Category Archives: Wealth tax

Part 40 – The Moore @USTransitionTax Appeal: Unrealized Income And Attacking The “Wealth Of OTHER Nations”

Leave a reply

Introduction

The Moore’s are U.S. residents who happen to be the U.S. shareholders of a CFC (“Controlled Foreign Corporation”). In basic terms, the Moore’s transition tax appeal is based on the fact that (1) although the Moore’s received no distribution from the CFC, they (2) were deemed to have received a distribution and required to treat the “deemed distribution” as U.S. taxable income. In other words, they paid “real tax” on “pretend income”. In a previous post I demonstrated how the “transition tax” AKA “repatriation tax” (taxation of “unrealized gains”) resulted in pure double taxation.

The double taxation caused by the transition tax was the result of:

1. The creation of a fictitious realization event which generated a U.S. tax before an actual realization event in India; coupled with

2. A later, ACTUAL realization event in India which generated an additional tax in India.

Continue reading →

Professor @Gabriel_Zucman Discusses US Taxation Of Americans Abroad and FATCA

Leave a reply

On June 19, 2023 the Global Progressive Caucus of Democrats Abroad hosted Professor Gabriel Zucman to discuss “Fair Share Taxation And Tax Enforcement”. You may know that Professor Zucman is a strong advocate of wealth taxation. Senator Warren (in the specifics of her proposed wealth tax) appears to be a disciple of Professor Zucman’s views.

During the presentation Professor Zucman reinforced his view that “Fair Share Taxation” should include a wealth tax. Interestingly he recommends that FATCA be replaced by the CRS.

But, most interestingly he expressed his view that the current U.S. system of citizenship taxation (as it applies to most Americans living outside the United States) simply cannot be justified. Based on this video, I would say that Professor Zucman may be an ally in the fight to reform the taxation of Americans abroad.

I have put together a short twitter thread to highlight his main points. But, I do recommend that people watch the entire video. The discussion at the end is every bit as interesting (and revealing) as Professor Zucman’s presentation.

A threadreader version of the twitter thread is here:

https://threadreaderapp.com/thread/1674191242681352193.html

A pdf version is here:

ThreadReader_0_expatriationlaw_1674191242681352193

The live Twitter thread …

John Richardson – Follow me on Twitter @Expatriationlaw

Part 2 – The Warren “Ultra-Millionaire Tax Act of 2021” and The Wealth Of Other Nations

Leave a reply

The fact that …

Leads to the obvious question of …

Hmm…

The fact is that Senator Warren is proposing to impose her wealth tax on property located outside the United States, purchased by individuals who live outside the United States, who have no connection to the United States other than (perhaps) the circumstance of having been born in the United States. Yup, it’s true.

On March 18, 2021, FATCA will turn on 11. The Senator’s proposed wealth tax explicitly states that FATCA is to be used to enforce this tax! Finally an (il)legitimate use for FATCA.

In the 18th Century Adam Smith wrote “The Wealth Of Nations”. In the 21st Century Senator Warren is proposing to impose a wealth tax on “The Wealth Of OTHER Nations”.

Discussion And Analysis

This is the second of what I expect to be a multi-part series on Senator Warren’s proposed wealth tax of 2021. As the above tweet makes clear, the practical utility of the tax depends on US citizenship-based taxation (to whom it applies) and FATCA (how are non-US assets located). In my first post, I referenced Senator Warren’s statement that:

Continue reading →

Elizabeth Warren’s “Ultra-Millionaire Tax Act of 2021”: Coming Soon To A Neighbour (and maybe a nonresident spouse) Near You

Leave a reply

The Contextual Background – Elizabeth Warren – January 28, 2021

Excerpts from a recent CNBC interview (see the following link for context) …

https://www.cnbc.com/2021/01/28/first-on-cnbc-cnbc-transcript-senator-elizabeth-warren-d-mass-speaks-with-cnbcs-closing-bell-today.html

WARREN: Based on fact, the wealthiest in this country are paying less in taxes than everyone else. Asking them to step up and pay a little more and you’re telling me that they would forfeit their American citizenship, or they had to do that and I’m just calling her bluff on that. I’m sorry that’s not going to happen.

