly by your employer, based on the assumption that will be your constant salary for the rest of the year.
Now lets say you get fired in September, lowering your annual salary and bringing you into a lower tax bracket - unless you personally file for a return at the end of the year, the government feels no obligation to return the taxes you've overpaid.
I don't see how this is much different from the current situation in the United States.
Most people (I bet HN readership included) are paid under a full time employee structure where the employer files a W2 and deducts all (or most) of the federal taxes the employee is liable for from their paychec. Even if you are a contractor, you're supposed to pay all of your own taxes every quarter (or pay penalties + interest), including your employer's half of the Medicare/Social Security taxes.
The big difference in the United States is that you are still required to file your own forms by April for the previous fiscal year for your tax return. You still have to do work to get a nontrivial amount of money back.
Most people (I bet HN readership included) are paid under a full time employee structure where the employer files a W2 and deducts all (or most) of the federal taxes the employee is liable for from their paychec. Even if you are a contractor, you're supposed to pay all of your own taxes every quarter (or pay penalties + interest), including your employer's half of the Medicare/Social Security taxes.
The big difference in the United States is that you are still required to file your own forms by April for the previous fiscal year for your tax return. You still have to do work to get a nontrivial amount of money back.
OK, but in the UK it’s the same scenario until the point where the government automatically returns any extra taxes you’ve paid (assuming you’re purely paying income tax through your employer).
It's a possibility but it will not be forcibly true. In Belgium you also get taxes deducted from your pay check every month and if you pay to much they just put back the money into your account every year
The US has also attempted to do this. However, every attempt has been killed by corporate interests (like Intuit) and politicians (mostly Republicans) and special-interest-groups (conservative anti-tax organizations)
This may be true, but I downvoted your comment because I don't see any sources for the strongly worded assertions made.
This may be true, but I downvoted your comment because I don't see any sources for the strongly worded assertions made.
If we downvoted every assertion on HN that didn't come with a complete annotated appendix of sources, that would be every comment. Why do you apply this standard to this comment, and not to others?
A googling of something like "intuit lobby irs" will turn up as much info as you care to have about the situation, incidentally.
A googling of something like "intuit lobby irs" will turn up as much info as you care to have about the situation, incidentally.
I'm hoping people will start to realize this more over time. The taxes we pay in the United States are not that low, not when you start talking about the lack of social services we have and compare that to other countries with far more comprehensive programs. I have some Canadian friends who were shocked to learn I pay more taxes than they do. Well, of course, they were also shocked to learn I had health insurance at all, but that's a different story.
High taxes. Long wars that promise to only get longer. Lack of meaningful industry regulations. For what? What is it getting us? It's not like we're getting free tuition out of it, or even reasonably cheap tuition. It's not like we're getting more land and resources--and freedums, I seem to have a lot fewer of those these days, and it weren't no Al Qaida that done took 'em from me. We aren't getting cheaper products with more innovative features. Republicrats and Demicans can argue all day about what change is needed, and we've only ended up with the worst of both sides of the aisle. We'd be a lot better off with the whole program of one system, even if it was the system I didn't agree with.
High taxes. Long wars that promise to only get longer. Lack of meaningful industry regulations. For what? What is it getting us? It's not like we're getting free tuition out of it, or even reasonably cheap tuition. It's not like we're getting more land and resources--and freedums, I seem to have a lot fewer of those these days, and it weren't no Al Qaida that done took 'em from me. We aren't getting cheaper products with more innovative features. Republicrats and Demicans can argue all day about what change is needed, and we've only ended up with the worst of both sides of the aisle. We'd be a lot better off with the whole program of one system, even if it was the system I didn't agree with.
>Republicrats and Demicans
My boss goes with the phrase "Republi-cons and Demo-rats" which I was always a fan of.
My boss goes with the phrase "Republi-cons and Demo-rats" which I was always a fan of.
> We aren't getting cheaper products with more innovative features
I have a paperback sized device that can download thousands upon thousands of books pretty much anywhere I am. I think it's nothing short of incredible! And the battery lasts for several weeks at a go, to boot.
Your comments about taxes are fairly accurate, but the above surprised me some.
I have a paperback sized device that can download thousands upon thousands of books pretty much anywhere I am. I think it's nothing short of incredible! And the battery lasts for several weeks at a go, to boot.
