During an election year, it’s relatively common to hear Americans threaten to renounce their citizenship or move to Canada. However, an increasing number of U.S. citizens are already living abroad and a growing number of these expatriates and migrant workers are giving up their U.S. passports in a trend that has little to do with fears over the next occupant of the Oval Office.
The decision to renounce one’s U.S. citizenship is not something that is taken lightly by anyone; nevertheless, U.S. Department of the Treasury reports indicate that 4,279 persons gave up their passports in 2015. According to data compiled by Andrew Mitchel LLC, a law firm specializing in international taxation, since 2008 there has been a 560 percent increase in the annual number of Americans renouncing their citizenship.
One of the major culprits that has been implicated in this rising statistic is a piece of legislation passed in 2010: the Foreign Account Tax Compliance Act. The act was passed in order to tighten regulations on wealthy Americans who sought to evade taxes overseas. It accomplished this by threatening foreign banks with harsh penalties for noncompliance with new transparency requirements. Unfortunately for many less wealthy American citizens living abroad, this has led to numerous foreign banks refusing to let them open their own accounts or even sign on to joint accounts with foreign spouses.
Another result of the Foreign Account Tax Compliance Act has been an increase in taxation on American expatriates. Most countries in the world determine taxation on residency alone but the U.S. is one of only two nations (the other being Eritrea) which bases taxation on citizenship as well. This means that U.S. citizens living abroad are subjected to double taxation, i.e., paying taxes to both their country of residence and the U.S. Until recently, this only affected wealthy expatriates, but the Foreign Account Tax Compliance Act widens the realm of taxable assets, meaning that the less affluent are being forced to undergo a complicated and expensive process that sometimes ends with them finding out they owed nothing to the government in the first place.
These increased burdens on U.S. citizens abroad have driven many to resort to renunciation of their citizenship. For those who deem this the best course of action, the costs can be exorbitant and the process rather complex. Someone seeking to expatriate themselves must submit their last five years’ tax returns, likely spending thousands of dollars on accountants and legal fees, pay an exit tax if their yearly net income tax is above a certain threshold and finally a separate fee for renouncing their citizenship, a fee which recently saw a 422 percent increase to $2,350 due to the increasing number of renunciations.
The worst part of all of this for American expatriates is that they have a very small voice in the District of Columbia. Representation in Congress for these citizens is based off of their last state of residency and given that the expatriate population is from all over the country, there is no single voice representing their interests in the halls of power.
This problem is even more significant for the so-called accidental Americans. An accidental American is someone who was born in the U.S. to a non-American parent or parents that were temporarily working or studying in the country. These people were raised abroad and don’t always identify as American; indeed many were, until recently, unaware that the U.S. government considers them citizens. Double taxation and being barred from creating bank accounts in their home countries are placing huge strains on the lives of these citizens who, more often than not, aren’t even registered to vote in American elections.
To put it simply, the U.S. either needs to abandon citizenship-based taxation or it needs to reform the current laws so that Americans living abroad aren’t faced with an unfair burden. It’s up to Americans living at home to be their voice in the District of Columbia and ensure that this happens in order to remove these unfair hurdles to international citizenship or, if not for any other reason, just in case they really do decide to move to Canada after the election.
Benjamin Goldberg is a junior double-majoring in Africana studies and history.