WARREN: Look, they want to use American workers. They want to use American highways. They want to use American police forces. They want to use American infrastructure, but they just don’t want to help pay to support it. And that’s the trick, a wealth tax needs to be national because you can still get advantages, if you move from state to state. But the idea behind wealth tax is you have to pay it if you’re an American citizen. It doesn’t matter whether you live in Texas or California or even whether you move to Europe or South America. If you want to keep your American citizenship, you pay the wealth tax and it doesn’t matter where you put your assets. You can try to hide them in the Cayman Islands, you can try to put them up in Switzerland, but it doesn’t matter, you still pay the two-cent wealth tax. And here’s the nice thing about that, you know, a lot of the wealth is quite visible and easy to see, it’s right there in the stock market. A two-cent wealth tax changes this country fundamentally because it means we say as a nation, we are going to invest in the next generation. We’re going to invest in creating opportunity not just for a handful at the top, we’re going to create opportunity for all of our kids. That’s how we build a strong future in this country.

Prologue: For Whom The Tax Tolls – What Is An “Ultra” Millionaire?

One dictionary definition of “Ultra” includes:

ultra noun [C] (PERSON)

usually disapproving

a person who has extreme political or religious opinions, or opinions that are more extreme than others in the same political party, etc.:

Soon the ultras on the right of the party will resume their criticism of the prime minister.

On August 20, 2019 Forbes reported that Elizabeth Warren had a net worth of approximately 12 million USD. A large part of these assets are her pensions. But apparently her proposed wealth tax doesn’t apply (it’s unclear to what extent it would apply to pensions) to her. At a minimum, the proposal applies ONLY to “Ultra” millionaires (at least today).

Elizabeth Warren Introduces Wealth Tax – Version 1

On or about March 1, 2021, Senator Warren introduced her proposed “ULTRA-Millionaire Tax Act Of 2021”. Given that the threshold is $50 million USD, it appears that the Senator, although a millionaire, is not an “ULTRA” millionaire. There is nothing in the proposed act that suggests the plan is indexed to inflation. Even if the threshold is NOT lowered (which it will most certainly be), the inevitability of inflation will ensure that more and more people are ensnared by it. In the same way that the late Senator Kennedy referred to the 877A Exit Tax as the billionaire’s tax (when it applied to everyday people), over time, the wealth tax will become the millionaires’ tax that will be applied to (by the standards of today) thousandaires.

Now, I don’t believe that this is going to become law soon. But, all confiscatory taxation, starts as an idea that germinates, until enough politicians (who would not personally be impacted) are used to the idea and then it will become law. Tax laws have the potential to become law through either accident (a revenue offset measure which nobody reads) or by design (stated purpose of the legislation). This is exactly what happened with the S. 877A expatriation tax (a revenue offset provision).

Part A – The Evolution of Taxation From Taxation Of Income (Sharing Of Income) To Taxation On Wealth (Taking Of Assets)

Continue reading →

About #FATCA and @Citizenshiptax: Here is the @DemsAbroad Interview with @TulsiGabbard on January 15, 2020

Leave a reply

With respect to U.S. FATCA and Citizenship-based taxation, her answers were:

1. FATCA: She would direct Treasury to take the necessary steps to alleviate the problems that Americans abroad experience with banking access.

2. Citizenship-based taxation: Bear in mind that the DA question always includes (1) a recognition that revenue neutrality is possible and (2) that any remedial legislation must be carefully constructed to “prevent abuse” (whatever that means). Ms. Gabbard said:

– in principle she believes in a move to residence-based taxation

– it must be constructed in such a way that the wealthy don’t leave the USA to avoid U.S. taxation

– it MUST be revenue neutral

From Jackson-Vanik To The HEART Act – The Evolution Of American Hypocrisy

1 Reply

Introduction

The above tweet references a 2012 post from the Isaac Brock Society pointing out the hypocrisy of “Jackson-Vanik” and the United States. “Jackson-Vanik” – enacted in 1974 – was a U.S. law which imposed sanctions on countries who imposed unreasonable restrictions (exit taxes) on the rights of their citizens to emigrate to new countries.