Your comments about taxes are fairly accurate, but the above surprised me some.
I think that happened despite the entrenched business interests who both used government subsidy to get going, then have fought regulation tooth and nail to be able to gouge the customer. Remember, Apple had tried to do a phone before the iPhone. And they listened to the wireless providers about what it should be, and it was awful.
It doesn't hurt that Oil accounts for 30% of Norwegian government revenue[1]. Of course you experience higher services at a similar tax burden.
1: http://www.economist.com/news/special-report/21570842-oil-ma...)
1: http://www.economist.com/news/special-report/21570842-oil-ma...)
95% of that is put into the Government Pension Fund Global (colloquially the Oil Fund) which, contrary to its name, is not used for pensions. It just sits there, and together with the actual Norwegian pension fund it's the largest sovereign fund in the world. The Oil Fund holds 857.1 billion USD. The reason for the arrangement is to control inflation and avoid the dutch disease.
Norway is not Saudi Arabia, in other words. The part that worries me is not oil's contribution to the government balance, but its outsized share of private enterprise, especially technology.
Norway is not Saudi Arabia, in other words. The part that worries me is not oil's contribution to the government balance, but its outsized share of private enterprise, especially technology.
4% of the entire fund gets paid out each year. Nobody claims that the Harvard endowment isn't a boon to Harvard just because they stick most of their large donations there instead of spending them immediately.
But that's financial* income. I interpreted the parent as implying that the reason taxes are so low is because of oil, which is not necessarily true, and at least harder to prove than you would think.
*The fund is composed of 60% global shares, 35% bonds and 5% real estate.
Live(!) valuation here: http://www.nbim.no/en/
*The fund is composed of 60% global shares, 35% bonds and 5% real estate.
Live(!) valuation here: http://www.nbim.no/en/
If I strike oil and make a million dollars, then put that money into bonds, I wouldn't say the income I get from the bonds is "bond money" rather than "oil money".
That said, I certainly agree that wise application of that oil income has as much of an impact on the country's financial well-being as the income itself.
That said, I certainly agree that wise application of that oil income has as much of an impact on the country's financial well-being as the income itself.
I'm sure it helps, but we have mostly the same situation in the rest of Scandinavia and that's without any oil.
Let's be honest here: the real issue is bureaucracy, not the actual tax bill. Whether taxes are higher or lower; whether they're on income, consumption or corporations - unless there's some really dramatic difference, it's all a bit of a wash.
Cost of living to some degree reflects what people actually can afford because that's what suppliers can get away with.
The stress and time wasted to comply with pointless regulations (ala IRS) likely affects your quality of life more than a few numbers on a balance sheet that are likely compensated by living costs.
Cost of living to some degree reflects what people actually can afford because that's what suppliers can get away with.
The stress and time wasted to comply with pointless regulations (ala IRS) likely affects your quality of life more than a few numbers on a balance sheet that are likely compensated by living costs.
[deleted]
Sound nice except for the being frozen part :-)
The IRS could do our taxes as well if there weren't 500,000 special interest exceptions to everything.
The IRS could do our taxes as well if there weren't 500,000 special interest exceptions to everything.
And the special interest lobbying of tax preparers to not let the IRS fill out our taxes.
The IRS could prepare a fairly reasonable tax return, and let people modify it for their deductions or unreported income. But for most people, all their income is reported, along with mortgage info.
The IRS could prepare a fairly reasonable tax return, and let people modify it for their deductions or unreported income. But for most people, all their income is reported, along with mortgage info.
Someday we will be paying people to throw their feces around in the name of creating jobs and protecting the janitorial industry.
If only the American public actually understood the value of paying someone to have responsibilities rather than paying them to do work. But that might entail paying people to do their taxes, get an educations, vote, obey the law, etc. Real communism stuff!
If only the American public actually understood the value of paying someone to have responsibilities rather than paying them to do work. But that might entail paying people to do their taxes, get an educations, vote, obey the law, etc. Real communism stuff!
with a seventy five thousand page tax code do we think they could?
Taxes should be a one page affair, yet as always politicians are adept at dividing us, boxing us, and generally punishing us when we don't do as we are told. The IRS is a political weapon more often than not.
As a typical corporate drone with a house how complex should my taxes be? I do the correct deductions throughout the year yet I never have a near zero difference.
