Opinion: U.S. taxes force citizenship choice

January 2, 2013


— We read about famous people like French film star Gerard Depardieu, who moved to Belgium to avoid a 75 percent income tax on millionaires proposed by France’s Socialist government (a measure rejected last week by a French council, though French leadership has vowed to resubmit a similar proposal). Then there is Eduardo Saverin, who took the extreme step of giving up his U.S. citizenship and could see a savings of $39 million on his Facebook investment, according to the research firm Wealth-X. He says business reasons, rather than high taxes, were his primary motivation.

I had read about financially motivated expatriates but never knew one who had taken the ultimate step until I visited with my longtime friend “Sam” (I’m withholding his real name to protect his current employment). Sam works for a large investment firm. He has lived here for the last 25 years.

He says that five years ago, he began thinking he could no longer “afford to be an American.” Contributing to his decision was the cost of sending his five children to college. Even though he and his wife pay taxes on a home in California, the state has denied them in-state college tuition, meaning it could cost them $50,000 per child. While there is a $95,100 earned U.S. income tax exclusion, Sam says it isn’t enough to substantially reduce his U.S. taxes and still cover his costs.

Here is how burdensome U.S. tax laws have become: Seven years ago, Sam left a major investment banking firm based in the U.S. to join another international bank. The law required that his 14 years of pension savings become current income and taxed it at a rate of 35 percent. He says he could not roll over the account due to a “quirk” in the law. Hong Kong citizens are taxed at a rate of only 15 percent.

Another consideration, he says, was the refusal by Hong Kong banks to allow him to open a securities account. The reason? “None wanted to deal with onerous U.S. reporting requirements. My own bank could not even open an account for me to invest in local securities.”

Sam says his decision was “emotionally difficult. My parents worried I would not be able to return to see them in the U.S. (He managed to get a 10-year tourist visa.) I would have to give up the right to vote or run for political office. I was concerned that others would call me a traitor or deserter.”

“I had paid over $1 million in U.S. taxes but didn’t receive any benefits, nor did my wife and kids. (She maintains her U.S. citizenship.) As I saw the massive U.S. deficit continue to climb, it became clear that the government would likely raise taxes further. I finally decided to expatriate. ... A dozen of my friends who have lived over 10 years in Asia have done the same. We can no longer afford to be American citizens.”

Eugene Chow, an attorney who specializes in helping Americans give up their U.S. citizenship, told The Wall Street Journal’s “Asia Today” program that while such actions continue to be rare, they are increasing. He says people pay a high price for giving up their citizenship. Not only is there an “exit tax,” but all appreciated assets, including a home, are assessed a 15 percent capital gains tax, even if they haven’t been sold.

Chow says, “The IRS is essentially outsourcing its compliance rules to non-American-related companies and they are saying to Americans, ‘We don’t want your business.’ So that’s more of a practical reason for why some people choose to give up their passports — to make it a less complicated life living overseas.”

While the media love to focus on billionaires, says Chow, most who renounce U.S. citizenship are “people who have changed circumstances; people ... who have lived and worked (overseas) for the last 10-15 years, who might have married a foreign spouse and who believe their future is overseas, rather than back in the U.S.”

With so many foreigners wanting to become U.S. citizens, it’s still a shock to know someone who has relinquished his citizenship. It is another reason for simplifying the U.S. tax code. America should want to retain people with the skills and experience of people like Sam, who have contributed more than tax money to their (now former) country.

— Cal Thomas is a columnist for Tribune Media Services.


SnakeFist 1 year, 3 months ago

I've heard that taxes are really low in Somalia. Maybe "Sam" should have moved there if he doesn't want to fund a functioning government and the many goods and services it provides.


jayhawklawrence 1 year, 3 months ago

Cal seems really lost.

Probably a good description of the current Republican Party.


donttreadonme 1 year, 3 months ago

Not to mention, the "taxes on a home in California" were likely relatively low, due to Prop 13. Fail.


verity 1 year, 3 months ago

I think both Mr Thomas and Mr Will have run out of ideas and it is time for them to retire. Will is 71 and Thomas is 70, time to enjoy their time in the sun.

