Americans Abroad Renounce Citizenship Over Taxes
A report in today’s NYT says that an increasing number of Americans living abroad are renouncing their citizenship to avoid double taxation.
Historically, small numbers of Americans have turned in their passports every year for political and economic reasons, with the numbers reaching a high of about 2,000 during the Vietnam War in the early 1970s. But after Congress sharply raised taxes this year for many Americans living abroad, some international tax lawyers say they detect rising demand from citizens to renounce ties with the United States, the only developed country that taxes it citizens while they live overseas. Americans abroad are also taxed in the countries where they live.
So far this year, the Internal Revenue Service has tallied 509 Americans who have given up their citizenship, said Anthony Burke, an I.R.S. spokesman in Washington. He said complete figures were still being calculated.
Applications to renounce citizenship are on the rise at the American Embassy in Paris, according to an official who spoke on condition of anonymity. At the embassy in London, the number of applications was reported to be fairly stable over the past two years, though it would be hard to spot a recent surge because applications are taking longer to process there than in past years. Neither embassy would disclose exact figures. A spokeswoman for the American Embassy in London, Karen Maxfield, said Americans living abroad usually took the step “because they do not have strong ties to the United States and do not believe that they will ever live there in the future.”
Concern about taxes among Americans living abroad has surged since President Bush signed into law a bill that sharply raises tax rates for those with incomes of more than $82,400 a year. The legislation also increases taxes on employer-provided benefits like housing allowances.
For some Americans abroad, motivations for renunciation are mixed and complex, involving social concerns, political displeasure with their government and other reasons. But it is clear that taxation plays a large role for many, even though few are willing to admit that because of penalties enacted a decade ago. In 1996, Congress tried to address a wave of tax-driven expatriation by the wealthy by requiring former citizens to file tax returns for a decade and forbidding Americans who renounced their passports for tax reasons from visiting the United States.
An interesting phenomenon, especially if the United States is indeed the only country that does this.
It’s hardly a great loss, however, to purge from the citizenship and voting roles those who have no intention of returning to the country.