By 1996, the United States (led by the Clinton administration) was imposing Exit Taxes on certain Americans who renounced U.S. citizenship. James Dale Davidson writing in “The Sovereign Individual” (1997) compared the justification (or lack thereof) for U.S. Exit Taxes to the rationale for Exit Taxes imposed by the East Germany, as follows:

If you accept the premise that people are or ought to be assets of the state, Honeker’s wall made sense. Berlin without a wall was a loophole to the Communists, just as escape from U.S. tax jurisdiction was a loophole to Clinton’s IRS. Clinton’s argument about escaping billionaires, aside from showing a politician’s usual disregard for the integrity of numbers, were similar in kind to Honeker’s, but somewhat less logical because the U.S. Government, in fact, does not have a large economic investment in wealthy citizens who might seek to flee. It is not a question of their having been educated at state expense and wanting to slip away and practice law somewhere else. The overwhelming majority of those to whom the exit tax would apply have created their wealth by their own efforts and in spite of, not because of, the U.S. Government.

James Dale Davidson – The Sovereign Individual page 117. (This book contains some of the most prescient observations about citizenship-based taxation I have ever seen.)

(Enacted as a revenue offset to the HEART Act in 2008, the United States of America now has the most brutal exit taxes imposed in the history of the world. In effect, it confiscates non-U.S. assets, acquired by people who did not live in the United States. Because of the confiscatory intent of the U.S. Exit Tax Regime, the Internal Revenue Code includes numerous reporting requirements whenever an individual renounces U.S. citizenship. To learn about the inner workings of the Section 877A Exit Tax – see the series of posts here.)

Continue reading →

SECURE Act of 2019 Erodes Future Capital Growth In Order To Pay For The Present Expenses

Leave a reply

Introduction – The SECURE Act aims to: “Set Every Community Up for Retirement Enhancement”

The above tweet references an excellent article by Daniel Kurt, describing the pros and cons of IRA reform. Significantly, the article includes:

One other key change in the new bill is paying for all this: the removal of a provision known as the stretch IRA, which has allowed non-spouses inheriting retirement accounts to stretch out disbursements over their lifetimes. The new rules will require a full payout from the inherited IRA within 10 years of the death of the original account holder, raising an estimated $15.7 billion in additional tax revenue. (This will apply only to heirs of account holders who die starting in 2020.)

Legislative/Socioeconomic Background

There is a “retirement crisis” in North America. Neither Canadians nor Americans are saving enough for retirement. At the same both governments are operating with huge deficits. Individuals have failed to plan for financing their retirements. As a result, any and all honest attempts to improve the situation are welcome. That said, governments seem to reflexively attempt to solve problems by generally increasing taxes. In some cases, governments increase the rate of taxation on income. In other cases governments broaden the tax based by subjecting new things to taxation. There is however a worrisome trend toward governments simply imposing taxation on existing capital. Examples include: the Section 965 transition tax and Section 877A expatriation tax. In both cases these laws create “fake income” by deeming there to be a distribution where there was in actual fact, no distribution to be taxed. The SECURE Act continues the same principle by forcing certain inherited IRAs to be distributed within a ten year period. At a bare minimum, this reinforces the principle that individuals should not be able to easily transfer assets to the next generation and that existing capital pools are fair game for taxation.

Prior To The SECURE Act Certain Inherited IRAs Could Grow For The Life Of The Beneficiary

In an earlier post (with the help of Chris Stooksbury) I had described the tremendous growth and capital preserving opportunity in certain inherited ROTH IRAs.

No more!

Continue reading →

A public service announcement during this Holiday Season: Uncle Sam Is Demanding Retired Accidental Americans for Their Life Savings

1 Reply

Uncle Sam Is Demanding Retired Accidental Americans for Their Life Savings

(Some Holiday Season wisdom sent to me from an anonymous source)

Meet one of the most fascinating anomalies of our time, the accidental American. That is to say, folks who were born in the United States but who were not raised there. Whether you identify as an American or not, Uncle Sam is itching to take your money. Here’s what you need to know about being an accidental American, apologies in advance for the inconvenience.

