The canary in the coal mine

The Vancouver Consulate is now officially backlogged in its requests for renunciation of US citizenship.

Phil Hodgen is advising everyone to make an appointment to meet with a consular officer rather than mailing in an application. It’s worth the trip even if travel is involved, he said, as too much can go wrong with a mailed application.

He adds that the drastic increase in the number of renouncers may be a “canary in the coal mine.” The numbers may be small for now, but “when people vote with their feet – and are willing to pay a staggering tax to do so – they are sending a message. […] Something gone awry.”

Why are so many people renouncing? Here are the reasons Phil Hodgen has come up with based on the anecdotes he’s been receiving:

  • The current jack-boot tax enforcement attitude of the IRS scares them. Many of the people we help expatriate settle in countries with higher tax rates than the U.S. It is not the rate of tax that matters. It is something else. Can you guess, Mr. Shulman?
  • The estate tax. The funny (as in “it is a monument to towering stupidity”) thing about expatriation is that people who do so cannot allow their capital to return to the United States after death because of the exit tax rules – Section 2801. So the U.S. government drives capital out of the United States and then creates economic disincentives for that capital to return. Makes sense. We don’t need investment capital in the United States. We have too much real estate already. We don’t need investors. Or jobs. We have plenty of jobs already in the United States. Go away with your silly investment capital. Our banks are fine.
  • The hassle of pointless paperwork. Unlike other countries, the United States imposes income tax on its citizens no matter where they live. Even if there is no tax imposed (because, for instance, the host country has a higher tax rate than the USA) there is a paperwork burden and the opportunity for screwing things up accidentally. And then, please cross-reference my first point re:  jack-boots. Oh. And look at the constant threat that Congress will do away with the foreign earned income exclusion. Yet more Towers of Stupidity from our friends in Congress.
  • They’ve put down roots (or have roots) in another country. Non-tax reasons exist. After living abroad for decades, people finally decide that the United States is no longer home. Or they came to the United States from another country and find the United States no longer hospitable, and prefer the home country to the USA. My parents are immigrants, and they decided that their home countries are no longer home-the United States is home. The reverse happens, too. Especially with Canada, in my experience.
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5 Responses to The canary in the coal mine

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