Category Archives: Wealth tax

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

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

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.)

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

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!

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

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

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.

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