Monday, 09 December 2013 16:08

Amid IRS Abuse, Record Number of Americans Give Up U.S. Citizenship

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Facing an increasingly out-of-control federal government in Washington, D.C., record numbers of Americans are giving up their U.S. citizenship in an effort to escape onerous requirements enforced by the IRS — which apply no matter where in the world a citizen lives. Because the IRS requirements have already become so bad, a growing number of banks around the world are refusing to even accept American customers in an effort to avoid U.S. government bullying and mountains of regulations. Following a trend in recent times, with citizenship renunciations continuing to hit new records, some members of Congress are slowly starting to take notice.

According to official figures and experts cited by the Wall Street Journal, almost 2,400 people so far this year have either given up their U.S. citizenship or turned in their green cards. That means the numbers thus far are up by at least 33 percent over 2011, when 1,781 did so, more than twice as many as in preceding years. In 2012, meanwhile, almost 2,000 people reportedly decided to permanently sever Uncle Sam’s grip, and experts say the real numbers are even higher. By comparison, just 742 renounced their citizenship in 2009.

The exodus is widely expected to continue or even accelerate — especially among the wealthy and mobile — unless and until Congress takes action to rein in the IRS and reduce the draconian burdens imposed on Americans abroad. The U.S. government, of course, is almost unique in the world in that it demands that citizens pay U.S. taxes and file massive amounts of complex paperwork no matter where on the planet they reside and work. According to reports, the only other government in the world to seek tribute from citizens abroad is the one ruling Eritrea.

“The reality is that the U.S. tax system gives dual citizens a good reason to walk away from their U.S. citizenship or permanent-resident status,” former federal prosecutor Jeffrey Neiman was quoted as saying in a recent CNBC report about the growing trend. “It's a painful process but easier than staying in compliance with the law.” Other experts echoed those sentiments, saying that, despite the costs, renunciation of U.S. citizenship is an increasingly appealing option — and probably easier than keeping track of the ever-changing American tax code. 

The precise motivations for Americans ditching Uncle Sam undoubtedly vary widely from case to case and individual to individual. However, experts say the biggest reasons for the surge in numbers are changes in tax laws, expected higher and much higher taxes, and stepped up “enforcement” activities targeting the millions of Americans living abroad.

“Nothing has changed in immigration law that would make people want to renounce,” immigration specialist Freddi Weintraub, a partner at New York-based law firm Fragomen Worldwide, told the Wall Street Journal. “Current or anticipated changes in tax law and enforcement are driving this increase.” Numerous other experts in the field quoted in media reports echoed those findings, suggesting that the IRS and the U.S. tax code were the primary drivers. Recent income and investment tax hikes certainly did not help.

Another key element in the story behind the accelerating flight is the Foreign Account Tax Compliance Act (FATCA), passed in 2010 and set to go into effect next year. Under the scheme, which has sparked an outcry among Americans living abroad — as well as with foreign banks that will now have to comply with IRS decrees — financial institutions all over the world are required to report information about U.S. citizens and green-card holders to the U.S. federal government.

Penalties for even minor or unintentional mistakes can be devastating, critics say — potentially serious enough to bankrupt even the very wealthy. "With the new regulations, it's too ... easy to commit errors," explained immigration and nationality chief Shaoul Aslan at Washington-based law firm Patton Boggs. “People are tired of that — and not as much the saving of taxes as people not wanting to commit an error.”

McClatchy news highlighted the plight of Oklahoma-born Ruth Anne Freeborn, who has lived in Canada with her Canadian husband and son for over three decades. Because of FATCA, her foreign bank was required to hand over all of her family’s financial information to the Obama administration, which her husband, of course, opposed. So, after carefully considering her options, Freeborn eventually decided to renounce her U.S. citizenship in September rather than subject her family to intrusive prying by the IRS and the federal government.

