They’ve been allowed for decades to avoid paying for the infrastructure and management of the country while simultaneously holding most of the influence.
“Renouncing citizenship” means they’ll give up none of the influence, lose the taxes, live how and wherever they want.
The best thing to do is forbid them re-entry into the country nor to hold controlling interest in any company in the US.
Faced with actual consequences and true separation from the actual thing they care about (their source of wealth, not the country) they will reconsider. I’m not sure if this is a net plus, as they are a selfish lot.
You seem to be making a lot of assumptions about who is giving up citizenship here. Obviously there are some high profile people who are still highly involved with the US, but I'd imagine a lot of folks doing this are those who don't live in America and don't want to deal with the hassle and cost of filing US tax returns every year when they earn no money in the US.
On the contrary! The overall tax burden of many European may be lower than that of the US when you compare like for like. That is, the cost of all taxes in Europe and the cost of all taxes and the fees paid for equivalent services in the US.
For most people, that's taxes in Europe vs taxes + health insurance premiums in the US.
Even if the combined totals are equivalent or higher in Europe, government-provided healthcare provides cost predictability that doesn't exist in the US. One year I might pay a much lower amount in the US, while the next year a single medical procedure could easily double my expenses.
Also, lots of us taxes are hiding in plain sight as "mandatory services". "Gated Community" is basically a different version of social transfer tax. Health system is another huge "mandatory tax". Enormous debts to complete education, whos equivalent you can get for free in europe. If you sum it all honestly up, the us is a pretty bad deal.
There are quite a bit of places in EU with low capital gains tax and can be gorgeous to live in if you're wealthy. For example Croatia is a EU member - capital gains tax is flat 12%, and is a popular tourist destination with beautiful coast. It's not a bad deal if you're a remote freelancer - you end up paying like 20% in taxes total + something like 300€/month flat for health insurance and minimal pension contributions.
If you're software engineer in Poland and spend some time architecting your contract, you can pay only 5% income tax (+ irrelevant amount for social security) as "R&D tax relief for commercializing IP rights".
Point you're making applies to countries like Belgium or France.
If you're using IPBox as average software engineer that has nothing to do with actual R&D or innovation then you should feel ashamed cuz it's straight doubtful from ethical and moral standpoint
I'm all for progressive taxes, but fuck system where Comarch CEO pays fraction of my tax percentage.
I'm not doing it tho, 15% ryczałt (lump sum?) is low enough to not care, and ipbox seems like tax trap. I'm not paying money to villains like Memcen to lower my taxes.
10% is a gross exaggeration, though. Romania has lower salaries than Poland, as far as I know, and in Romania as a senior engineer in a decent company you can get a total <<net>> compensation of €3.5k - €4k per month, that would be ~$4k - $4.8k per month, so ~$48k - ~58k. Again, net. And probably more since there are companies that give you RSUs/ESPPs, so you can go along for the ride. Not as many as in the US, obviously, but a decent chunk. So you could even push towards something like $70k.
I think even at the biggest FAANGS in the US, you total <<net>> compensation as a senior engineer will be $250k-$300k, leaving the ratio somewhere around 4-5x (and this is for a super limited set of companies and positions; I'd imagine that the average ratio would be closer to 2-3x).
And don't forget that local living expenses are minimal. You'd get to keep maybe even 90% of your salary.
I don't know if whether the numbers you quote for Romania are correct or not (Polish salaries for devs are not even remotely close to that), but a salary that nets you €4k/month after taxes is not very common in Sweden - which is considered a richer country than Romania.
The difference between Sweden and Romania is not between Swedish and Romanian software developers. It's between Swedish and Romanian janitors. The Swedish ones probably make 10x what the Romanian ones make. And most people in Romania are closer to the janitor salary wise, than to the software developer.
> I'd imagine that the average ratio would be closer to 2-3x
To which you replied:
> 10% is a gross exaggeration but "the average ratio would be closer to 2-3x" sounds equally exaggerated in the other direction.
My original example pointed to the top of the range and then I used the median, which is the statistically most relevant indicator for comparing salaries.
