As new tax laws affecting American expats take effect, more expats are resorting to renouncing their citizenship. (Image Source: Flickr: Clapstarr/CC-BY-NC)
Taxes remain, with death, a certainty in America. Sadly, that also applies to even Americans living abroad: The United States remains one of the few countries that tax income on Americans living and working outside the country. With a new change in the American tax code that forces institutions to report all American-owned assets, American expats living abroad are increasingly deciding to turn in their passports and renounce their citizenships, and not necessarily to evade taxes.
The new tax policy, based from the Foreign Account Tax Compliance Act, was passed by Congress in 2010. While the tax policy primarily targets foreign corporations that have American assets, the law also requests that American individuals living abroad file additional forms, so as to confirm all assets can be accounted for. Given that American citizens already face a significant amount of paperwork from filing their taxes while away from the country, this new law is prompting expats, most of them middle-class workers, to renounce their citizenship.
According to the State Department, 1,809 American citizens and green card holders have renounced their citizenship in the first half of 2013 alone. This is up from 932 in the entirety of 2012, which had reached a low point in the last quarter. Based on current projections, the number of renunciations could well exceed the total number of the last five years.
Granted, this is a very small number, and the situation only affects American expats. However, it reflects growing trends among Americans to leave the country. As immigration reform stagnates in Congress, and the politics of the country continues to confound people, many American citizens are taking the notion of "If you don't like it, leave!" seriously, and leaving the country. While invoking tax reform so that expats are not shackled to being taxed in two countries would be a great idea, even the basic concept of tax reform remains shelved for the time being, even in light of an imminent government shutdown at the end of the year.