President Obama promised he would unite the world…and he’s right.
Representatives from dozens of nations have bitterly complained about an awful piece of legislation, called the Foreign Account Tax Compliance Act (FATCA), that was enacted back in 2010.
They despise this unjust law because it extends the power of the IRS into the domestic affairs of other nations. That’s an understandable source of conflict, which should be easy to understand. Wouldn’t all of us get upset, after all, if the French government or Russian government wanted to impose their laws on things that take place within our borders?
But it’s not just foreign governments that are irked. The law is so bad that it is causing a big uptick in the number of Americans who are giving up their citizenship.
Here are some details from a Bloomberg report.
Americans renouncing U.S. citizenship surged sixfold in the second quarter from a year earlier… Expatriates giving up their nationality at U.S. embassies climbed to 1,131 in the three months through June from 189 in the year-earlier period, according to Federal Register figures published today. That brought the first-half total to 1,810 compared with 235 for the whole of 2008. The U.S., the only nation in the Organization for Economic Cooperation and Development that taxes citizens wherever they reside.
I’m glad that the article mentions that American law is so out of whack with the rest of the world.
We should be embarrassed that our tax system – at least with regard to the treatment of citizens living abroad and the treatment of tax exiles – is worse than what they have in nations such as France.
And while there was an increase in the number of Americans going Galt after Obama took office, the recent increase seems to be the result of the FATCA legislation.
Shunned by Swiss and German banks and facing tougher asset-disclosure rules under the Foreign Account Tax Compliance Act, more of the estimated 6 million Americans living overseas are weighing the cost of holding a U.S. passport. …Fatca…was estimated to generate $8.7 billion over 10 years, according to the congressional Joint Committee on Taxation.
I very much doubt, by the way, that the law will collect $8.7 billion over 10 years.
And it’s worth noting that President Obama initially claimed that his assault on “tax havens” would generate $100 billion every year. If you don’t believe me, click here and listen to his words at the 2;30 mark.
So we started with politicians asserting they could get $100 billion every year. Then they said only $8.7 billion over ten years, or less than $1 billion per year.
And now it’s likely that revenues will fall because so many taxpayers are leaving the country. This is yet another example of how the Laffer Curve foils the plans of greedy politicians.
You may be tempted to criticize these overseas Americans, but I’ve talked to several hundred of them in the past few years and you can’t begin to imagine how their lives are made more difficult by the illegitimate extraterritorial laws concocted by Washington. Bloomberg has a few more details.
For individuals, the costs are also rising. Getting a mortgage or acquiring life insurance is becoming almost impossible for American citizens living overseas, Ledvina said. “With increased U.S. tax reporting, U.S. accounting costs alone are around $2,000 per year for a U.S. citizen residing abroad,” the tax lawyer said. “Adding factors, such as difficulty in finding a bank to accept a U.S. citizen as a client, it is difficult to justify keeping the U.S. citizenship for those who reside permanently abroad.”
Imagine what your life would be like if you had trouble opening a bank account or conducting all sorts of other financial activities. Things that are supposed to be routine, but are now nightmares.
I collected some of the statements from these overseas Americans. I encourage you to visit this link and get a sense of what they have to endure.
And then keep in mind that all of these problems would disappear if we had the right kind of tax system, such as the flat tax, and didn’t let the tentacles of the IRS extend beyond America’s borders.
P.S. Based on people I’ve met in my international travels, I’d guess that, for every American that officially gives up their citizenship, there are probably a dozen more living overseas who simply drop off the radar screen. Many of these people can’t afford – or can’t stand – to deal with the onerous requirements imposed by hacks, bullies, and lightweights in Washington such as Barbara Boxer.
P.P.S. Remember the Facebook billionaire who moved to Singapore to escape being an American taxpayer? Many of us – including me – instinctively find this unsettling. But if we believe that folks should have the freedom to move from California to Texas to benefit from better tax policy, shouldn’t they also have the freedom to move to another nation?
The same is true for companies.
If our tax law is bad, we should lower tax rates and adopt real reform.
Unless, of course, you think it’s okay to blame the victim.
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As a Brit living in London, with many American friends, I am shocked about how many of them are trying to renounce their US citizenship, and are extremely tearful about it.
I am aware of many US citizens who have moved to Europe and have carved a life for themselves making their way, but in nt very high-paying jobs in teaching, the law and and other professions. Many of them have married European partners, but have held on to their US citizenship.