> 3x != 2x, and I suspect 3x is still too low; also comparing median salaries is not enough.
It's no different than ireland (same % taxation), are they both tax havens? Cyprus is not on the OECD tax havens list for years, and in fact are considered a rather safe choice, hence the rise in popularity of their residence/citizenship programs (and their fees)
Well, you know that you pay taxes on the country you live & work in ? So you have to find a job and a house in Cyprus. And on top of that, Cyprus is one of the few european countries that are not yet in the Schengen area. So you'll have to stay on the tiny 9,251 Square Kilometers.
> Well, you know that you pay taxes on the country you live & work in ? So you have to find a job and a house in Cyprus.
Remote work? Or own a foreign company and pay yourself in dividends? These are extremely common cases.
> And on top of that, Cyprus is one of the few european countries that are not yet in the Schengen area. So you'll have to stay on the tiny 9,251 Square Kilometers.
That's not how Schengen works: Schengen is about being able to freely travel in the Schengen area without having to even show your passport / national ID card. For example I regularly cross borders, by car, between Belgium, France, Spain, Monaco and Andorra (Monaco is Schengen while Andorra, wonderful place on earth btw, is not, but Andorra has got agreements for free travel with France and Spain anyway) and I've never been asked my ID once. Heck, lately I've always been doing my PCR tests, as officially required due to the sars-cov-2 restrictions, and although it's mandatory to cross borders I've never been asked to show them.
A passport from Cyprus allows you to travel, without the need for a visa, to most countries in the world if I'm not mistaken. The thing is: because Cyprus is an island you'll very often be flying to/from there and you'll have to show your passport. But you're definitely not stuck on the island.
> you know that you pay taxes on the country you live & work in
Yes, I know this. I live abroad.
Yes, every country has taxes. The tax rates are not the same. Additionally, countries like Singapore have zero capital gains tax. Executives can just take a symbolic job and pay themselves a symbolic salary, but they're not getting rich off their salaries
> you'll have to stay on the tiny 9,251 Square Kilometers
No you won't, you'll just have to pass a border control whenever you leave or re-enter the country. That's hardly a huge hindrance, unless you're wanted.
> while simultaneously holding most of the influence.
There are 20 million millionaires in the states. This is not even 10,000 people year over year with assets, not even net worth, over $2 million. This is a tiny fraction of the population, most of whom are contrarian or pursue an alternative lifestyle, given that they are living abroad.
I would hardly call someone with $2 million as having outsized influenced, they're barely upper middle class or be able to afford a house in San Francisco. If we assume this distribution obey a power-law, there are a small percentage of individuals here there who are ultra ultra wealthy to have that influence.
There are ideological reasons to renounce citizenship, and maybe having a small amount of wealth enables to pursue this option as it involves legal fees and also affordance of living off investment income. There are likely many poor people who would like to leave to, but don't have the financial means to. The data set will be biased towards those who can afford the process.
Furthermore, renouncement of citizenship involves exit taxes, on which people have already paid taxes.
> The best thing to do is forbid them re-entry into the country
On what legal grounds? They can't enter on a tourist visa? To visit a dying friend or family member one last time?
> nor to hold controlling interest in any company in the US.
Then we should stop all foreign investments and investors.
> The best thing to do is forbid them re-entry into the country
Given the track-record lefty authoritarianism has, I'm always a little nauseated to see people pull out the truncheon and jack-boots to enforce "economic justice". That and suggestions like this don't even make any sense, and rarely ever do. It always looks to me like retribution is the aim here, rather than effective economic policy.
Well, now, let's not paint "authoritarianism" as "lefty". Some Marx-reading student on campus is not exactly a threat, is it?
The ultra-left sentiment is, indeed, anti-liberal at its core, but it is still an irrelevant fringe.
The actual, viable threat of authoritarianism is coming from the opposite side, which is a spit away from holding absolute power, here in the States, at least. And then, it's on.