Taxes should be a one page affair, yet as always politicians are adept at dividing us, boxing us, and generally punishing us when we don't do as we are told. The IRS is a political weapon more often than not.
As a typical corporate drone with a house how complex should my taxes be? I do the correct deductions throughout the year yet I never have a near zero difference.
> with a seventy five thousand page tax code do we think they could?
Yes, for nearly everyone.
In fact, the IRS already does this -- your employer, bank, etc have already reported all of the biggest items to the IRS. They know what your tax bill will look like before you even crack open the 1040 instructions. Then when you file they'll compare what you send via the baseline and flag anything that has a discrepancy in that taxpayer's favor.
The IRS could easily let you start with the baseline and just say "OK, sounds good" or "actually, I've itemized my deductions, here is what I think the number should be". In fact the IRS wants to do that since it would be less work for them overall. Congress won't never let them though.
To bring it back to the original article, this is also why expats should never expect tax relief. The tax preparation industry would lose millions of customers.
Yes, for nearly everyone.
In fact, the IRS already does this -- your employer, bank, etc have already reported all of the biggest items to the IRS. They know what your tax bill will look like before you even crack open the 1040 instructions. Then when you file they'll compare what you send via the baseline and flag anything that has a discrepancy in that taxpayer's favor.
The IRS could easily let you start with the baseline and just say "OK, sounds good" or "actually, I've itemized my deductions, here is what I think the number should be". In fact the IRS wants to do that since it would be less work for them overall. Congress won't never let them though.
To bring it back to the original article, this is also why expats should never expect tax relief. The tax preparation industry would lose millions of customers.
they could probably do it anyway, but intuit lobbied against it:
http://www.propublica.org/article/turbotax-maker-linked-to-g...
http://www.propublica.org/article/turbotax-maker-linked-to-g...
The lobbying by Intuit that prevents us from having first-world taxing bodies makes my blood boil.
We need a "lobby for the common people" fund.
The irony of this statement is that the entire US government itself was formed on a similar premise.
"government of the people, by the people, for the people"
http://en.wikipedia.org/wiki/Gettysburg_Address
http://en.wikipedia.org/wiki/Gettysburg_Address
Those are called “taxes”. In theory.
To be fair, there's lobbying on the other side against simplified tax codes. There have been lots of proposals: flat tax, fair tax, consumption taxes, VATs, etc. All are opposed by lobbying groups and not even the same ones.
All this foaming at the mouth and finger pointing only makes things worse.
All this foaming at the mouth and finger pointing only makes things worse.
I think we can all agree that you should never have to pay to have your taxes done. Taxes are a rule set, a rule set that can be codified into software.
The IRS should be able to prefill all of your taxes for you, and allow you to click Submit. But you should be able to change/add info, if you have supporting documentation. There is no reason Intuit and other businesses should need to exist to provide tax preparation services.
The IRS should be able to prefill all of your taxes for you, and allow you to click Submit. But you should be able to change/add info, if you have supporting documentation. There is no reason Intuit and other businesses should need to exist to provide tax preparation services.
Well yeah but we're talking about the U.S. here, this is a culture that won't put final prices on price tags because then the customers won't know how much sales tax they're paying.
>You pay taxes that are not much higher than in the US and actually get things in return, like excellent health care, free tuition a social safety net, better infrastructure, and a much much higher standard of living across the board. Wellstone was right: We all do better when we all do better.
You mean "We all do better when we use oil money spend $3800 more per capita than we collect in taxes".
You mean "We all do better when we use oil money spend $3800 more per capita than we collect in taxes".
> You pay taxes that are not much higher than in the US and actually get things in return
This is amazing. (Let's disregard the two countries' differences in population sizes, demographics, debt, and military budgets.) A self-employed person in the US tends to lose between 40 and 50% of income to triple-taxes (depending on federal, state, and local levels), self-employment tax, and the need to buy expensive health insurance. What is the range of Norwegian tax rates under similar circumstances? Does Norway have a high consumption or sales tax rate?
This is amazing. (Let's disregard the two countries' differences in population sizes, demographics, debt, and military budgets.) A self-employed person in the US tends to lose between 40 and 50% of income to triple-taxes (depending on federal, state, and local levels), self-employment tax, and the need to buy expensive health insurance. What is the range of Norwegian tax rates under similar circumstances? Does Norway have a high consumption or sales tax rate?
