[Joel’s Note: In the July 3 edition of The Daily Reckoning, senior editor Eric Fry wondered aloud why more and more Americans are renouncing their US citizenship. “Americans who bail on their country may not think things are going to get any worse any time soon,” wrote Eric, “but they clearly do not believe things are going to get better. So far, the pitter-patter of footsteps heading for the exits is barely a murmur…but the murmur is getting louder.”So is it the rampant overspending mentioned above motivating the as-yet mini-exodus? A loss of freedom? Over-regulation? The weather?
We asked expat Reckoners to weigh-in…and weigh-in you did. Below you’ll find a selection of expat experiences. Please enjoy…]
Reckoner Peter W. Dunn, PhD, writes…
I administrate an important website (Isaac Brock Society) with multiple bloggers who cover the issue of expatriation, expat taxes, FBAR and FATCA. As someone who expatriated in 2011 and who has blogged on the issue for the last two years, I believe that the vast majority of those who relinquish their US citizenship are people who are already long term residents overseas — not people who decide to leave the United States in order to escape the growing oppression of the United States.
You have to understand what has happened. In 2010, I decided to renounce my US citizenship because of the 2008 HEROES Act which created a financial Berlin Wall, which would penalise covered expatriates with an exit tax. I haven’t lived in the US since 1986. ALL of my wealth is now in Canada. ALL of my wealth was earned in Canada. I have filed my US income taxes and I owed nothing. But I was not going to allow your country to prevent me from exercising my freedom to decide where I would be a citizen, just because I had over 2 million in assets. But the thing is I don’t have that much, but with the way your Federal Reserve is inflating the US dollar (I am a frequent reader of The Daily Reckoning), I fear that my small Canadian fortune would be worth well in excess of 2 million puny US dollars. I decided it was time to renounce. But the thing is, I wasn’t even a Canadian yet, because as a proud American who always traveled on an American passport, I had never seen the need to take on Canadian citizenship. It took a year to obtain my Canadian citizenship. Now the Queen of Canada is the only thing standing between me and your arbitrary and capricious POTUS. That’s my story. On February 28, 2011, the day I became a Canadian, I ceased to be a United States citizen.
But around 2009, the IRS, who was now in charge of the enforcement of the FBAR law, began to threaten people with substantial fines for not filing. They created an Overseas Voluntary Disclosure Program, an amnesty program with a confiscatory penalty of only 20% of your financial wealth, in some cases including real estate. Today the OVDP fine is 27.5%. This is in lieu of maximum willful penalty rate of about 383% of your financial wealth, so warns the IRS today. In the summer of 2011, these OVDI/OVDP programs were made known to the general public in Canada by a complicit Canadian media — Canadian “journalists” began to do the dirty work of scaring the hell out of US persons in Canada. This set off a huge number of people who needed to renounce their citizenship or otherwise clarify their citizenship status (if they had relinquished decades ago but had no proof of their relinquishment — US border guards were insisting that they travel on a US passport).
This is what Marvin van Horn (cf. Amy Feldman article at Reuters), one of our bloggers and one of the early victims of the 2009 OVDP, has called a Tax “Jihad” waged on US expats around the world.
Thus, I think there is also strong evidence of the following: (1) the vast majority of Certificates of Loss of Nationality are issued not to wealthy people quitting the US to avoid taxes but long term expats who have decided that relinquishing is the best way to avoid this Tax Jihad; (2) the government reported stats are well below the true number of people who have relinquished: I am not on the list despite my 29 February 2012 approval date of my CLN. Many people have reported similar results. I would not be at all surprised if over 10,000 people relinquished their US citizenship last year. In other words, the US government is lying and incompetent in its reporting of the numbers. Would that be a surprise to you?
And here’s Reckoner Terry, also writing from north of the 49th Parallel…
Read your Expatriation story with great interest. I moved to Canada 27 years ago to take a temporary job and fell in love with Vancouver. Not only did I stay, I became a dual citizen. Started a business. Bought a home. However, I remained a proud American with dreams of returning or retiring to my homeland — or at least living there half the year with my Canadian wife. Not anymore.
Now I’m seriously considering giving up my US citizenship. Why? Because Uncle Sam thinks every dollar I make in Canada is his business. Last year I had to pay taxes in both Canada and the states, yet I have not worked a day in the US since leaving in the mid-’80s. The US filing requirements for people living outside the country are onerous and invasive. The US is the only country with such requirements. Not only must I report my income, I must report the highest balance of the year from any bank, brokerage or other financial account outside the US, including account numbers, institution addresses, etc. I must supply the financial statements and Canadian tax filings from my small business. I must report the smallest details from every share of stock bought and sold in Canada or the US. Thus I must pay two tax accountants, because the reporting is so complex. If I don’t file, if I make the smallest mistake in my filings, the penalties are outrageous — whether I owe money or not. Lately I have feared visiting my family in the states, because if there have been any irregularities in my US tax filings, I can be held in the US indefinitely.
And get this…a child of a US citizen born in Canada must also file a US tax return — even if they’ve never spent a day of their life in the good ol’ USA.
I hate the thought of bailing on my homeland. But the cost, aggravation, time and anger this policy generates has worn me down. What do I get in return? The chance to go back to my homeland anytime I want. Well, maybe that’s not such a great incentive anymore.
I was complaining about all of this to a Canadian friend of mine. His response? “There are people literally dying to get into the US to work. You can do so anytime you want. Shut up and quit complaining.”
Perhaps he’s right. But he’s never had to fill out a form TD F 90-22.1 and lie awake at night wondering if he missed a decimal place.
Thanks for the chance to vent.
And finally, one from Reckoner Karen, looking perhaps to head south…
For many years I have dreamed of living in some tropical locale, mostly for the weather. But about, (what year was that election?) 3-4 years ago I started seriously planning it. We are in the process of getting our affairs in order to make the trek south, either to Nicaragua or Panama. I have a pension that I am not counting on lasting for the rest of my life, otherwise our funds are limited.
We hope to be established in a place before my pension evaporates. I believe we could live a much richer, comfortable life elsewhere. I can think of many reasons to leave; cheaper cost of living, less government interference, fewer people expecting a handout or outright living off the government, but very few reasons to stay; family. Every day there is a new reason to be disgusted with what’s going on in this country, we are tired of it and figure it will only get worse when the millionaires we elect to represent us have no idea what it’s like to be an “average” American. We are looking for a simpler, less stressful life and believe that is impossible to find here.
for The Daily Reckoning
Expat Experiences originally appeared in the Daily Reckoning. The Daily Reckoning, published by Agora Financial provides over 400,000 global readers economic news, market analysis, and contrarian investment ideas. Recently Agora Financial released a video titled “What Causes Gas Price to Increase?“.
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