This is a complete misrepresentation of my point. I never tried to 'paint "authoritarianism" as "lefty"'. I specified there's an issue with lefties who are also authoritarians. If you don't think that can exist and if you think it's not that big of a deal, I suggest you take a look at the latter-half of the 20th century. It's pretty uncharitable to paint my argument as being afraid of a student on a campus who's read the Communist Manifesto. That's not even in my argument and requires a lot of bad-faith interpolation to get to from what I said.
> viable threat of authoritarianism is coming from the opposite side
This is nothing more than whataboutism. There's authoritarians on both sides. They're both just as dangerous in the end-game. In Canada, it's the left mainly. In the US, there's highly vocal, and influential to public opinion, left wing authoritarians. In Canada lefty authoritarianism isn't just a fringe, it's mainstream. This is true in a lot of places too. I'm not sure why some folks insist on downplaying the risk of authoritarianism when it comes from the left as opposed to the right. Both kill just as many people, one just uses gas where the other uses starvation.
You're correct. And the reasoning behind having not stopped lefty authoritarianism is actually very interesting and complex. At least one American general got ousted from his position after suggesting the USSR be subjugated after the Second World War.
The road to hell is paved with good intentions. I'm not sure subjugation of Communist states by force would have lead to a better outcome, historically.
I just find it fascinating and a bit sad that authoritarianism is often seen as somehow better, if it comes from the left.
If people truly value democracy and freedom, authoritarianism should be opposed regardless of its underlying political color.
> bit sad that authoritarianism is often seen as somehow better, if it comes from the left
This is exactly the train of thought I had thrown at me by another commenter who was insistent on bringing up the fact that the right wing is "worse" somehow. You're right, it is very disappointing to see.
"highly vocal", "influential to public opinion". I am sorry, these are just words. Prove that it's influential.
Is there an effort by these "loud" individuals to drive a focused disinformation campaign targeted at nullifying legitimate votes? One third of the United States is entirely sold on it. That is quite "influential", I would say, and presents clear and present danger.
This is just whataboutism again. There's nothing constructive to say to someone who's entrenched in ideology like you clearly are. I'm not taking about the right, and never have been. The right is irrelevant in this conversation. All you have done is derail this into but the other guys are bad too. Did I say "the right is fine?" No, I explicitly did not. I actually said both are tyrants when they can be.
You've addressed nothing I've said and launched a demand for sources on cherry-picked words from the point I made. I don't want to, and won't, argue with ideology and party lines.
You've made nearly identical points to me just about the right for some reason, despite the fact that I'm not even talking about them. I've used the word 'right' once in any other comment until this one. Not sure why you're trying to turn this into a right-left partisan shit-slinging match. Not every discussion of the left necessitates a discussion about the right's negative traits, and vice-versa. If you truly believe this, I suggest you get your head out of American partisan ideology.
Unless there are more than 20 million millionaires, you're talking about the top 6 percent of the wealth distribution. I wouldn't call that particular percentile "barely middle class". That term probably should be reserved for the 60th percentile, no? Middle being 60 to 40? 70 to 30?
Edit: fixed my percentile thanks to child comment!
Inflation. Being a millionaire or having a six figure salaries used to have much more weight during the 80s.
Pretty much any senior level engineer at FANG can be a millionaire if they saved, but they can barely afford a standalone home in San Francisco. What does the term 'middle class' even mean if they can't afford a home?
Only 20% of millionaires surveyed feel they're rich.
Senior-level engineers at a FAANGs are already a pretty rare and prestigious class of people. I'm a reasonably intelligent person and I've failed to pass the hiring bar at every FAANG.
And of course they don't "feel" rich. Lifestyle inflation is a thing. Trade the Civic for a Tesla; send the kids to private school; buy organic groceries; take international vacations every year or so; yet still find the means to save more money each year than the average household in the USA earns. Feeling is a state of mind, not a state of being.
You're including non-adults (330m population @ 6%). It's closer to 8% of the adult US population. Not very many people under 18 are millionaires or reasonably likely to be. The non-adults in question fall under the millionaire household grouping.
And if anyone is interested in the household wealth distribution (as of 1Q21):
$2 million is the minimum to be listed - it is not the median, let alone the mean. Eric Schmidt alone has wealth equivalent to 10,000 people with a “mere” $2 million.
