But what really pushed these 3,000 people to jump ship is apparently the Foreign Account Tax Compliance Act (FATCA), passed by Congress in 2010. The new law attacks an old problem: tax evasion. You know, the old “offshore” account scheme: the IRS can’t tax what they don’t know about.
Sen. Carl Levin (D-MI) explained the need for FATCA in 2010,
Right now, thousands of U.S. tax dodgers conceal billions of dollars in assets within secrecy-shrouded foreign banks, dodging taxes and penalizing those of us who pay the taxes we owe. The Permanent Subcommittee on Investigations… estimated that these tax-dodging schemes cost the Federal Treasury $100 billion a year.
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Imagine if you will that you are an American trying to conceal money from Uncle Sam by squirreling it away in the old Swiss bank account (now becoming Singapore bank accounts) and suddenly being told you are expected to report your foreign assets of $50,000 and report those bank accounts that hold more than $10,000.
How dare you, Uncle Sam! Expecting people to pay their taxes? Really? How gauche!
Of course, as CNNMoney points out, “it is illegal to renounce your U.S. status to avoid paying taxes, and giving up citizenship doesn’t mean you’re off the hook for back taxes” (though good luck collecting, IRS).
One way to look at this is to say we’re losing a few thousand people who were not only not contributing to the American economy, but who weren’t paying taxes in the first place. Another way to look at it would be to say the truly guilty will never pay their fair share of taxes and will never have to renounce their citizenship. People like Mitt Romney.
Most Americans don’t have foreign bank accounts. Most Americans don’t have bank account with $10,000 in them. According to the Federal Reserve, US Census Bureau, and Internal Revenue Service, the average American savings account last year was $3,800. One in four Americans has no savings at all and 7.7 percent have no bank account at all. This means most Americans will not be terribly put out that foreign banks are declining to accept American customers as a result of FATCA.
Meanwhile, Senator Levin has sought to tighten the screws by introducing the Levin-Whitehouse-Begich-Shaheen Stop Tax Haven Abuse Act, S. 1533, introduced September 19, 2013, which would, among other things, strengthen FATCA. The bill would also, explains Sen. Levin’s summary, “stop companies incorporated offshore but managed and controlled from the United States from claiming foreign status (§103) and avoiding U.S. taxes on their foreign income by treating them as U.S. domestic corporations for tax purposes.”
Only a Democrat could be guilty of such a heinous scheme to make Americans – and American corporations – pay their taxes. The Center for Freedom and Prosperity laments that “IRS tentacles spread overseas” and that “the IRS is no longer just a headache for American citizens”:
American tax collectors are now in the process of implementing a law that exacerbates the anti-saving, anti-investment bias in US tax policy. This will discourage individuals and businesses from investing in the United States. To be blunt, this law, the Foreign Account Tax Compliance Act (FATCA), is adding new burdens on the rest of the world which are likely to backfire on the United States.
Well, we did lose those 3,000 people…
The Center for Freedom and Prosperity complains that FATCA “is the product of a misguided school of thought within the US political class which believes that there are vast sums of unpaid taxes which the IRS would be able to collect if only the rest of the world would stop hiding it from them.” They might feel this way for one simple reason: it is true. A quick perusal of S. 1533’s summary reveals the extent of the offshore problem and explains why the rest of us are paying more taxes than millionaires and corporations.
So weep for the 3,000? Certainly, if Americans are being turned away by banks overseas and their purpose is not to hide money from the IRS but to legitimately function in a foreign economy, we should regret the law’s unforeseen consequences. In the global marketplace, millions of Americans (According to Fox News, estimates range from 2.2 to 6.8 million while the IRS in 2009 estimated more than 7 million) live or work overseas.
These Americans rightly want the same rights as the rest of us living in the United States. They want to vote. Fair enough. But we have these rights because we pay for them – through taxation. Does it seem reasonable to expect to have all the rights of American citizens while declining to pay taxes?
There clearly is a problem and you would think Republicans, who shut down government programs because they cost a couple of million dollars, would be horrified at the loss of hundreds of billions. But that is not going to happen: no Republican would dare suggest the wealthy, or corporations, pay their fair share in taxes. That would make them RINOs at best, Democrats at worst.
CNNMoney calls the 3,000 a “dramatic spike” compared to the last five years and if you compare it to the 900-some people who turned in their passports last year, then yes, it is. CNNMoney says the spike is triple the average of the past five years, and Time Magazine reported in 2013 that there has been “a sevenfold increase since 2008.” But 3,000 is a drop in the bucket compared to the up to 7 million Americans living overseas, as Time admitted.
Nobody is trying to punish the honest, tax-paying Americans living abroad. The problem lies not with these people but with the ultra wealthy and with the corporations which use the complexities of American tax law to escape paying taxes altogether. Yes, there are problems with FATCA but problems can be addressed.
Certainly it is hyperbolic, as CNNMoney quotes Hong Kong-based immigration lawyer Eugene Chow as saying, that “The U.S. used to be the ‘Rolls Royce’ of destinations — the land of opportunity,” and that “Both naturalized and native-born American citizens are choosing to say goodbye to Uncle Sam today.” According to the CIA’s World Factbook, more people immigrated to the U.S. than emigrating elsewhere in 2013 and that will no doubt remain true in 2014.
In the end, it isn’t the 1 percent who are leaving the United States, but their money.
Hrafnkell Haraldsson, a social liberal with leanings toward centrist politics has degrees in history and philosophy. His interests include, besides history and philosophy, human rights issues, freedom of choice, religion, and the precarious dichotomy of freedom of speech and intolerance. He brings a slightly different perspective to his writing, being that he is neither a follower of an Abrahamic faith nor an atheist but a polytheist, a modern-day Heathen who follows the customs and traditions of his Norse ancestors. He maintains his own blog, A Heathen’s Day, which deals with Heathen and Pagan matters, and Mos Maiorum Foundation www.mosmaiorum.org, dedicated to ethnic religion. He has also contributed to NewsJunkiePost, GodsOwnParty and Pagan+Politics.
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