“My decision was either to protect my Canadian spouse and child from this overreach or I could relinquish my U.S. citizenship,” she told the news service, which reported that growing numbers of Americans were “ditching their U.S. passports out of frustration and fear” over FATCA. “It was with great sorrow I felt I had to relinquish, but there was no other choice for me and many like me…. My husband cannot understand why Americans are so offended by having their personal emails and phone calls monitored by the NSA yet are very comfortable requiring a Canadian to hand over their bank account data.”

The increasingly byzantine and oppressive regulations, along with more aggressive government efforts to enforce them, have also led a growing number of banks and financial institutions around the world to refuse to do business with anyone subject to Uncle Sam. As The New American has been reporting for years, Congress and the IRS have essentially made U.S. citizens into pariahs around the world in many respects. In some cases, the U.S. government has even gone so far as to terrorize and threaten governments and nations that refuse to bow to the will of Washington’s political class. Switzerland and the Swiss were among the most recent victims.

For Americans living overseas, it is becoming increasingly nightmarish. “Many banks, foreign financial institutions, are just turning Americans away — it’s easier for them not to have American clients,” explained Marylouise Serrato, executive director of the group American Citizens Abroad, in comments about the effect of FATCA and IRS regulations. “For some people it [renunciation] becomes a solution. But it’s done with a very heavy heart.”

In recent years, the factors highlighted by experts have also driven more than a few wealthy Americans to renounce their citizenship and move to more market-friendly countries, such as Singapore and Switzerland. In response, U.S. lawmakers unveiled a scheme to extract their wealth, too. Last year, Democrats, including Sen. Charles Schumer (D-N.Y.), were mocked and ridiculed for proposing to tax people such as Facebook co-founder Eduardo Saverin, who potentially saved tens of millions of dollars by giving up his citizenship in 2012, in perpetuity. Analysts said the proposal, which has not yet passed, was another sign of America moving toward “banana republic” status.

Already, people giving up their citizenship can be subject to an “exit tax,” but for D.C. politicians, more wealth must always be extracted. Responding to a tsunami of outrage among Americans living abroad, however, there are some timid efforts in Congress to begin addressing the growing problem. “FATCA is a textbook example of a bad law that doesn’t achieve its stated purpose but does manage to unleash a host of unanticipated destructive consequences,” explained Sen. Rand Paul (R-Ky.), who offered legislation to kill FATCA this year. “Tax evasion is a problem that should be addressed, but not in an egregious way.”

Even some Democrats and original FATCA cosponsors are apparently having second thoughts about the draconian effects of the bill on Americans abroad. So far, though, lawmakers seem far more interested in borrowing, spending, and taxing as much as possible than in helping to stem the growing trickle of U.S. citizens expatriating or easing the burden on Americans living and working in other countries. As FATCA goes into force next year, the disaster is set to get worse, which may eventually prompt Congress to act. In the meantime, though, millions of innocent Americans will continue to suffer.

Alex Newman, a foreign correspondent for The New American, is normally based in Europe. He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it. . 

Related articles:

Democrats Mocked Over Bill to Tax Billionaire Who Gave Up U.S. Citizenship

IRS Makes Americans International Pariahs

U.S. Terrorizes Switzerland Over Taxes, Banking

Rich Americans Are Fleeing the Country

U.S. Economic Freedom Plummets to 18th Place Globally, Study Shows

Facebook Co-Founder Saved Big Money Giving Up U.S. Citizenship

Singapore Tax Rates Encourage Prosperity

Our Marxist Tax Code

IRS Would Revoke Passports for Alleged Tax Debt Under Bill

6 comments

  • Comment Link SwissTechie Tuesday, 31 December 2013 01:59 posted by SwissTechie

    Sophie Michael, people who renounce only want to live in America if the American people can realize that what the government is currently doing is wrong. If the American people realize that they made a big mistake, then they will attempt to reverse the damage caused by heavily flawed policy. On the other hand, if the American people do not realize that they made a big mistake, then it doesn't make any sense to be a US citizen or to live in America. Both America and its citizens lose of the current situation persists, while both win if the mistake can be identified and corrected.