Breaking it Down, Prepare to be Outraged, You Should Be

You might want to brace yourself for the inevitable frustration that will ensue. Picture this, you’ve lived in Spain for most of your life and were born in the United States. You’re about to retire and are getting excited about getting the chance to wind down, relax, and spend more time with your family. Unfortunately, Uncle Sam sees your retirement as his cue to come knocking on your door demanding money.

Uncle Sam Wants to Turn Your Life Savings Into Back Taxes

The money that you worked the better years of your life to accumulate is something to be proud of as a productive citizen. Uncle Sam, less affectionately known as the IRS, is determined to drain your life savings. The U.S. government will tell you that you owe money to them for back taxes. Any rational mind will readily surmise that these claims and demands are as fanciful as they are unfair.

We aren’t talking about a few hundred Euros here. You could easily owe tens of thousands of dollars to the U.S. government for no reason other than having been born in the United States of America.

Unfortunately for all of us retired accidental Americans, Uncle Sam couldn’t care less over the reasoning. The cold hard fact is that America is a business. President Calvin Coolidge spoke some of the most honest words ever uttered by a politician when he said, “The business of America is, business.” That’s it plain and simple. When Uncle Sam comes gunning for your savings, don’t ask him why he’s doing it, it’s just business.

You Are Not Alone

As an accidental American, you are not alone. There are thousands of people who are suffering from the same injustices. Through arrogance, greed, delirium, or all three, the U.S. government is helping itself to the savings of people around the world.

The IRS is an ever-hungry machine that is intent on strangling every red cent out of people that it possibly can. Given the lofty powers awarded to it by way of the U.S. government, they can be a scary bunch. However, staying informed on the monstrous policies that you’re unfairly expected to comply with is always a good idea. The U.S. government has deliberately made it as difficult and as painful as possible to preserve your savings from the ravages of Uncle Sam’s insatiable fiscal desires.

Over the years, governments have been driven to squeeze citizens of their savings. Some governments are fair when it comes to this. The disturbingly innovative voraciousness of the U.S. government’s mechanisms for sucking money out of its citizens is highly concerning. Of course, that voraciousness extends to accidental citizens around the world.

Stay Informed and Stay Angry

It’s always advisable to stay informed on these matters so that you can at least anticipate the damage before it hits you. Unfortunately all staying informed is going to do is let you know what to expect and be a bit proactive about it. The policies themselves aren’t changing and they have shown no signs of doing so any time soon. Why should they? The U.S. government is making a killing by raking in all of that money from accidental Americans.

Skimming from their life savings is a cash cow that will be hard for Uncle Sam to give up. That’s why you should be upset. The IRS is actively targeting your life savings and will use unrelenting bureaucratic forces to get a chunk of it. You have a right to be upset, no one should have to dole out so much of their hard earned money because of a fanciful design in policy.

(Some Holiday Season wisdom from an anonymous source)

John Richardson – Follow me on Twitter @Expatriationlaw

FATCA @Citizenshiptax and Wealth taxes: Laura Snyder Engages @Gabriel_Zucman In The Twittersphere

Leave a reply

Introduction

Citizenship-based taxation, FATCA and how the interact can best be understood by Americans abroad.

The professors (who have clearly never lived under a citizenship taxation regime and have limited understanding of FATCA) explain the relationship between U.S. citizenship-based taxation and the success of a – “Made In The USA” wealth tax – in the article which includes:

The situation in the United States is different. You can’t shirk your tax responsibilities by moving, because U.S. citizens are responsible to the Internal Revenue Service no matter where they live. The only way to escape the IRS is to renounce citizenship, an extreme move that in both Warren’s and Sanders’s plans would trigger a large exit tax of 40 percent on net worth.

Some people tweet. Some people tweet for fun. Some people tweet to educate.

The purpose this post is to collect the series of tweets that Laura Snyder complied to provide a higher level of education to the professors.

_______________________________________________________________________________________________

Continue reading →