But US citizens abroad, just making their way through life, now have to find £3k annually to use an accountant to counter the tax demands of their country, even though they left it 20 years ago.
ANd if they do not comply, the US has enforced an agreement with other countries that they will automatically extradite US citizens who do not fill in the forms correctly.
What the heck is going on?
A British government would never, ever get away with such a repressive sanction against our people who choose to make their way in foreign countries.
Our system says that if you make a fortune abroad, then you will be taxed when you bring your capital back into your homeland. But the taxation regime makes it easy for people to bring their gains back home, in the belief that over the years of their return, they will make a contribution.
The British invented the concept of Free Trade. Under that principle is a notion that you will eventually bring your wealth back to the country of your birth.
It seems to me that US foreign entrepreneurs, are deciding, en masse, to ditch their US citizenship, and never return to their homeland.
The greatest drive for US exports has always been the frontier business operator who has opened up new markets wherever they may be, sourcing US partners to further their aims.
In future, the US business entrepreneur will continue to make his/her mark, but will seek a passport that frees him from the extraordinary fiscal rendition of the IRS and will source ancillary services from anywhere but the US, to avoid any future draconian imposition on them.
So Mr Cruz has awoken to the fact that he’s a ‘accidental Canadian’. It’s fortunate for him that Canada hasn’t subjected him to the same nightmare that ‘accidental Americans’ the world over are waking up to.
Mr Cruz’s ignorance and presumptuousness is mind-boggling but unfortunately typical of how many Americans think. First of all he’s an American “at birth” and a Canadian “by birth”. Secondly he assumes that somehow his American citizenship negated his Canadian. To renounce his Canadian he can make an online payment of $100 to the Canadian government and maybe have to see a Canadian citizenship judge at his local Canadian consulate. By contrast, in order to renounce US citizenship (even if you were born outside the US) Americans throughout the world must file at least 5 years worth of US tax returns, pay all back taxes and penalties owed, make at least one visit to a US consulate where they pay a fee of $450, and in many cases pay a hefty exit tax. The US should call themselves “land of the fee” for it certainly isn’t free with the walls it’s erected around itself.
Reblogged this on Idaho Independent Press and commented:
People renouncing U.S. citizenship like never before, this is why Idaho needs to work towards being as independent from the feds as much and as soon as possible!
Chip:
Please compare the Fair Tax to FreedomIncomeTax.com.
Sector Senate
The Fairtax is the answer. Go to Fairtax.org
Passed the Senate on February 24, 2010 (70-28)
Passed the House as the Hiring Incentives to Restore Employment Act, Title V, Subtitle A on March 4, 2010 (217-201) with amendment
To Guilerrmo. “The stupidity and short-sightedness of US lawmakers has created this abomination”
I suspect it was mainly dems that voted for this abomination, so you may need to narrow your target of outrage. Dont blame all lawmakers for what the dems are doing.
Going Galt means refusing to support the looters who would bleed you dry. In this sense, leaving America for a freer country is “going Galt” just as much as is remaining here, quitting your job, and dropping out of the system.
Foreign Account Tax Compliance Act
Never trust a law called ‘FATCAt’
Liberals are like abusive spouses-always justifying their abuse on the actions of the abused.
@Zorba…
Excellent comments.
Sealing the safety valves (with exit taxes and citizenship renouncement as the only means to avoid taxation of income earned in foreign societies) is one more way to ensure that the eventual economic implosion will happen at a catastrophic depth. Yes, sealing the safety valves delays implosion, delays emigration, keeps a few more Americans under the taxation of the American majority, just for a little bit longer. But fundamentals cannot be neutralized by gimmicks and thus the economic distortion keeps compounding.
Falling dictators try to hang on for a few more years by intensifying oppression and tyranny. The American majority is trying to hang on to a few more years of top prosperity illusion, by punishing those who want to emigrate, more redistribution, more protectionism. It will not work and it will only make the inevitable correction all the more fierce. The more you sandbag the river of fundamentals, with no outlet, the more catastrophic the inevitable flood. Top American prosperity is riding on momentum at this point. Act accordingly….
Attention Mr. Dan Mitchell –
Would you favor a demonstration of how the
FreedomIncomeTax would work?
With a flat tax base (the receipt of money)
and a 1% flat tax rate, such a demonstration
would show how free markets, not political
bureaucracy, would govern income taxes.