  • Comment Link SwissTechie Tuesday, 31 December 2013 01:53 posted by SwissTechie

    Mitchell Dobrenen, you say that you are "from the government". As you must know, the "government" has declared national origin discrimination as being a US federal crime. National origin discrimination means that it is wrong to discriminate against an individual due to their citizenship. Currently, US policy is causing Americans living abroad to be discriminated against due to their national origin discrimination. Americans are getting kicked out of bank and denied financial services, due to your government and in violation of its laws.

    You say that you "here to help". Helping means helping Americans living abroad from the faults of the government. Yet, instead of helping and instead of opposing the faults of your government, you are honoring and defending government crimes by attacking the people who are being violated by your government.

    So, you are not "here to help" and you are not "from the government". Rather, you are here to insult and condemn Americans on grounds of national origin and in violation of government laws.

  • Comment Link Sophie Michael Friday, 27 December 2013 01:39 posted by Sophie Michael

    I believe renouncing your U.S. citizenship is a decision that comes with a number of variables that must be vigilantly considered before jumping into the pool as there are no reversals once the COLN is issued and the only way to regain one’s U.S citizenship is through the long and difficult process of naturalization under the current U.S. immigration law and Former U.S. citizens also face difficulty in even coming back into the United States for visits.

  • Comment Link Mitchell Dobrenen Sunday, 22 December 2013 07:51 posted by Mitchell Dobrenen

    I'm from the government and I'm here to help! I'm sure they will find a way to screw this situation up as badly as they do for every other minority problem. 2,000 people a year renouncing citizenship to avoid paying taxes. If this is such a BIG problem then the government should find a way to keep the 2,000 people a day dying to avoid taxes alive so they can keep paying them. Oops, I forgot the 50% death tax. Ooo, ooo, I've got it a renunciation tax. They can leave, but they have to leave everything behind and start over with just the clothes on their back and $25 in their pocket like so many immigrants have done to come to America and live in the land of the free! Immigrants are happy to pay taxes rather than live under a truly repressive government.

  • Comment Link Lea Tuesday, 10 December 2013 07:39 posted by Lea

    I think you will find that the exodus won't be among the wealthy. Those who are wealthy have the means to pay expensive tax attorneys and wealth management advisers to help mitigate the issues that FATCA raises - and this is a tiny proportion of the 7 million Americans living overseas.

    The real exodus is going to be among the 'normal' people - those who are poor, lower-class, middle class - teachers teaching English, small business owners trying to stretch their markets overseas, those who moved due to marriage or family, and those who are 'accidental Americans' - they were born in the US but only lived there a few months - or were born to US parents, but never lived in the US at all. That is the general make-up of the 7 million Americans living overseas, and these are the people who are being profoundly affected by FATCA and citizenship-based taxation.

    Speaking for myself, I moved to the UK 17 years ago with my British spouse. Most of my adult working life has been spent in the UK. We are not rich. I have never earned enough money to meet the requirements to pay US taxes. However, due to FATCA, all of my bank account information and my husband's bank account information will be sent to the IRS beginning in July 2014. If we decide to open a savings account for my 6 year old and I'm a signator on the account, then her account information could be swept up as well. The tax forms I have to fill out each year to show I owe nothing are pages long. If I lived in the US, I wouldn't even have to file. If I make one mistake on any of my forms, I could be liable for tens of thousands of dollars in penalties.

    So, yes, I'm considering giving up my citizenship. To protect myself and my family. How sad is that?

  • Comment Link R Jensen Monday, 09 December 2013 19:54 posted by R Jensen

    "The exodus is widely expected to continue or even accelerate — especially among the wealthy and mobile — unless and until Congress takes action to rein in the IRS and reduce the draconian burdens imposed on Americans abroad."

    That or they build a fence on the border--not to keep the Mexicans out but to keep the sugar daddies in.

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