> They’ve been allowed for decades to avoid paying for the infrastructure and management of the country while simultaneously holding most of the influence.
Maybe you didn't know this but Americans living overseas still have to file and pay US taxes, often getting double-taxed buy two different countries - and often by a higher tax country than the US.
In fact, the US is one of only two countries in the world with this arrangement. I'm an American living overseas and it's a bit of a logical nightmare dealing with all the requirements. Even opening a simple checking account is difficult now for Americans overseas.
Americans who haven't lived overseas or haven't traveled much often have difficulty empathizing. But when we were living in the US, I would have found it very strange if not absurd if my non-US born wife had to file and pay taxes to her country of birth.
> often getting double-taxed buy two different countries - and often by a higher tax country than the US.
If there's a tax treaty between the two countries, they're not going to be double taxed. They will simply pay tax at the higher-country-rate, and owe nothing to the other.
If there's no tax treaty ... I'm not familiar with how that works. The US has tax treaties with many countries around the world, especially the OECD nations.
I think gp was referring to how capital gains aren't taxed until realized. Having billions in unrealized gains gives you influence, even though you didn't yet pay tax on it.
However, when you relinquish your citizenship you pay an exit tax which is more or less equivalent to what you'd pay if you sold all your assets and paid gains taxes, so I'm not sure how this move really helps billionaires, except that they don't have to pay taxes on future gains.
If a person has no income or capital gains from the U.S. and doesn’t live in the U.S. shouldn’t they be exempt from paying U.S. taxes? Also, shouldn’t foreign financial institutions be exempt from reporting to the U.S. about financial activities of U.S. citizens when they are outside the U.S.? I think the answer to both questions ought to be yes.
EDIT: I’m aware of the rules regarding income taxes for Americans based on their citizenship and not on where the income was earned. My questions address this and by saying ‘yes’ to them I’m indicating that these rules are dumb in my opinion.
"If you are a U.S. citizen or resident alien, the rules for filing income, estate, and gift tax returns and paying estimated tax are generally the same whether you are in the United States or abroad. Your worldwide income is subject to U.S. income tax, regardless of where you reside." - per the IRS (https://www.irs.gov/individuals/international-taxpayers/taxp...)
Foreign banks in nations with treaties with the United States require you to file a special form to the IRS when opening a bank account, furthermore they will report information on your bank account to the US government.
Wouldn't this create loopholes? A US citizen could leave the US to make foreign investments, then come back to the US and be exempt on taxes on this foreign investments while enjoying the benefits of being in the US and not paying their share of taxes.
Most countries tax worldwide income of their _residents_ (not citizens). So in your scenario, you'd end up paying tax on the foreign investments if you profit from it when you resume being a US resident. Unless you don't declare the foreign assets, which would be illegal (gotta file an FBAR each year).
There's no loophole here, a large majority of countries work this way, and OECD countries certainly do (although some have different treatments for short term residents). Usually the logic is: if you don't pay taxes in country A, you'll pay in country B anyways. And you'll pay an exit tax when you go from country A to B in many cases, so country A gets their cut.
Most civilized countries determine tax status based on where the person lived for the year. Reporting how much you earn overseas is one thing, but paying taxes twice while living and earning overseas is extraordinarily cruel.
Maybe people no longer want to live in US and it is wealthy that have it easier to actually go through with this?
Or maybe they actually live somewhere else and don't like paying their taxes TWICE. Almost every country in the world (except US) requires taxes based on residency, not citizenship.
For example, being Pole, if I spend more than 180 days in Sweden, I now owe taxes in Sweden but no longer owe them in Poland. That is because Poland recognizes that, while I am Polish citizen, I actually was Swedish resident during that tax year. And have an agreement with Sweden so that it is clear where I have to pay my taxes.
The US doesn't want to play nice and will only provide you with a little bit of credit for the tax you had to pay in another country. But if you earned a lot, you now have to pay it twice.