And the ex-pat problems you describe in today’s
article go away because the tax base definition of
“money received, from whatever source derived”,
includes only money received within the territorial U.S..
Please see the 288 word advocacy at
http://www.FreedomIncomeTax.com.
Submitted by Sector Senate
Welcome to police state America.
Please, enjoy your stay.
Now…what are you gonna do about it?
What the US Government under Obama has done is target otherwise law abiding US Citizens living overseas. These citizens are tax complient in their home country where they live, but are persecuted by the long arm of the US Government. What basis does the US have to tax and tax again a US citizen living abroad for services not received? No other country does this (since 1939 Nazi Germany did it to those seeking to leave). Residence based taxation like the rest of the world for overseas Americans is the way to go – Congress PLEASE do something about this travisty.
Many people are working for cash only.
I went Galt from Southern California in 1994, two years after the Rodney King riots. I woke up one morning and had to explain to my eight year old daughter why those people were allowed to hit a truck driver over the head with a brick and burn down their neighborhoods and area stores.
I sold my house, my business and moved to a nice rural area. I went to my county fair on Friday night and the cowboys at the Rodeo said a prayer for our veterans, troops and their animals. We sang the national anthem and I got tears in my eyes as I realized my granddaughter who still lives in Southern California and is not allowed to pray in public or even visit a school restroom without state persecution, interference or mandates. Thank God her parents will be leaving to live near me in a few months.
Going Galt for me meant intentionally cutting my own income back to part-time, buying tangibles, land and making sure I had the skills and tools to protect myself and those I am responsible for from the looters and moochers. The pledge I took was “I swear by my life, and my love of it, that I will never live for the sake of another man, nor ask another man to live for mine.” Almost twenty years later, I am so glad I left when I did. California has become a nightmare.
I’ve gone Galt.
Galt didn’t flee America, and he did not give up his citizenship. His motives and interests are far from those of the emigrant’s. In fact, a shrewd reading of Atlas Shrugged leads one to the conclusion that Rand’s working title, The Strike, was apt in more ways than she might have cared to admit publicly.
You see, Galt, a stalker by any reasonable measure, organized a coup d’état against the central government of the USA. By the end of the story, that government is in disarray, and the rest of the country, too, is going to pieces. Much of this can be attributed to Galt’s long-range planning and patient project management. In spite of the chaos, however, John is in a big, big hurry to return to the world that he just finished turning upside down. Why would that be? Well, certainly he wants to scoop up some property at steeply discounted prices from distressed sellers. For example, he might want to buy the power companies’ distribution networks, to which he can attach copies of his newfangled generation device. This should be little trouble with the power companies failing, and it would not take him long to corner markets for power generation and distribution.
But recall that Galt has positioned hisself publicly as a kind of savior from a depraved culture and the government that stands astride it. That is not the behavior of shrewd businessmen who lack political ambitions. They much prefer the safety of anonymity insofar as privacy is possible for the successful businessman. So, soon the next phase of his coup d’état project will have Galt moving again against the government that is not likely to welcome his return to the world of commerce. This is where talent such as Judge Narragansett will become extremely useful to Galt.
It’s not necessary, however, to suppose that characters like Akston, Mulligan, Narragansett, and so on were aware of the plan for a strike against the state, and, for that matter, the power companies. They could be merely Galt’s pawns as, it seems, was Dagny.
So, in a way, your claim that more Americans are going Galt is a smear against their reputations and a nice smokescreen for any real-life Galt who aspires to political power on the American political scene.
Progressives will argue that the provisions are inconvenient but not onerous and in any case place the US somewhere in the middle and not the bottom of the oppression spectrum.
But remaining most prosperous country in the world –as most Americans delusionaly hope and have become accustomed to – depends on much narrower margins than the onerous provisions of FATCA, or even other milder approaches that may one day replace it. Arguing that America can maintain top prosperity (by what? Divine intervention? ) by simply avoiding the bottom is a hopeless and delusional fantasy. America has already slid almost twenty slots in the Economic Freedom of the World index and not only shows not indication of reversing that but the trend is negative. That tells all, and that is all you need to know about America’s prosperity future. Those who put hope only in America, risk shackling themselves to a declining empire. And the citizens of declining empires have a tendency and history of turning nasty, as they desperately try to hang on to past glories. Decline is a very painful and nasty process.
