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Take my US passport... Stop taxing me
More Americans give up citizenship because of higher taxes on those
who work abroad
December 19, 2006
YOU probably would find this hard to believe - American citizens
giving up their passports for other countries' citizenships.
True, some have done it in the past and still do it for political
and economic reasons. But for tax reasons?
Yes. Tax lawyers tell the International Herald Tribune that they
detect a rising demand from citizens to renounce ties with the US.
All because the US has decided to tax its citizens who work
overseas.
'The administrative costs of being an American and living outside
the US have gone up dramatically,' said Mr Marnin Michaels, a tax
lawyer with Baker & McKenzie in Zurich.
A former US Marine from California who gave up her US passport last
month had this to say: 'It's a really hard thing to do. I kept
putting it off. But it's my kids and the estate tax. I don't care
if I die with only one Swiss franc to my name, but the US shouldn't
get money I earned when I die.'
The woman, who has lived in Geneva for 16 years, did not want to be
named. She said she was tired of the cost and time of filing yearly
US tax returns on top of her Swiss taxes.
Americans abroad are also taxed in foreign countries where they
reside.
To date this year, the Internal Revenue Service has tallied 509
Americans who have given up their citizenship, said Mr Anthony
Burke, an IRS spokesman in Washington, although he added that the
full figures are still being counted.
Applications are on the rise at the US Embassy in Paris, according
to an official who did not want to be named.
Concern about taxes among US expatriates has gone up after
President George Bush signed into law a bill that sharply increased
tax rates for Americans abroad with income of more than US$82,400
($127,100) a year.
The legislation also increased taxes on employer-provided benefits
like housing allowances.
The changes have taken retrospective effect from 1 Jan.
Previously, the first US$80,000 earned by Americans overseas was
tax-free, and the next dollar earned fell into the lowest tax
bracket. But under the new laws, anything over the new US$82,400
tax-free threshold is treated as if it were in the higher tax
bracket.
Secondly, in the past, a large part of a US expat's housing
allowance was tax-free. Any amount above US$11,894 was deductible.
But the new laws mean that for amounts up to US$42,900, the first
US$13,184 will be taxed and any amount exceeding the US$42,900
level will be taxed again.
Mr Matthew Ledvina, an international tax lawyer in Geneva, said
more US citizens with second passports were seeking legal advice on
the citizenship issue.
He said some expatriates were weighing the value of their US
passports and debating whether it was worth keeping them if the
cost topped US$50,000 a year.
'There are incentives to do it before year end so that you can
minimise your future reporting,' he said.
US EXPATS IN S'PORE
A survey released last month by the American Chamber of Commerce in
Singapore found that nearly 40 per cent of US expats polled here
were considering returning to the US because of higher taxes.
Mr Andy Sundberg, a director of Geneva-based American Citizens
Abroad, has been tracking renunciations dating back to the 1960s
through US Treasury Department figures published yearly.
He considers the numbers relatively low at this point, but he has
also noticed a surge in interest among Americans in taking the
ultimate step.
'I think the cup is boiling over for a number of people living
abroad,' he told the International Herald Tribune.
'With the Internet, and the speed and ubiquity of information,
people are more aware of what's happening.'