Don't know about Norway, but here in New Zealand there is a personal income tax with progressive rates from 17.5% to 33%, with an additional ~1.5% ACC levy (essentially accident insurance). There's also 15% flat-rate GST (a value-added tax) applied to everything at point of sale.
Councils also charge rates for local road, service and facility management based on land and improvement value, this works out to around $1000-$2000 per year for a family-size house. This is simply invoiced to the home owner.
There are limited rebates for low-income people, especially families.
This covers healthcare - both emergency and elective (though there are waiting lists for elective procedures), education at pre-univeristy levels (though schools do ask for donations because the funding is low after decades of cuts), road maintenance, public transport subsidies, unemployment and sickness benefits, armed forces and various other things.
All this is deducted as I earn, I haven't filed a tex return since I was self employed 8 years ago. As a self-employed contractor I could claim business expenses against income and then paid the personal income tax on the remainder. I did not have an accountant for this, though I have accounting training.
Incorporated companies pay a flat 28% tax, though there are some company types where the shareholders simply pay personal tax on dividends. There's no requirement for a company to be registered or incorporated though, simply pay personal tax on any profits.
Also we don't have any capital gains tax, stamp duty, or pretty much any other sort of tax, other than import duties.
Everywhere overseas looks so complex from this perspective.
Councils also charge rates for local road, service and facility management based on land and improvement value, this works out to around $1000-$2000 per year for a family-size house. This is simply invoiced to the home owner.
There are limited rebates for low-income people, especially families.
This covers healthcare - both emergency and elective (though there are waiting lists for elective procedures), education at pre-univeristy levels (though schools do ask for donations because the funding is low after decades of cuts), road maintenance, public transport subsidies, unemployment and sickness benefits, armed forces and various other things.
All this is deducted as I earn, I haven't filed a tex return since I was self employed 8 years ago. As a self-employed contractor I could claim business expenses against income and then paid the personal income tax on the remainder. I did not have an accountant for this, though I have accounting training.
Incorporated companies pay a flat 28% tax, though there are some company types where the shareholders simply pay personal tax on dividends. There's no requirement for a company to be registered or incorporated though, simply pay personal tax on any profits.
Also we don't have any capital gains tax, stamp duty, or pretty much any other sort of tax, other than import duties.
Everywhere overseas looks so complex from this perspective.
Self-employment tax? I get a self-employment tax cut. (Though recently the tax service has been complaining it's losing too much revenue due to the rising popularity of self-empoyment, so that cut might be on the way out.) I believe my actual income taxes over 2013 amounted to about 10%, which is distressingly low. I don't mind paying a bit more than that.
This is in Netherland, by the way. We also have sales tax that ranges from 6% for necessities (food, books) to 21% for luxuries. My health insurance costs about EUR 100 per month.
This is in Netherland, by the way. We also have sales tax that ranges from 6% for necessities (food, books) to 21% for luxuries. My health insurance costs about EUR 100 per month.
Norway has a 25% VAT rate (lower for food and other items).
Oh that last thing is nice; I feel like the Canadian government could easily do the same, as what they are essentially doing is checking my work against theirs, and sending me a notice afterwards that says "yup!" or "you were off by a bit".
Although it still only takes me 30 minutes.
Although it still only takes me 30 minutes.
Oooh... Irish taxes are like that too! I miss it.
German taxes, on the other hand...
German taxes, on the other hand...
I had to ask about 5 people "wait, so I REALLY don't have to file taxes?? Seriously?" after I moved to Ireland before it really sank in. The answer is no, and if you need to change your tax situation (for instance, if you get married) a simple email to your local PAYE office will often suffice. I email [email protected] and usually get a response within a few days.
Of course, the sad thing is that I actually DO still have to file taxes. To the US.
Of course, the sad thing is that I actually DO still have to file taxes. To the US.
How bad are the German tax forms? I'm considering moving there. Is it just that you have to do it by hand, or are they more complicated as well?
I'm a PhD student, so of course your mileage may vary, but at the end of the year I have two options: I can accept that whatever the government deducted from my salary was correct (and do nothing else), or I can fill a form if I think I should be getting money in return.
I know that the special cases (foreign income, family outside the country and so on) are a bit more complex, though.
I know that the special cases (foreign income, family outside the country and so on) are a bit more complex, though.