In the fractal behavior of the economy there will be some better economic growth quarters, and perhaps even whole years to muddle the narratives of the underlying trendlines. But the long term growth of the US has, in my view, irreversibly shrunk towards a lower trendline. And in terms of prosperity, that is ALL that matters. At some stage — and rather suddenly is my guess – the tipping point will be reached and the floodgates of those wanting to escape an inevitably ever more tyrannical US majority (the more you slide, the more you try to squeeze out of the few remaining producers) will open, and the issue of citizenship renunciation will be propelled into center stage in American political life.
———-
But, to diverge a bit, most ominous of all, are not those going Galt, but those going Jim Taggart – a widespread transformation that Ayn rand never really gave due coverage in her books – in Ayn Rand’s philosophy people seem to be born either of the Galt type or the Jim Taggart type, no widespread transformations are acknowledged. But the Galt to Taggart mutants are the ones who will now withdraw their superior skills from entrepreneurship, and redirect them towards lobbying to be the exclusive recipients of wealth. Wealth that, in a collectivist world, must increasingly pass through the one and only one people approved allocation bottleneck: Washington. In essence, the process by which all wealth is allocated not by dynamic market merit, but rather by “the people” through the political democratic majoritarian process . In other words, collective control of the economy through the political democratic majoritarian process (I know most will wonder: What’s wrong with that?).
Many have dreamed of the prosperous paradise where most citizens wake up every morning and leave their beloved families to go inside four office walls to spend half their day (or more if all the effects of collectivist legislation and regulation are accounted for) working for the benefit of distant others – AND! do that with enough residual enthusiasm to outcompete the rest of the world, to boot. Those dreams have consistently resulted in systemic and irreversible decline, and those are the dreams of today’s Americans.
So, as a practical suggestion…
You better go Galt, before the majority starts noticing (i.e. before you cross the exit tax threshold, and before the majority lowers it with a new law, on their predictable behavior to decline). Once the first few chaps start crying “Evacuate! Head for the life rafts!” it will be too late.
It’s the US government that’s priced US citizenship out of the market.
PS: Bravo to all commenters!!
Five stars!(Even though I know I am now a target of this administration for saying so, I do believe in a higher power.) Evil thrives when good people do nothing. Can’t believe the number of professional people who will not blog because they fear the retaliation of this vindictive regime.
Plenty of Americans drop off the radar right here in the “good old” USA. Cutting taxable income, retiring ASAP, moving to the hinterlands, and a host of other techniques. It is foolish to stay. If you are being swarmed by piranha, get out of the river.
Obama is making sure that ALL of the middle class of Americans go down with the rest of them. If an avenue for escape is left, then there is too big a risk that too many Americans would use it and then the Cloward-Piven thing doesn’t work.
It many ways this development makes sense. Is it going Galt, well I am not sure that characterization is accurate, but it is definitely a statement of value. Membership has it privileges and its costs. It appears that FATCA is causing many to do a cost vs benefit analysis of staying part of the U.S. Citizenship club.
The profile of those that are getting their CLNs remains a big question, as this Federal Register list is very incomplete, and just the IRS slice of the pie that they are mandated to report. The FBI has a more complete list that they maintain that is related to homeland security to assure that those that renounce can not get a permit to buy a gun in the future.
But without a FOIA request to the STATE Department we really don’t know. The press like to stereotype it as the Rich escaping, but even that is harder to do now with the provisions of the Exit tax that whacks them hard for the privilege. I think this is more of a middle class long term resident or accidental American phenomena, but then I could be wrong too.
There are a lot of good comments on the WSJ article by Laura Saunders on the same subject. Worth a read if the subject interests you. It is a disturbing trend for those of us culturally raised to not see our country as one people would flee from. How long have we been taught that the American Dream is something all aspire to? This increasing embryonic movement to give up membership in what is increasingly a Tax, Form and Penalty club is disquieting. The fallout of the Obama offshore jihad. Good intentions having bad consequences.
http://on.wsj.com/1eB38XB
My brother and sister-in-law are teaching at The American School in Switzerland. It took them 3 months to open a checking account, even with full time jobs. On the bright side, they have been paid in Swiss Francs. Since they started, they have not received a raise, but their salary in $US has gone up significantly.
[…] https://danieljmitchell.wordpress.com/2013/08/11/more-americans-going-galt/ […]
Excellent post, Dan! The stupidity and short-sightedness of US lawmakers has created this abomination, making lives for those of us who live honestly, work hard or study abroad more difficult. Thanks for focusing on this.
Reblogged this on U.S. Constitutional Free Press and commented:
P