The exit tax is pretty insane too.
Basically if you earn a certain amount or have a high enough net worth, you must pay a tax on all of your assets as if you were selling everything you owned. You are charged this amount even if you are not selling anything.
This is the only wealth tax in America as far as I understand it.
It's there for a reason tho...
If it wasn't, the wealthy would take their wealth and fuck off to somewhere it was worth more.
They're fine to do that, but the US is still going to want it's cut, you're still paying federal taxes every year because you're a US Citizen.
Rich people hate paying taxes. So they just renounced citizenship on the way out and took all their wealth with them.
But like you said, it's based on how much wealth you own so for normal people, it's not a big deal.
It's weird seeing people against it.
Edit:
Also, you have to be pretty wealthy to even have to pay it. The vast majority of Americans would pay $0 to renounce.
https://www.irs.gov/individuals/international-taxpayers/expatriation-tax
Next day edit:
Edit:
I’ve lost count of how many rich overseas workers have made 5+ replies to my comments in less than 10 minutes screaching about how they shouldn’t pay taxes
And every single one claims to be right on the line for having to pay it… yet want it thrown out for billionaires as well…
Apparently I can’t turn off replies to comment like on reddit, so I’m just blocking every “temporary poor billionaire” who wants to spend energy online arguing billionaires should pay taxes because it would mean they do too
No one has time for the Scrouge McDuck defenders.
To be entirely fair, I think its insane that the US would charge income tax on citizens who live abroad in the first place.
Well, yeah, but again it's only for the wealthy
If you are a U.S. citizen or a resident alien of the United States and you live abroad, you are taxed on your worldwide income. However, you may qualify to exclude your foreign earnings from income up to an amount that is adjusted annually for inflation ($107,600 for 2020, $108,700 for 2021, $112,000 for 2022, and $120,000 for 2023). In addition, you can exclude or deduct certain foreign housing amounts.
https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion
Those parts are never mentioned when people complain about this stuff. Because the only ones paying it are the wealthy ones, and they always bitch about taxes.
They pay, because at any moment they can come back as a citizen. If the wealthy do t want to pay for that option, then they can renounce citizenship and pay a one time tax to remove their wealth.
I'm aware there's no real way to say anything here without sounding like a pretentious snob, but those income limits aren't exactly spectacularly high.
I work in tech in NYC and my income is around those limits. My boyfriend is from Switzerland and there's a non-trivial chance that we'll wind up there long-term. If I was from literally any other country in the world beyond Eritrea, I would file Swiss taxes and that would be that. Instead, I'll have a direct financial incentive to give up my native citizenship because I'm from one of two countries that makes a claim to any income earned anywhere in the world, even if I don't step foot in the country that year. This is particularly rough in Switzerland because average salaries there are quite high, and thus so are costs of living, and so surpassing those limits isn't a particularly uncommon thing. (Edit: About one in four Swiss residents make more than $120,000 annually).
I know this won't garner any sympathy at all, but a bad policy only affecting the relatively wealthy doesn't change the fact that it's a bad policy. It could even backfire from a financial perspective, since having renounced American citizenship, I'd be less inclined to spend time in the US and contribute to taxes while visiting, and I'd never move back long-term, cutting off a chance of the government getting full income taxes from me ever again, whereas a change of circumstances might have otherwise prompted me to eventually return to the US.
Not sure if you noticed, but the American social net is fucked. Mostly because of people who make a lot and not contribute back.
If you don't want to pay taxes, you don't have to participate in the American system.
If you want all the benefits and none of the costs of being American...
Someone in this thread mentioning offering violin recitials for free
Please do explain then how literally every single other country in the world with a strong safety net and welfare system has managed to fund it without having to tax expats.
If you want all the benefits and none of the costs of being American…
Because again, in literally every single country except one African dictatorship, they interpret "the benefits" as things that you enjoy while actually being in the country, and therefore something you pay for while residing there. The ability to be a citizen of your native country is an assumed right everywhere else.
The only benefit I'd be enjoying is the right to return to my home country if I ever needed to. You don't have to pay for that in practically any other country. And so, yes, I would have to seriously think about renouncing my citizenship since I'd be paying for essentially nothing. I think that's rather unfortunate.
Cool, renounce your citizenship then.
I'm not going to keep repeating the same things and giving you the same IRS website and hoping you magically start understanding.
Please do explain then how literally every single other country in the world with a strong safety net and welfare system has managed to fund it without having to tax expats.
We're all waiting...
They tax their rich...
Hey, America should do that too!
