What's an 'Economic Patriot' to Do About the Surge of Expats Renouncing U.S. Citizenship?
President Obama and friends have been on a tear recently about corporations moving their headquarters overseas to friendlier tax climates. The White House even featured a cartoonish 19th-century fat cat on its Website while the president wrapped himself in "economic patriotism" to denounce "corporate deserters." He fulminated, "Even as corporate profits are higher than ever, there's a small but growing group of big corporations that are fleeing the country to get out of paying taxes."
Leave aside the accuracy of that statement (the U.S. has burdensome business taxes compared to most other developed countries). Not all the "deserters" are incorporated. This week, the Department of the Treasury released quarterly figures on Americans who renounce their citizenship, and the number keeps climbing. As tax attorney Andrew Mitchel points out:
The number of published expatriates for the quarter was 576. The number of published expatriates for the first half of 2014 has been 1,577 (1,001 + 576). Last year there was a record setting 2,999 published expatriates.
And, once again, taxes are very likely the driving force behind people waving bye-bye to the good old U.S. of A. Last year, McClatchy reported on a "new tax law driving expats to renounce U.S. citizenship." The Foreign Account Tax Compliance Act doubles down on this country's already nearly unique practice of taxing its citizens' income even when they live overseas by imposing intrusive reporting requirements not only on Americans, but even on the foreign financial institutions that do business with them. The U.S. government strong-armed many foreign governments into accepting and enforcing the rules.
Not surprisingly, rather than become clerks for U.S. government officials, many financial institutions around the world now refuse to do business with Americans. Which can be a tad awkward for people holding U.S passports and living overseas, but cut off from the ability to so much as open a savings account.
And suddenly we have a rising tide of citizenship renunciations. That's U.S. tax policy at your service.
Individuals fleeing the punitive U.S. tax system find themselves the recipients of politicians' wrath, just as corporations do. When Eduardo Saverin of Facebook fame renounced his citizenship, Sen. Charles Schumer (D-NY) sputtered, "Mr. Saverin has decided to 'defriend' the United States of America just to avoid paying his taxes. We aren't going to let him get away with it so easily."
Schumer even wanted to bar such "deserters" from ever again visiting the U.S.
If you won't be his friend, he won't let you play with any of his friends ever again.
That's economic patriotism: a temper tantrum in place of rational thought. Because thought might require you to realize that your bad behavior drives people away.