The story is that you can usually get money back by filing your taxes. To file your taxes, you buy this year's software, and block off a straight weekend to enter the data. Or you pay an accountant, who will as likely as not royally bodge it, potentially illegally.
I have been ignoring the problem.
I have been ignoring the problem.
If you are employed you don't have to touch tax forms.
How could Germany have an inefficient tax filing program? That doesn't make any sense. Please explain somebody
Oh boy, you have clearly never encountered the German bureaucracy. I know it was meant as a joke, but it won't be so funny once you get in the habit of carrying a document folder with you with all the documentation you have for every bureaucracy encounter. The one redeeming quality is that everything is always properly done.
Germany as a collective may seem efficient. Germany on an individual basis is... well, a whole lot of work I never considered before moving here. Good luck to you.
Also, there kinda isn't one Germany. Mittelstand vs Megacorp and different cities are all very different.
Also, there kinda isn't one Germany. Mittelstand vs Megacorp and different cities are all very different.
The awesomest part about Norwegian taxes is that they don't have to pay for everything because of all the Norwegian North Sea oil. I'm happy for the Norwegians, but this is not apples to apples.
http://en.wikipedia.org/wiki/Government_Pension_Fund_of_Norw...
http://en.wikipedia.org/wiki/Government_Pension_Fund_of_Norw...
Yes, because the US doesn't have any oil ... oh, wait!
Cumulative oil production:
US: ~200bn barrels Norway: ~25bn barrels
(in all fairness, the population of the US is about 60 times larger ... but then again, most of the fund is not spent today)
Cumulative oil production:
US: ~200bn barrels Norway: ~25bn barrels
(in all fairness, the population of the US is about 60 times larger ... but then again, most of the fund is not spent today)
IMHO the comparison is fair. The US is the largest oil producing country in the world. It just happens to also have to import oil because consumption is so high.
"Almost all my friends are cultural mutts — people with hybrid backgrounds, for whom nationality isn't the most important part of their identity."
I do identify with my birth country to an extent, but definitely no more or no less than any of the other places I've lived in since I left. I'm afraid this might upset some people, but the piece of paper in my pocket has value only insofar as I can't get a better deal somewhere else.
I've grown pretty tired of "ownership through urination" and I know my multi-cultural friends all feel the same. I know this is mostly down to historical baggage but I really, really wish we could do something about it.
I'm genuinely curious, are there any recognized countries without actual land/borders?
I do identify with my birth country to an extent, but definitely no more or no less than any of the other places I've lived in since I left. I'm afraid this might upset some people, but the piece of paper in my pocket has value only insofar as I can't get a better deal somewhere else.
I've grown pretty tired of "ownership through urination" and I know my multi-cultural friends all feel the same. I know this is mostly down to historical baggage but I really, really wish we could do something about it.
I'm genuinely curious, are there any recognized countries without actual land/borders?
Depending on how adventurous you are, you could look at "The World Passport." You can get a passport that has been accepted at 160 nations, supposedly, although based on my research a few years ago it's pretty hit-or-miss. Some great gems on their website like:
>Does this mean I don't have to pay my national tax?
>No, you must pay that proportion of your national tax officially allocated to peaceful pursuits.
I wouldn't dare travel without another passport as a backup, but I would love to live in a world where I could. And as an American, cutting out the 40% or whatever of my taxes that goes to MiniPax would make me ecstatic.
http://www.worldservice.org/docpass.html
Edit: Here's the list of countries that have accepted it. Part of me wonders if a substantial number of these are legitimate, or if they're just from very tired border agents.
http://www.worldservice.org/visas.html
>Does this mean I don't have to pay my national tax?
>No, you must pay that proportion of your national tax officially allocated to peaceful pursuits.
I wouldn't dare travel without another passport as a backup, but I would love to live in a world where I could. And as an American, cutting out the 40% or whatever of my taxes that goes to MiniPax would make me ecstatic.
http://www.worldservice.org/docpass.html
Edit: Here's the list of countries that have accepted it. Part of me wonders if a substantial number of these are legitimate, or if they're just from very tired border agents.
http://www.worldservice.org/visas.html
> I'm genuinely curious, are there any recognized countries without actual land/borders?
I think the closest you can get is SMOM: http://en.wikipedia.org/wiki/Sovereign_Military_Order_of_Mal...