What's one way we could do that... Maybe we should tax them on things like foreign property deals?
Oh... But what if one of them just changes permanent residency to overseas and then claim that means the sale can't be taxed in America?
Well, we could just tax foreign income over an amount the vast amount of American workers will never earn.
....
Hopefully I got this whole conversation out of the way.
I known you don't care about facts here, but for anyone else reading this, the top 10% of American tax payers contribute 74% of all income tax. The US has one of the most progressive tax systems in the world. Stronger social nets in other countries depend on significantly higher taxes on the middle class. That of course does not mean that the extremely wealthy aren't dodging a lot of taxes, but a decently experienced tech worker or pretty much any doctor is in a very very different tax situation than Jeff Bezos etc.
By the way, again not that you care, but your average worker that earns $120,000 is not making massive international real-estate deals. In the context of Switzerland, for instance, one in four Swiss people make enough to be over the US foreign tax threshold.
Clearly you don't have any interest in talking, and that's fine, but I do feel obligated to point out that you curiously did not answer this question:
Please do explain then how literally every single other country in the world with a strong safety net and welfare system has managed to fund it without having to tax expats.
The people this law targets aren't the ones committing tax avoidance. And the US social safety net isn't fucked because of a lack money, it's fucked because it doesn't even exist in the law.
The exit tax doesn't do shit to address that. It doesn't pay for anyone's healthcare or magically make the poverty cliff go away. It's a tax on upper income workers. Meanwhile actual rich people get their money through capital gains or loans and don't pay this shit at all.
Oh but I forgot that since I own a small house in a middle class rural neighborhood and drive a Subaru that I'm "rich" so my opinion doesn't mean shit apparently.
$120k is "wealthy" now? 120k isn't even enough to buy a fucking house in most cities in the US. Actual wealthy people aren't affected by this law because they don't have regular income.
120K lands you at 86th percentile [1]. So... relatively, you are sorta well off.
Sure, you can't buy a house with that income in a big city. But that merely shows how fucked up the real estate bubble is. Just think, the top 86th percentile earning person is no where near enough to even buy a home. Houses are about 1m in my neighborhood. So you need to earn about 250k/yr to realistically afford a home. That lands you at 97th percentile. So just top 3% of the people can actually afford a home on a single person's salary. That's how fucked we are.
The median income for a non-family household (i.e. single) is 45k, and family household is 95k (possibly dual income) according to 2023 census [2]. So, you're doing relatively quite well in comparison.
Who is "wealthy" is a subjective term. So a median person might see someone making 120k as wealthy. But the person earning 120k might see themselves as poor since they can't even own a home. Historically, the single income middle class could afford homes.
I've seen this on Reddit before: Six figures means you're rich, because that was true in the 80s, right? Obviously people don't have a clue that 40 years of inflation has made that middle class.
Also: income is not wealth, and the willful lack of understanding on that point blows my mind. A person who is wealthy can live an upper middle class lifestyle or better without ever having to work again. A person who has respectable income may have minimal wealth, or even mountains of debt (student loans, mortgage, etc). A person who makes 100k could be a few months unemployment away from losing their house or lease, while a person with "wealth" may not have to work at all.
People don't become filthy rich working full time for six figures. The wealthy (~$20-50m net worth and up IMO) are people who made their money with something other than labor - through investments and things that the government doesn't really classify as normal income.
Edit: It's like the saying goes: nobody makes a billion dollars. They take a billion dollars. If you tax the wealthy on income, you collect very little tax, because it's not classified as income. Meanwhile you're going to tax an engineer or physician who probably have hefty student loans and work their asses off full time, at the highest marginal rates because we don't or can't tax wealth.
Edit2: we've got minimum wage internet trolls who think an employee software engineer is basically a cigar chomping capitalist because they make over the median wage. The middle class has shrunk and maybe you're not in it. Get a clue, dumbasses.
I pay no tax to the US, but I bitch about it. I've lived abroad since I was 3y.o and realized when I turned 18 that I have to declare to the IRS every year. Let me tell you, it is an absolute pain in the ass when you have to do it yourself, without a US bank account or phone number. Takes me a full working day to declare 0 tax to the IRS when they already know that I owe zero tax because they force any bank I have accounts at to report to them. Half the banks in Sweden simply refuse to have me as a customer because of this, in addition to certain types of income technically being subject to double taxation because of US law.
I can't even get rid of my US citizenship without paying an absurd exit tax
I can’t even get rid of my US citizenship without paying an absurd exit tax
If that's true in your case, it means you have over 2 million in assets or made more than 170k averaged over the last five years...