I actually know 2 or 3 people that work here in Poland that resigned their US citizenship for exactly this reason. Because IRS will hunt you down and demand your taxes even if you don't set foot in US for decades. It has been a topic in our newspapers couple of years ago when we still looked up to US as better place to live and people would need explanation for why somebody in right mind would want to resign US citizenship in favor of Polish.
I have even heard of a person that had to US citizens as parents but never set foot on US soil, that was hunted by IRS to pay taxes.
It is not like people don't have to pay taxes in other countries, though some have smaller rates. To get better picture you would have to look at where they actually went.
> For example, being Pole, if I spend more than 180 days in Sweden, I now owe taxes in Sweden but no longer owe them in Poland. That is because Poland recognizes that, while I am Polish citizen, I actually was Swedish resident during that tax year. And have an agreement with Sweden so that it is clear where I have to pay my taxes.
The US has similar arrangements with many countries, and you are not doubly-taxed. You simply pay taxes at the highest rate of the two (US and <other country>).
Likewise, if you move to the US from a higher-tax country, and the US has a tax treaty with that country, in your first year in the US (assuming you move mid-year), you will owe taxes to both countries, but will only pay the US rate overall. My first year in the US, the US government paid me US$600 because in their eyes, I had paid the UK too much in taxes for the 5 months I had worked there.
The hassle is that you still have to file with the IRS, even if your actual tax liability to the US is zero.
> The US has similar arrangements with many countries, and you are not doubly-taxed. You simply pay taxes at the highest rate of the two (US and <other country>).
But do you see how punitive that is to US expats? It means that they never benefit from tax mitigation efforts in their resident country if the US has higher taxes on that. That, tax-wise, they are perpetually worse off than US residents and their local neighbors.
Think about the effect of this on small businesses (which are hardly alone in their troubles). Small businesses owned by US expats are at a perpetual disadvantage relative to local businesses because they can’t operate purely within the local tax environment. If the US introduces some poorly thought out regulation, like the GILTI tax, they are hit completely independently of the local competition through no fault of their own.
Besides, if the resident country decides to mitigate some local issue by lowering taxes, what business is that to the US? It’s criminal that it uses its own citizens to siphon off another country’s wealth.
My dispute was only with the term "doubly-taxed", which for countries with a tax treaty is simply false.
Nevertheless, you are correct that as a US citizen, you are destined to pay max (USTax (income), OtherTax (income)). I don't agree with this, but it's not called "double taxation".
You are assuming 100% of these people are moving to countries with lower taxes. That's simply not true.
In fact, countries that have high standard of living usually have equal or higher taxes than the states.
Contrary to what you may assume, especially people who have sought an alternative lifestyle abroad value value having a high standard of living, and not going to move to some shithole just because it has lower taxes.
What countries are they moving to? Currently if you save and invest your money you can pass it to your children (or whoever) with a step up in cost basis. So the investments can go on indefinitely from generation to generation essentially without tax. Because technically, you haven't realized any gains yet. In the meantime, you can borrow from banks against these investments (also I believe not taxable, at least not like income tax). These new laws would get rid of the ability to pass on your wealth without a significant (like 50%?) tax because they would recognize death or gifts as a taxable "transaction". Unless you donate it to charity. Which might be why Buffet is leaving all of his money to charities (which are run by his kids...or at least some of them).
I'm honestly still trying to figure this out but that's what I understand so far. Another interesting consequence is that calculating long term investment cost basis's sounds like a f'ing nightmare. Maybe that's why the step up rule exists?
IRS thinks Green Card Holders who are non-citizens and non-residents owes them taxes on income on their country of residence and citizenship.
They're effectively the only country that believes they're entitled to non-citizen and non-resident income, but we're the "selfish lot" for relieving ourselves of a double tax burden to a country we don't reside in? No thanks you can have it back.
It's funny that citizens of every other rich country on the planet have this free arrangement where we only pay tax where we live. But in your fantasies this behaviour and freedom is so evil we should be blocked from returning home
It's probably pointless to discuss this with someone who insists on generalizing anyone above a certain net worth as being selfish, but -
As it turns out, it's no longer the 80s, and there are increasingly multiple other countries were the super-rich can move their activities, wealth and lifestyle to without missing a beat.