I think the closest you can get is SMOM: http://en.wikipedia.org/wiki/Sovereign_Military_Order_of_Mal...
Most citizen renunciations are dual citizens living aboard and deciding the paperwork is not worth it. Its rarely someone with a a single US citizenship, residing inside the US and deciding to exit due to taxes or moral convictions. Some of these dual citizenships inherited their American citizen by birth without ever living inside the USA.
Good for him. There is nothing "patriotic" about complying with unreasonable and out-of-control tax demands. I expect that this process will accelerate as income taxes continue to rise and more indirect income taxes are added such as the affordable care act health insurance requirements and booming student loan debt/interest. It may just wind up being a wise move drop the financial burden of being an American citizen and leave. How ironic...
The funny part about this to me is that the largest beneficiaries of tax loopholes are big companies like Apple, Google, etc. They have billions squirreled away overseas, and the .gov is likely never going to see a dime of it.
So, instead, they prey on little folk.
So, instead, they prey on little folk.
Posting this from a throwaway account, because, well, you can never be too careful.
Several points, as an American who has lived abroad for most of my life, and only recently found out about the taxation laws and requirements:
* the requirements are Overwhelming. Most people don't realize how bad it gets. It's not about the money (most "normal" Americans living abroad owe no money to the IRS), but about the reporting. Every bank account, every stock you own or owned within the last several years, every company you started, and guess what — even if you own 15% of an LLC, that is considered a "controlled company", so all of its financials are to be reported. It's insane!
* it's not work you can easily shift to an accountant. Oh, you do have to hire one, because there is no way a US citizen can do his own taxes (in contrast to most EU countries, for example), but you still have to prepare all the information. Ever tried to report interest (accrued monthly) on six bank accounts, in three currencies, over the past 6 years?
* the benefits of being an American: frankly, I can hardly name any these days. I guess the ability to work in the US counts as one.
* it used to be that having US citizenship would be a dream, especially for people in former Eastern European post-soviet countries. But this is no longer the case. These days being a citizen of one of the EU countries gives you much more benefits and earns you much less hate abroad.
The problem with taxation of expats is very, very serious, and as others have mentioned it is unlikely to be resolved, because there is no organized lobby. The real tax-evaders don't have this problem: it's "normal" people who do.
Several points, as an American who has lived abroad for most of my life, and only recently found out about the taxation laws and requirements:
* the requirements are Overwhelming. Most people don't realize how bad it gets. It's not about the money (most "normal" Americans living abroad owe no money to the IRS), but about the reporting. Every bank account, every stock you own or owned within the last several years, every company you started, and guess what — even if you own 15% of an LLC, that is considered a "controlled company", so all of its financials are to be reported. It's insane!
* it's not work you can easily shift to an accountant. Oh, you do have to hire one, because there is no way a US citizen can do his own taxes (in contrast to most EU countries, for example), but you still have to prepare all the information. Ever tried to report interest (accrued monthly) on six bank accounts, in three currencies, over the past 6 years?
* the benefits of being an American: frankly, I can hardly name any these days. I guess the ability to work in the US counts as one.
* it used to be that having US citizenship would be a dream, especially for people in former Eastern European post-soviet countries. But this is no longer the case. These days being a citizen of one of the EU countries gives you much more benefits and earns you much less hate abroad.
The problem with taxation of expats is very, very serious, and as others have mentioned it is unlikely to be resolved, because there is no organized lobby. The real tax-evaders don't have this problem: it's "normal" people who do.
I'm an American expat (albeit a young one) and I agree that you have plenty of good points there. But how many are exclusive to the problem of expats and aren't just problems with the tax system in general? Maybe it's because I do see value in having an American citizenship, but I wouldn't mind paying taxes, even as an expat, if it were simpler.
Luckily I'm young and make less than $97,600 (yet another seemingly arbitrary corner of the tax code), so I don't have to pay taxes. Of course, I still have to file and then request an exemption, but that's no surprise in a system where lawyers are the only ones voting on the laws.
Luckily I'm young and make less than $97,600 (yet another seemingly arbitrary corner of the tax code), so I don't have to pay taxes. Of course, I still have to file and then request an exemption, but that's no surprise in a system where lawyers are the only ones voting on the laws.
I don't mind paying taxes. What I do mind is the overreaching US tax system which puts a huge reporting burden on expats.