Unfortunately, Mr Krauthammer isn't old enough for Social Security yet.


Gandalf 1 year, 3 months ago

To paraphrase a comment I read the other day. There are no poor millionaires, only temporarily embarrassed billionaires.


tomatogrower 1 year, 3 months ago

Good riddance to bad rubbish. "“I had paid over $1 million in U.S. taxes but didn’t receive any benefits, nor did my wife and kids. "

What? You and wife never travelled on our roads and highways? Maybe no one ever broke into your house, but you honestly don't think that break ins would not have happened if there weren't police? Your house in California might have burned to the ground, if it hadn't been for tax tuned firefighters. You flew first class safely in our skies with tax funded security. You didn't buy gasoline or food in the the US? These are highly subsidized. You earn lots of money, but you want to send your kids to a public university instead of a private, ivy league university? Why? I have heard that the parties in California universities are a lot of fun, and there are people who you can hire to do your school work, just get in touch with the Walton family. Food stamps allow you to pay your driver, maids, and other "menial" employees less money, but they still have the energy to work for you. So how is it you have never received anything in return?

We have subsidized these rich spoiled brat's lavish lifestyles for too long. Please leave and don't return. And take Cal with you.


Alyosha 1 year, 3 months ago

My siblings are able to pay for their kids' college without being millionaires and without renouncing their citizenship, so I don't have much sympathy for Cal's wealthy friend.

Wanting to renounce one's American citizenship suggests that they don't take very seriously why the Constitution is such a radically worthy document, or that they don't have much gratitude for the men and women who have died creating and protecting this country. That's fine, as far as personal choices go, but it seems kind of petulant.

My family have been on this continent since before the American revolution, and I would not renounce my US citizenship. It's too valuable a fact and idea.


organic_locallygrown_hatred 1 year, 3 months ago

Gee, I sure do feel sorry for rich people. Given that the majority of people who read (and agree with) Cal's column don't even have the luxury of having a million dollar's worth of income, why should they care if rich people have to pay more in taxes?

I also think it's pretty humorous the way rich people are made out to be the only victims of paying too much tax in this country.

Cal Thomas doesn't seem particularly concerned about the less fortunate, or working families who will pay more in taxes and don't have the luxury to find loopholes, off-shore accounts and the ability to become a citizen in another country for the sake of getting more money.

I know that Cal Thomas is a conservative. Wouldn't conservatives and Tea Party types be offended by someone choosing more money over U.S. Citizenship? With their near-constant rhetoric about what a real American is, and fear of foreigners, fear of American values being flushed away, then wouldn't losing your U.S. citizenship for the sake of having millions of more dollars than you already heave mean that you have committed the ultimate betrayal against your home land?


Liberty_Uno 1 year, 3 months ago

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JackMcKee 1 year, 3 months ago

Bet he still has most of wealth and investments in dollars. Leech.


Cait McKnelly 1 year, 3 months ago

I have so many questions. Was that million in taxes paid in one year or over the course of several? Why did California turn them down for instate tuition? Where are they really living? He has five kids in college at one time? He's a banker in international finance? (This IMMEDIATELY makes him suspect.)
Sounds to me like this guy is a greedy POS who would rather make money than be an American citizen. Don't let the door hit ya in the back on the way out.


Laus_Deo 1 year, 3 months ago

"Corruptissima re publica plurimae leges.” (The more corrupt the state, the more numerous the laws.) — Tacitus, Annals

I'm sorry.... The more money I make, the more I have to give it to somebody in the government? Why is that now? Is this so I don't get my knees broke?


Gandalf 1 year, 3 months ago

Another crock of BS from cal. Poor fellow paid a million in taxes. Wouldn't that mean he also made at least 2 or 3 million after taxes? And HE can't afford to live in the US? Sounds more like he just wants the power of being rich in a slave market country. Plus gets away from his wife and kids as well. Good riddance and don't hurry back.


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