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 US tax regime where expat US citizens still have to pay full tax to the US (except where there's a tax treaty that limits double taxation) is exceptionally harsh - almost no other countries do that.
This.
The US keeps taxing you after you leave. And for citizens, it is for life.
The conversation here at this moment seems to be focused solely on whether or not it is complicated or costly to keep filing US taxes. This misses the point in that the US is the _only_ developed country to impose worldwide taxation on its citizens regardless of where they live. The only other country to do so is Eritrea and the US has routinely criticized them for doing so. Moreover, it makes expats ineligible for certain retirement savings in their country of domicile (as the US does not recognize pre-tax deductions for these investments, like those countries do not recognize investments in 401k’s). It also makes it challenging for expats to find banks willing to serve them because elf the added complexity.
All of this adds up to making Americans less attractive abroad than say Aussies or Brits, which surely has some negative impact on US competitiveness. And for what? Even the IRS estimates the savings in lost taxes to be a mere fraction of the costs of enforcement.
This makes literally zero sense. None. Cut your nose off to spite your face.
This story appears on HN like clockwork every 3 months. Why? Because the Federal register publishes quarterly figures, the articles write themselves with very little work, and there's a large contingent of people on HN who think taxes are evil. I do think the policy of taxing US citizens on overseas earnings is unwise and FACTA is somewhat unworkable, but it's worth noting that taxation of Americans living abroad (and at a higher rate, to boot) dates back to 1864, when it was introduced to defray the costs of the civil war.
http://www.treasury.gov/resource-center/tax-policy/Documents... has all the information, and you can see the little quarterly blip on the search results graph as newspapers run the story reliably every 3 months. There has been a distinct uptick since the passage of FACTA but applications seem slightly down this year compared to 2013.
Worst part is that we have to pay US taxes as well local taxes even if we don't live or make any money in the US. If you live in a county with an effective lower tax rate you have to pay the difference.
I take home less money than someone with the same job and same expenses. In addition it's so cumbersome to file from abroad that I have to pay someone.
It's like the king of England collecting taxes from the ones who left.
We also have to declare the entire finances of any company that we own more then 10 percent in which is a huge problem for the other 90 percent owners that aren't Americans.
I don't think this will ever get fixed since Americans abroad also don't have any representation in congress. :-(
>US is one of the few countries that taxes its citizens who move abroad.
More precisely it is taxation by citizenship, not residence.
For example, the Netherlands will happily tax everyone on their assets worldwide, but you're not going to be paying Dutch income taxes if you're not living and working in the Netherlands.
The US has "world tax" which means they can tax their citizens all over the world (no matter what currency). It's not even limited to citizens, it actually extends to anyone who's living in the US for the majority of the year.
You have no idea what you're talking about. It isn't just about taxation it's about countries being forced to report to the IRS. If you have a foreign account with a balance over $10k and you fail to report the account (in a filing separate from your tax returns,) you are fined $10k -- no exceptions. If the balance just goes above $10k for even one minute, you are on the hook for reporting that account for as long as you have the account. Except for Eritrea, no other country has citizenship based taxation. Additionally, you can't even open bank accounts overseas as an American with many banks. You also don't seem to understand citizenship law. There are millions of Americans who have never even been to the US, yet must file taxes and report bank accounts. As far as that blue passport getting you on a C130.. That doesn't happen anymore. The State Department routinely leaves Americans stranded in war zones while the French actually send the military to get their people out. US consular services abroad are a joke. I've lived overseas for about 8 of the past ten years and I routinely deal with consular nonsense. Finally, to your point about being 'rich enough' to pay taxes; the exception is only about $96k -- however if your working in Paris or London or Tokyo, that is barely a survival wage for a family. That aside, you still are subject to double taxation as well if you're in a country without a tax treaty. Frankly, I suspect you've never lived as an expat nor do you understand the facets of the law that make it so onerous.
I've worn te uniform of the US military and paid my 'dues,' yet to imply that an overseas American is any less American is offensive. When I am outside the US, I do not consume a single taxpayer funded service. All consular services for the most part are self-funded. If the time comes when I need the Marines to come bail me out, send me the bill and I'll pay cash; otherwise the IRS can leave me the hell alone. I am a proud American, but I despise the Democrats who passed FATCA along with the class warfare rhetoric that led to it. To Democrats, overseas Americans are presumed to be money launderers, drug dealers or tax evader. I am neither yet the burden of proof is on me. Did you know when Insend money to the US, I must provide proof of the fund's origins? I have to prove my innocence in order to use my own money! FATCA is worse than the NSA -- it's a license to violate my financial sovereignty.
It really doesn't make sense how the US is the only country which insists on taxing their citizens, no matter where they live. It makes American labor less competitive and promotes the insularity of American culture.
I'm living abroad and you can definitely see the impact of the US tax system in the background of expats: Americans are severely underrepresented. The same salary, when offered to a British expat and an American, is much less attractive to the American because of the 30+% tax burden imposed.
reply