If you're young, things are slightly simpler. You don't have a financial history, you (usually) only have one bank account, no savings, no trust funds, no stocks, no shares in companies, and often no mortgage. Believe me, it gets much, much more complicated later on. But I do hope you know what FBAR and FATCA requirements are when you say that you file and request an exemption.
I've seen other tax systems and the US one is the only one with these overblown reporting requirements.
If you're young, things are slightly simpler. You don't have a financial history, you (usually) only have one bank account, no savings, no trust funds, no stocks, no shares in companies, and often no mortgage. Believe me, it gets much, much more complicated later on. But I do hope you know what FBAR and FATCA requirements are when you say that you file and request an exemption.
I've seen other tax systems and the US one is the only one with these overblown reporting requirements.
In each bill I get from my bank(a european bank),it's noted,right next to the headings, that if you are an american citizen,the bank will report any operation on your account to the US administration! US went to great lengths to compel foreign banks who operate in the US to snitch on US citizens abroad,even those who havent lived in USA for a long time. I'm not really sure how many countries in the world do that.
I'm currently working for a Dutch bank, and as far as I can tell, this is a specific exception for US citizens. There's also specific rules for doing business with countries the US doesn't like (Cuba, North Korea, Iran and a few others). Other countries don't get special exceptions.
That said, of course all countries try to catch tax dodgers, but they go about that in a different way than the US does.
That said, of course all countries try to catch tax dodgers, but they go about that in a different way than the US does.
And yet with all this reporting, they IRS can't just calculate the damn taxes themselves, but require you to spend hundreds to thousands of dollars to produce reams of paperwork.
It's all banks worldwide, including banks with no US presence or assets, and the answer is that no other countries do it (because it's insane).
Good. Give it up. Most of us like me are willing to pay an additional 10% tax every year just to get US citizenship.
I'm an American citizen living and working in Switzerland for the last 8 years. When my daughter turned 5, I took her to our local bank to open a savings account for her. The people at the bank turned pale when they realized I was an American. They explained to me that they would have to do a giant pile of paperwork and due to the trouble, they could not open an account. My wife (who's Swiss) had to go to the bank to do it for me. I've had this experience several times, and only hold one account here. It's not like I'm a tax-dodging rich person, I'm an average programmer earning a modest wage. Meanwhile, I know Americans who live here and have quite a lot of money, and manage to move it around and not pay much tax at all. It makes me really want to give up my passport, too.
I note with some amusement the difference in the way that foreign income for private citizens is of interest to the IRS and yet foreign income for corporations can be left abroad and remains untaxed. One would have hoped that it may be the other way round.
Can turbotax/intuit etc help mitigating the regulation problem?I'm OK paying the tax but the paperwork is unnecessarily complex. I think this is the key point here.
Keep voting Democrat and Republican, and you will keep getting these results.
>We’re responding to the burden and cost of onerous financial reporting and tax filing requirements that are neither fair nor just.
I would swear it was a joke article but apparently he's serious. It takes all kinds to make a world.
I would swear it was a joke article but apparently he's serious. It takes all kinds to make a world.
Posting this from a throwaway account.
What are the consequences of not filing if you don't owe anything? It seems likely the IRS could eventually force backfiling, but have they issued any fines?
What are the consequences of not filing if you don't owe anything? It seems likely the IRS could eventually force backfiling, but have they issued any fines?
I read read horror stories in International Living, etc. about people paying huge penalties for minor mistakes in filings.
Also, with FACTA, foreign banks get screwed by the U.S. if they make a mistake on paperwork - really big fines.
Also, with FACTA, foreign banks get screwed by the U.S. if they make a mistake on paperwork - really big fines.
The laws and attitudes of the Congressmen is something I find very typical of our politicians:
Screw over everybody so a few wealthy folks don't "get away with anything".
Screw over everybody so a few wealthy folks don't "get away with anything".
All that gets even more fun when you request citizenship.
- green card holder has all the obligations of citizens, none of the benefits
- you are start with lots of assets that are now taxable in the US, already overseas.
- green card holder has all the obligations of citizens, none of the benefits
- you are start with lots of assets that are now taxable in the US, already overseas.
To summarize more concisely, American citizens living abroad must pay taxes with their time and with their personal information rather than with their dollars or foreign currency.
