Welcome to Berlin, Yankee! Hope You Brought a Mattress for Your Money!
There are an estimated 7.6 million Americans living in foreign countries, give or take. They come in all shapes and sizes, but there are some broad types—young people in their 20s flinging themselves into the world to teach English, work for nonprofits, start businesses and/or seek adventure; peak-age professionals working for international companies or institutions; U.S. military personnel and their families; dual passport-holders more tethered to their second nationality; graying bohemians who never figured out how to go back; and even the occasional retiree making their Social Security checks go farther.
Generally absent from the expat cohort are the Mitt Romney-style super-rich who were the target of the Foreign Account Tax Compliant Act of 2010 (FATCA), a terrible law that forces all Americans (and their spouses) with foreign-based financial holdings of more than $10,000 to engage in absurdly detailed IRS reporting or face punitively steep penalties, while also forcing foreign financial institutions to rat on their American clients and even perform collections on behalf of Uncle Sam. All for the prize of collecting a very small sum in extra tax receipts—an estimated $1 billion or so per year, or enough to fund the federal government for about two-and-a-half hours.
The super-rich have reacted like the super-rich do: either by complying (why not, they're rich!), or by parking their money into what few countries and institutions that still refuse to do the bidding of the Internal Revenue Service.
But what about our initial groups of expats? They're screwed, as a new Wall Street Journal report makes infuriatingly clear. Excerpt:
It isn't what William Hart expected when he moved to Berlin from North Carolina nearly four years ago. This spring, the 24-year-old e-commerce analyst said he was rejected for an online brokerage account by Deutsche Bank AG, although he has a checking account there and worked as an intern at the company. In addition, a smaller local bank turned him down for an online checking account, and he says Wells Fargo & Co., his U.S. bank, closed his brokerage account when it learned he lives in Germany. […]
"I seem to exist in a no-man's-land," said Mr. Hart. "Can it really be that expats are facing such massive obstacles in basic financial matters?" […]
Among those affected by the tightened policies are retirees of modest means in communities around Lake Chapala in Mexico, where an estimated 10,000 Americans live. "It hit people out of the blue," said Ann Lewis, 75, a former small-business owner from New Jersey, who was notified in late May that her account with Banamex USA, a unit of Citigroup Inc., would be closed this past June 30. […] Ms. Lewis said she found Mexican banks expensive and harder to work with: Checks can take weeks to clear while exchange rates fluctuate, she said, and wire transfers can each cost $45 or more.
Judith Furukawa, an American living in Dubai who has been an expat for nearly 15 years, is willing to pay fees to wire money from her U.S. account in Pennsylvania—but her U.S. bank no longer accepts wire requests from overseas.
Americans abroad are also encountering troubles with U.S.-based investment accounts. In recent months, firms including Fidelity Investments, Charles Schwab Corp., T. Rowe Price Group Inc. and others have told overseas investors and advisers they may no longer buy or trade mutual funds.
For Allen Cutler, a U.S. citizen who has lived in the Philippines for 30 years and said he had an account at T. Rowe Price for two decades, the restriction is "very unsettling, leaving me with the feeling that more is to follow."
All of this was 100 percent predictable at the time of the law's passage, and has been very well covered in the press (including the news that as of today, the application fee for revoking U.S. citizenship—which record numbers of Americans have been doing—has been jacked up by the federal government from $450 to $2,350).
The plain truth is that U.S. politicians just do not care that their invasive laws screw over many millions of Americans while gratuitously pissing off friendly countries and foreign investors in the United States, all for the joy of funding the federal government for half an afternoon. Repealing FATCA should be on the front-burner of any politician claiming to stand for limited government.