If you're below both this, you don't have to pay the exit tax
https://www.irs.gov/individuals/international-taxpayers/expatriation-tax
So either you don't know the basics of what you're complaining about, or you're pretending you don't make an obscene amount of money
...or I don't have a 5yr record of reporting taxes to the IRS. There's also the 2'500USD "Administration fee"
They pay, because at any moment they can come back as a citizen.
But that's true of pretty much every other country in the world as well. So it still doesn't explain why the US is the only one that charges tax on foreign-earned income.
So it still doesn’t explain why the US is the only one that charges tax on foreign-earned income.
On the wealthy...
You keep omitting that point, and it's starting to get old.
But the reason is idealistic.
America was supposed to be the land of immigrants where anyone can immigrate, work hard, and earn wealth.
That system doesn't work if once you amass your wealth, you fuck off somewhere else and take it all with you. The reasoning is you were able to amass that wealth through America's social ladder.
If the wealthy (the only ones that pay foreign income tax or exit taxes) don't want to pay that, they know that being honest will never result in change.
If how I'm saying it doesn't make sense, use the IRS website I've provided numerous times.
You keep calling these people "wealthy" but the income levels you shared don't even come close to matching that. Also lol at the idea of America being an idealistic place so that's why people should pay this tax. My fucking ass. America is and always has been rigged for rich people, which should immediately tell you why this law still exists.
How about we actually tax real wealthy people, like millionaires loaning money to themselves, instead of forcing the middle class to pick up the slack yet again?
Correct. It's only the US and Eritrea (the North Korea of Africa) who do this. It's insane.
It's like the Inheritance tax. It's basically meaningless to the poor, but it sounds bad so the GOP uses it to scare their base. However the targets of the tax are primarily the handful of rich capitalist bastards who have a harder time ~~bribing~~ lobbying their way out of it.
My issue isn't so much with the tax itself as it is selectively enforced. If those assets remained in the US and the person never renounced, they would never be taxed. Or at least not taxed at the same rate.
So it's important enough to make sure rich people don't run away but, as long as you don't try to run, you don't owe us anything.. So the rich in America can continue getting richer..
Also, the income threshold is pretty average for any senior level software engineer. You don't need to be astoundingly rich to be on the hook.
What?
You think Americans do t pay property tax?
They're still paying it even if they don't set foot in America
I'm sorry, everytime you reply you say a new wrong thing I have to type alot to explain. I thought there was a few things you didn't know, but I'm not going to take the time to explain how American taxes work from ground up.
Also, the income threshold is pretty average for any senior level software engineer. You don’t need to be astoundingly rich to be on the hook.
Over $100,000/year is wealthy in America. The median income is 3/4 of that...
You think Americans do t pay property tax?
This is not the same thing as an exit tax.
For example, two people each own identical houses. One lives in the US and one lives outside. Both decide to keep it until they die. They both owe property taxes. If the person living outside of the US renounces their citizenship, they owe an exit tax even though they did not sell the property. The value of the house didn't change. It's location, owner, property tax obligation.. Nothing changed.
There is nothing wrong with this. It should just be applied equally. If there is going to be a wealth tax, I want it applied to wealthy Americans even if they don't renounce their citizenship.
If those assets remained in the US and the person never renounced, they would never be taxed.
You flat out said it...
Fuck it, I'm just blocking, I don't want roped into another one of these
I think it makes a lot of sense for people with millions of dollars (or more) of assets, but not for normal people.
How can you file a lawsuit in a country you are not a citizen of, against a country you are not a citizen of? Real question.
Do you really think foreign nationals aren’t afforded legal rights within the United States? Real question.
Yes that was my understanding of the situation. Feel free to explain why I'm wrong, that's why I asked the question. Even the term "foreign national" is something I'm not familiar with and it's not entirely clear whether you would even use it in some of the cases cited in the article considering that one individual is self described as living overseas when he renounced his citizenship.
A foreign national is anyone that is a citizen of a foreign nation. If an American is renouncing their US citizenship, they must already have gained citizenship of another nation, which makes them a foreign national once they no longer have US citizenship.
If they had no legal rights in the United States, there would be zero tourism or business travel from foreigners to the US because any American could do whatever they want to that foreign person (steal from them, con them, murder them, you name it) without fear of legal repercussions.
So yes, foreigners have the right to use American courts if the injustice they are alleging happened on American soil.
Yes that makes sense now, thank you!
