The Motley Fool Discussion Boards
Financial Planning / Tax Strategies
|Subject: Re: Renouncing citizenship for tax purposes||Date: 8/23/2013 4:23 AM|
|Author: saunafool||Number: 119064 of 124279|
I'm fine with people renouncing US citizenship to avoid US taxes. However, I want them banned from ever setting foot on US soil again. Seems a fair trade-off.
Maybe it would help to understand why Americans live overseas and what kind of situation the tax laws put them into.
I am American and I live in Europe, and I've been living in Europe for 6 years. I basically consider myself to be living abroad indefinitely.
Why do I live here? Because my wife is French and I saw an opportunity to build a business selling American-made product to oil refineries (which is what I did in the U.S. before moving). Basically, I was working for a small company selling a niche product in the U.S. and having a great deal of success. The manufacturer of the product (a Fortune 500 company) was completely unable to sell it in Europe--i.e. sales of $0. They asked if we would be interested, so I agreed to start a new company to sell the product over here. Now, we are very successful in Europe, which has created manufacturing jobs in the U.S. and a couple of sales jobs in Europe.
Most of the Americans I've met who live "permanently" in Europe are here for similar reasons--marriage or they started a business over here. Sure, there are some ultra-rich people who hide out in Switzerland. I've never met them.
Now, for the tax burden. First, you should be aware that we need to pay taxes in the country where we work. These taxes are generally higher than U.S. taxes to begin with. For Americans who are retired abroad and live off of investment income, they need to pay local taxes as well as U.S. taxes on all capital gains. The socialists in France just raised the capital gains tax rate on foreign income to 60% or something like that. (So much for my retirement in Provence.)
Americans living permanently overseas also need to pay U.S. income tax on income above $100,000/year ($190,000 filing jointly). You might think this is a generous exemption. However, the U.S. is the only nation on earth which imposes this burden upon its own expatriates. Iran does not do this. China does not do this. Russia does not do this. Even the French don't do it (although the new socialist government would like to).
What do we get for these taxes? Does our contribution count towards our Social Security when we get old? Can we take exemptions for 401k plans or IRA's? No. No. No.
Furthermore, until the last 2 years, the requirements were unclear.