Hanging around financial circles, I've seen a large exodus of people through the pandemic star the process of moving pieces towards places like Dubai and Singapore.
the point is that generally there is some expectation of loyalty to the country that allowed you to become super-rich in the first place. In finance specifically many of these people participated in outsourcing a huge chunk of the American economy for short term profit and their own gain and are now abandoning ship
abandoning your country for lower taxes so you can "live your lifestyle without missing a beat" is disgusting to most humans. The wealthy have abandoned any sense of duty to their fellow citizens and are somehow shocked people are angry about the situation
> the country that allowed you to become super-rich in the first place
But it's never enough. taxes already work on a scale such that the rich pay more (% wise), and they still owe more?
Almost every aspect of participating in the economy is taxed, e.g paying business-related taxes - those that participate more therefore pay more of these taxes too.
It seems "what is owed" is never clearly stated so you can always be hit up for more.
No, "most humans" aren't going to moralize and want to give back to their country in the form of taxes as a thank you when they strike gold.
Being forced to give a large portion of my family's hard earned wealth to a tired, ineffective institution which aims to invest it in initiatives I think will ruin the economy? Why in god's name would I do that if I have the choice not to?
The wealthy pay far less in taxes in proportion to their wealth than everyone else. Long term capital gains is only 10%.
The wealthy are only wealthy because the non-wealthy people who vastly outnumber the wealthy, allow them to keep their capital. I think massive wealth inequality is making a significant number of people rethink this generous position.
Forbidding them reentry on what basis that you can legally uphold vis a vi their being a foreign citizen from another country we are friendly with? Controlling interest in any U.S. company... chances are their company is already by accounting principles registered somewhere else internationally, or they might move asset ownership to some sort of family trust, or form shell companies to hold US Stock that you'd never trace.
I think you're underestimating the legal maneuvers these people can afford to find that have got then to where they are.
> avoid paying for the infrastructure and management of the country
The premise here is dead wrong. The top 1% pay ~40% of taxes; the top 5% pay ~60%. So not only do these people create the wonderful consumer goods that enrich your life; they also provide the roads, police, fire fighters, etc. Show some gratitude!
> Between the lines: While the numbers are down this year, that's probably because many U.S. embassies and consulates remain closed for COVID-19, and taking this grave step requires taking an oath in front of a State Department officer.
So it seems these are American passport holders who already live in foreign countries, so contributing to American infrastructure, etc, but not benefiting of those things. Obviously having embassies you can go to for help anywhere around the world is useful, but if these are dual-passport holders they probably have the second embassy, for example any EU embassy would help any EU citizen [1].
But well, 2020 saw the worst of Trump saying "Everything is under control!" while ICUs (and morgues) overfilled, so maybe that's a reason for the renouncements. Or maybe was there some new law which was going to come to effect in 2021?
Anyway, I find "forbidding re-entry" is extreme and tinpot-dictatorship-esque.
They would not be EU citizens. The taxes are even higher. The article is around specifically renouncing American citizenships. Also, dual-citizenship is useless. If you are, say, in Russia, and you have your Russian passport on you, the American consulate won't lift a finger - your ass is wholly Moscow's.
The people in the article aren't the only ones affected.
If I ever move back to Australia, I'll have to file US taxes and other reports such as FBAR for the rest of my life. If you get it wrong, they can and have seized up to 50% of your wealth. Not because it's owed, but just as a penalty.
And many Australian financial institutions won't let me open an account because of the reporting requirements.
This isn't just about the rich avoiding taxes. It's about the US overreaching and creating headaches for lots of people.
“Renouncing citizenship” means they’ll give up none of the influence, lose the taxes, live how and wherever they want.
The best thing to do is forbid them re-entry into the country nor to hold controlling interest in any company in the US.
Faced with actual consequences and true separation from the actual thing they care about (their source of wealth, not the country) they will reconsider. I’m not sure if this is a net plus, as they are a selfish lot.