I have a few weird questions if you have time to answer them. How does it work in the case where the person was outside of the USA at the time, seeing as they were not on USA "soil" at the time? It's just that one of the parties (in this case the federal government) has to be on USA soil?
And how does that work if, say, you're standing on the USA side of the Mexican border and you throw a brick at someone on the Mexican side? Could the Mexican citizen in this case file a lawsuit in a USA court?
I am not the OP, nor am I a lawyer, but I believe I am informed enough to answer these.
How does it work in the case where the person was outside of the USA at the time, seeing as they were not on USA "soil" at the time? It's just that one of the parties (in this case the federal government) has to be on USA soil?
Yes. In this case, the alleged offense (the cost demanded for renouncing citizenship) took place by the US federal government on American soil, which is why they can use through American courts.
The reason why they probably wouldn't be suing through the court system of the country they immigrated to is because other countries do not have the authority to dictate how much money the US is demanding. But at the same time, there's technically no reason to pay the US either if you never plan on going back there, given that the US has no power to arrest people in foreign soil...unless the two countries have an extradition treaty in place (and much of the first world does). The US would then have to sue for extradition within the court system of the other country first, and then you'd be facing a lawsuit in the US over unpaid fees.
The threat of the latter is also assuming the fee justifies the court expense spent pursuing it, which I doubt it would. I met a lot of American expats in China who technically owe the US government thousands of dollars in unpaid taxes/fees/etc but aren't even worried about going back to visit because the government would be spending far more pursuing legal action than they stand to make from the suit. The only time one should be worried is the rare example where the government might want to make an example of someone, or if you're a mob boss or something and that's the only concrete offense they can jail you for.
And how does that work if, say, you're standing on the USA side of the Mexican border and you throw a brick at someone on the Mexican side? Could the Mexican citizen in this case file a lawsuit in a USA court?
Now ain't that the tricky scenario. A similar case actually came up recently, with Hernandez v. Mesa and it was ruled at the time by the conservative-stacked Supreme Court that the US government was not responsible for prosecuting a crime where the victim was not in the US and not an American citizen. But the fact that there were dissenting opinions from all of the non-conservative judges, who are themselves legal experts on the constitution, shows that this is a very contentious gray area.
I guess the takeaway from this is that the person in this hypothetical scenario would be better off filing suit from Mexico and pushing for extradition, as the two countries have an extradition treaty.
Slow your roll, turbo, do you always get this shitty when someone asks a genuine question about a topic they aren't familiar with?
Real question.
That wasn’t me being shitty. That was me asking a genuine question in order to understand just how unfamiliar they were to this subject. Once they answered, you’ll find I explained the entire thing to them.
Do you always assume the worst in people? Real question.
The only people renouncing US citizenship are rich people because the US will still tax them.
The payment to renounce it is like a one time fee to not be taxed
I imagine it starts with hiring a lawyer, the same as if you're a citizen.
The court has jurisdiction regardless of what country the plaintiffs are from.
I can't quite follow this:
Esther Jenke also told the Times that finances played a role in her decision to renounce her citizenship.
"My husband and I bought a house. If we sell the house, even though it is our primary residence, because from a US perspective it's foreign property, we would have to pay capital gains tax on it," Jenke told the Times.
The 1st part says that there is a financial reason to renounce your citizenship, but the 2nd part makes it seem like they'll pay capital gains on the house, specifically because they renounced their citizenship
If they remain US citizens, they will have to pay US capital gains tax on the sale of their home in the place they now live. They'd also be liable for US federal income tax. This would be on top of whatever taxes they're liable for in the country they moved to.
If they have renounced their citizenship and are no longer resident in the US, then they're (broadly) no longer liable for US taxes, including US capital gains on the sale of their home.
Renouncing citizenship is expensive, but massively cheaper than the taxes they'd pay as non-resident US citizens. I'd assume their income had come in under the threshold or something, so the matter only came up when they wanted to sell their home.
And somewhere, the world's smallest gold plated violin shittily plays an off-tune medly of mediocrity.
The US is one of the few countries who don't care where you earn the money...
The financial incentive is to avoid paying taxes. Then she gave a hypothetical of what would happen if she hadn't renounced us citizenship. Because the US taxes a foreign home sale as capital gains, even when it's labeled as primary residence.
Because wealthy people hate paying taxes and would renounce citizenship to avoid, the US put in this percentage based fee to renounce US citizenship. For normal people it's nothing. But for the wealthy it can be a lot of money. So now a bunch of them are suing to get it back.
It's hard for these people to explain why they shouldn't have to keep paying taxes, so it's always going to sound confusing when they want sympathy.
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