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.


Laus_Deo 5 years, 5 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?

Alyosha 5 years, 5 months ago

Kindly point to a circumstance where a US citizen got their knees broken as a result of not paying taxes.

If you can't, your comment is nothing but emotional hyperbole, which is useless for an adult discussion of civic and public policy.

voevoda 5 years, 5 months ago

For Laus_Deo, from St. Paul:

"Every person must submit to the authorities in power, for all authority comes from God, and the existing authorities are instituted by him. It follows that anyone who rebels against authority is resisting a divine institution, and those who resist have themselves to thank for the punishment they will receive. Governments hold no terrors for the law-abiding but only for the criminal. You wish to have no fear of the authorities? Then continue to do right and you will have their approval, for they are God's agents working for your good. But if you are doing wrong, then you will have cause to fear them; it is not for nothing that they hold the power of the sword, for they are God's agents of punishment bringing retribution on the offender. That is why you are obliged to submit. It is an obligation imposed not merely by fear of retribution but by conscience. That is also why you pay taxes. The authorities are in God's service and it is to this they devote their energies. Discharge your obligations to everyone, pay tax and levy, reverence and respect, to those to whom they are due." (Romans 13:1-7)

voevoda 5 years, 5 months ago

Yes indeed, that is what the Constitution says, and I am glad it live in a country with this concept of the origin of political power. But St. Paul wrote this before the Constitution came into existence, so he can be forgiven for not taking it into account when formulating his ideas.

My message was intended for Laus_Deo, who likes to imagine himself to be a Christian, and therefore ought to respect the words of Scripture.

voevoda 5 years, 5 months ago

I'm not claiming anything, Gandalf. I'm just presenting to Laus_Deo a lesson from Scripture. And I'm not going to debate the finer points of God's will/human free will with you, a professed unbeliever who ridicules believers, including just two days ago, myself.

Cait McKnelly 5 years, 5 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.

voevoda 5 years, 5 months ago

Clearly, cait48, "Sam" owned more than one house. He had a home in California, where "he and his wife paid taxes"--but implicitly, they didn't live there. Sam's kids certainly could have attended a public university in whatever state they actually resided, and avoid the $50,000 price tag that way. That's what most of the rest of us do. But poor Sam demanded a taxpayer-subsidized education for his kids in violation of the residency rules that apply to everyone else. At the same time he whines about paying his fair share in taxes. What an overweening sense of entitlement he's got--and Cal Thomas, too, for presenting him as a "victim."

Cait McKnelly 5 years, 5 months ago

For someone that obviously has that kind of cash, I'm not sure why he's griping about 50k/year for college expenses. He should feel lucky they didn't want to go to an Ivy League school. (My guess is that they were nouveau riche and didn't have the blue blood, the celebrity cred or the smarts to get into one.)

JackMcKee 5 years, 5 months ago

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

Alyosha 5 years, 5 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.

tomatogrower 5 years, 5 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.

verity 5 years, 5 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.

verity 5 years, 5 months ago

Damn right! Speaking from experience, sometimes is just time to hang it up and let the youngsters with fresh ideas take over. I hope they'll do a better job than we did.

jayhawklawrence 5 years, 5 months ago

Cal seems really lost.

Probably a good description of the current Republican Party.

SnakeFist 5 years, 5 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.

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