The issue at hand that induces an increasing number of dual citizens to drop their American citizenship is that the U.S. government is supposedly forbidden from both prying into the private affairs of individuals and from compelling involuntary servitude, yet it does so on a massive scale with respect to its citizens living abroad.
These people are often paying more in tax to their local sovereign authority than they would if resident in one of the United States, and would thus owe no money to the U.S. even if they earned 100 times more. They are not trying to avoid the expense of taxes. They are trying to avoid the annual ordeal of stripping naked before their distant federal overlords in a humiliating ritual designed to show that they are guilty of no crime, absent any individualized suspicion of wrongdoing.
They should enjoy the presumption of innocence that the U.S. is compelled by its foundation law to extend, and be able to keep their private affairs private until there is enough specific evidence that a crime has been committed to issue specific warrants. The federal U.S. government has instead been acting as a bully and an ass, with no discernable goals other than to demand obedience and enforce compliance, for far too long.
They can tax foreign-domiciled citizens as much as they like, for now. Rather than question that here, I would very much like to remove their ability to levy their onerous information reporting requirements on those people and upon the foreign persons that would very much like to do business with them without some nosy busybody rudely inserting himself into the transaction to interfere.
When people who supposedly represent our interests act in such a fashion, it reflects extremely poorly upon the nation as a whole. While foreign entities currently tolerate the behavior, it is only because they lack more viable alternatives.
But beyond the behavior, those expatriates have firsthand knowledge of how other nations operate their taxation systems. And they know that the U.S. system is almost always worse when measured by the scale and complexity of the paperwork. There is no particular technical reason why it is that way. But every time a reform is proposed, the media narrative magically transforms it into an issue about money and fairness rather than transparency, privacy, simplicity, efficiency, or any of the other standards that show it to be a colossal failure when compared with any other modern economy on the planet.
It really is very embarrassing to think that my Big Brother not only watches me in my every waking moment, but he also preemptively beats up every single one of my friends in the schoolyard, just to ensure that I can't even have a moment's peace on a sleepover.
The issue at hand that induces an increasing number of dual citizens to drop their American citizenship is that the U.S. government is supposedly forbidden from both prying into the private affairs of individuals and from compelling involuntary servitude, yet it does so on a massive scale with respect to its citizens living abroad.
These people are often paying more in tax to their local sovereign authority than they would if resident in one of the United States, and would thus owe no money to the U.S. even if they earned 100 times more. They are not trying to avoid the expense of taxes. They are trying to avoid the annual ordeal of stripping naked before their distant federal overlords in a humiliating ritual designed to show that they are guilty of no crime, absent any individualized suspicion of wrongdoing.
They should enjoy the presumption of innocence that the U.S. is compelled by its foundation law to extend, and be able to keep their private affairs private until there is enough specific evidence that a crime has been committed to issue specific warrants. The federal U.S. government has instead been acting as a bully and an ass, with no discernable goals other than to demand obedience and enforce compliance, for far too long.
They can tax foreign-domiciled citizens as much as they like, for now. Rather than question that here, I would very much like to remove their ability to levy their onerous information reporting requirements on those people and upon the foreign persons that would very much like to do business with them without some nosy busybody rudely inserting himself into the transaction to interfere.
When people who supposedly represent our interests act in such a fashion, it reflects extremely poorly upon the nation as a whole. While foreign entities currently tolerate the behavior, it is only because they lack more viable alternatives.
But beyond the behavior, those expatriates have firsthand knowledge of how other nations operate their taxation systems. And they know that the U.S. system is almost always worse when measured by the scale and complexity of the paperwork. There is no particular technical reason why it is that way. But every time a reform is proposed, the media narrative magically transforms it into an issue about money and fairness rather than transparency, privacy, simplicity, efficiency, or any of the other standards that show it to be a colossal failure when compared with any other modern economy on the planet.
It really is very embarrassing to think that my Big Brother not only watches me in my every waking moment, but he also preemptively beats up every single one of my friends in the schoolyard, just to ensure that I can't even have a moment's peace on a sleepover.
If you live in a low income tax country like HK, Singapore, or Switzerland, AND you make over $100K a year, you have to actually pay money to the US government. This is where the housing deduction comes in useful.
That's a wild claim. The author is absent from New York and is free to visit http://www.elections.ny.gov/VotingAbsentee.html to learn about voting.